oversight

Procurement: Overview of HUD's Contracting Activities

Published by the Government Accountability Office on 1997-05-09.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

       United States
‘GAO   General Accounting Ofke
       Washington, D.C. 20548

       Resources, Community, and
       Economic Development Division
        B-276546


        May 9, 1997


        The Honorable Christopher S. Bond
        Chairman, Subcommittee on
         VA, HUD, and 3ndependent Agencies
        Committee on Appropriations
        United States Senate

        The Honorable Lauch Faircloth
        Chairman, Subcommittee on Financial Institutions
         and Regulatory Relief
        Committee on Banking, Housing, and Urban Affairs
        United States Senate

        The Honorable Rick A. Lazio
        Chairman, Subcommittee on Housing
         and Community Opportunity
        Committee on Banking and Financial Services
        House of Representatives

        Subject: Procurement: Overview of HUD’s Contracting Activities

        Each year the Department of Housing and Urban Development (HUD)
        purchases millions of dollars worth of supplies and services through contracts.
        HUD’s downsizing plans and recent allegations of contracting abuses have
        raised concerns about the Department’s ability to effectively manage its
        contracting workload. As an initial step in evaluatig the agency’s contracting
        activities, you asked us to describe (1) the source of HUD’s procurement
        authority and how it is delegated; (2) the offices responsible for contracting and
        their roles; and (3) the data HUD maintains on its contracting activities, and
        what these data show regarding the extent of the agency’s contracting activities
        since fiscal year 1990. In particular, you asked us to characterize contracting
        activities for task-order contracts. In addition, you asked us to explain how
        HUD obtains the services of experts and consultants, other than those obtained
        through contracts, and to describe the contracting activities performed by the


                                                         GAO/RCED-97-132R   HUD Contracting
B-276546

Office of Federal Housing Enterprise Oversight. Enclosure I provides
information for each of these objectives that was presented to you in briefings.

SUMMARY

HUD’s procurement authority is contained in the Department of Housing and
Urban Development Act (Public Law 89-174), the legislation that created the
Department in 1965. Procurement authority is delegated from the Secretary of
HUD through the Assistant Secretary for Administration to the Office of
Procurement and Contracts (OPC) at HUD headquarters, contracting divisions
in three field Administrative Service Centers @SC), and to the Government
National Mortgage Association (Ginnie Mae).

HUD’s procurement offices award and administer contracts on behalf of
program offices. This process entails receiving descriptions of need, soliciting
and receiving offers, awarding contracts, making necessary contract
modifications, resolving disputes, and closing out completed contracts. OPC
performs these functions for headquarters offices, and the three ASCs (located
in New York, New York; Atlanta, Georgia; and Denver, Colorado) perform them
for HUD’s field offices. Also, OPC is responsible for formulating contractig
policy, providing technical assistance, and evaluating contracting activities
agencywide. Ginnie Mae has its own procurement office that awards and
administers contracts in support of its programs.

Contracting data for the period we reviewed were maintained at each location
that performed contracting. The data varied considerably in terms of its
completeness and reliability. The headquarters procurement office has
maintained its data in the same automated database since 1977, and
procurement officials believe that at least from 1991 to the present, the data are
generally reliable. In contrast, HUD field offices only began using a common
automated database to track contracting activities in 1995, and agency officials
consider information from this system incomplete and unreliable. We were
consequently unable to develop any reportable information from this database.
 Ginnie Mae currently does not have an automated system for maintaining its
 contracting data, although it is developing a system expected to be operational
 by July 1997. Recognizing the need to improve the completeness and accuracy
 of information on its contracting activities, HUD is in the process of
 implementing a new system that will integrate and centralize headquarters and
 field procurement data. However, the new system does not include data on
 Ginnie Mae’s contracting activities.



 2                                                GAO/RCED-97-132R   HUD Contracting
B-276546

Data from the headquarters database indicate that annual contract obligations
grew from $213 million in fiscal year 1991 to $376 million in fiscal year 1996 (in
constant 1996 dollars). The major types of goods and services procured by
HUD headquarters during fiscal year 1996 included information technology
hardware and software; mortgage accounting and claims processing services;
advertising for the sale of HUD properties; and various professional, technical,
and administrative management support services. Typical goods and services
purchased by the field offices included real estate management services (such
as maintenance and repairs, advertising, and real estate closing services) and
mortgage insurance-related activities (such as mortgage credit analyses,
appraisals, and mortgage insurance endorsement processing).

In addition to the services obtained through contracts, HUD makes a limited
number of temporary and/or intermittent appointments of experts and
consultants. The Executive Personnel Management Division is responsible for
making these appointments on behalf of all HUD offices. Data provided by the
Division indicate that HUD makes about 10 to 12 appointments per year and for
the past 3 fiscal years obligated an average of about $171,000 annually for this
purpose.

The Office of Federal Housing Enterprise Oversight (OFHEO) is an independent
office within HUD. The Housing and Community Development Act (Public Law
102~550),which created OFHEO in 1992, authorizes its director to manage the
Office without the review or approval of the HUD Secretary. OFHEO follows
the Federal Acquisition Regulations (FAR) but does not follow HUD’s
Acquisition Regulations (HUDAR) or the internal processes described in
enclosure I. OFHEO formulates its own contracting policy and processes and
manages its seven open contracts without an automated data system.

AGENCY COMMENTS AND OUR EVALUATION

We sent copies of a draft of this report to HUD and OFHEO for review and
comment. HUD said in its comments that our characterization of field
procurement data as “incomplete and unreliable” should be tempered by the
fact that the data were generated by a transitional system that was developed in
90 days and that was recently replaced by a new system that contains both
headquarters and field contract data. While HUD acknowledges that our
characterization of the flaws in the data provided by the transitional system is
accurate, it states that the system was never intended to have the kinds of edits
and controls that we would expect to find in a Department-wide procurement
management system. Our report recognized that HUD’s field procurement
system was transitional and was being replaced by an integrated headquarters

3                                                 GAO/RCED-97-132R   FWD Contracting
B-276546
and field procurement data system. However, the transitional system’s
limitations continued to leave the agency in the position of not having reliable
information on field procurement activities. In addition, while HUD says that
its new procurement data system is operational in headquarters and the field,
field contracting officials told us that, as of the end of April 1997,
implementation problems have caused them to delay entering new contract data
into the system. The officials hoped to resolve these problems within a few
weeks.

HUD also said that the information we presented in enclosure I on the type of
competition used in agency contracts could lead to a distorted impression that
the agency used noncompetitive means for a substantial portion of contracts
and task orders. HUD notes that most of the contracts it awarded by other
than full and open competition were awarded under the Small Business
Administration’s 8(a) program, a category that HUD characterizes as “not
available for competition.” The data we presented were not intended to imply
that HUD was making inappropriate use of noncompetitive contract awards.
While we did not separately identify HUD’s use of setasides to small,
disadvantaged businesses under the 8(a) program, we clearly noted in the
report that this type of award is among the statutorily authorized exceptions to
the standard of full and open competition, and we included 8(a) awards under
the category “authorized by statute.” (HUD’s comments and our evaluation of
them are contained in enc. II.)

The Director of OPHEO’s Office of Pinance and Administration agreed with the
facts presented in our draft but suggested some organizational changes to
clarify that OFHEO’s contracting authority and functions are entirely distinct
from those of HUD. We made these changes in the report, as appropriate.



We performed our review from January through April 1997 in accordance with
generally accepted government auditing standards. We reviewed relevant
statutes and regulations. We also interviewed procurement officials in OPC, the
three ASCs, Ginnie Mae, and OFHEO, as well as officials in the Executive
Personnel Management Division. We analyzed data extracted from HUD’s
procurement databases and data provided to us by officials in Ginnie Mae,
OPHEO, and the Executive Personnel Management Division. However, we did
not verify the data contained in the HUD databases or provided to us by HUD
and OPHEO officials. Because HUD considered field procurement data to be
incomplete and unreliable, we focused on headquarters data to summarize
trends that occurred during fiscal years 1991 through 1996.

4                                                GAO/RCED-97-132R   HUD Contracting
B-276546
We are sending copies of this report to the appropriate congressional
committees; the Secretary of HUD; the Director, Office of Management and
Budget; and other interested parties. We will also make copies available to
others on request. If you have any questions or need additional information,
please call me at (202) 512-7631. Enclosure III lists major contributors to the
report.




Director, Housing and CommuniQ
 Development Issues

Enclosures - 3




                                                 GAOIRCED-97-132R   HUD Contracting
ENCLOSURE I                                    ENCLOSURE I




m       Housing and Community
        Development Issues

        The Department of Housing and Urban
        Development

        Overview of HUD Procurement




                                GAOLRCED-97-132R   HUD Contracting
 6
ENCLOSURE I                                                 ENCLOSURE I




w        Objectives

     l   What is the source of HUD’s procurement authority,
         and how is it delegated?
     l   Which HUD offices are responsible for contracting,
         and what are their roles?
     l   What data does HUD maintain on its contracting
         activities, and what do these data show regarding
         the extent of current contracting activities and
         trends in contracting since fiscal year 1990?
     l   Other than through contracts, how does HUD obtain
         the services of experts and consultants?




                                         GAO/RCED-97-132R   HUD Contracting
ENCLOSURE1                                           ENCLOSURE1




w        Source of HUD Procurement Authority
         and How It Is Delegated
     l   The Department of Housing and Urban
         Development Act, Public Law 89-174
         (1965), contains HUD’s contracting
         authority.
     l   The Federal Acquisition Regulations
         (FAR) System, contained in title 48 of
         the Code of Federal Regulations
         (CER.), establishes policies and
         procedures for acquisitions by all
         executive agencies.




                                  GAO/RCED-97-132R    HUD Contracting
8
ENCLOSURE I                                       ENCLOSLJREI




w        Source of HUD Procurement Authority
         and How It Is Delegated, continued
     l   HUD Acquisition Regulation (HUDAR),
         48 C.F.R. chapter 24, prescribes the
         agency’s procurement policies and
         procedures under the FAR system.
     l   All procurement by HUD must comply
         with HUDAR and FAR, except as may
         be otherwise authorized by law.




9                               GAO/WED-97-132R   HUD Contracting
                                                                              a




        ENCLOSURE1                                                                        ENCLOSURE1




               Delegation of HUD Procurement Authority


Director, Office of                                                                       President, Government
Procurement and                                                                             National Mortgage
    contracts                                                                                   Association


                                                 I
                                  r

                                      Directors, Administrative
                                          Service Centers




                                                                  ASC2 Contracting
                                                                   Division Director




Note: Authority for some purchases of
!$2!55000or less may be delegated to program
     .
References to HUD in this presentation do not
include the Office of Federal Housing
Enterprise Oversight.



                                                                       GAOALCED-97-132R    HUD Contracting
          10
ENCLOSUIXEI                                               ENCLOSURE I




G&J OFHEO Has Separate Procurement
    Authority
     l   The Office of Federal Housing Enterprise
         Oversight (OFHEO) is an independent office of
         HUD, established by the Housing and
         Community Development Act of 1992 (f?L.
         102-550).
     0 OFHEO’s contracting authority comes directly
       from the legislation, not from the Secretary of
       HUD.
     l   OFHEO does not follow the HUDAR or internal
         HUD processes.




11                                     GAO/RCED-97-132R   HUD Contracting
ENCLOSURE I                                          ENCLOSURE I




QQ       Procurement Offices Responsible for
         Contracting
     l   Office of Procurement and Contracts
         (OPC) awards and administers
         headquarters contracts for program
         offices and provides policy development,
         technical assistance, and evaluation
         HUD-wide.
      . Contracting divisions at three field
        Administrative Service Centers (ASC)
        award and administer field contracts for
        program offices.




12                                GAO/RCED-97-132R   HUD Contracting
ENCLOSURE I                                             ENCLOSUI-XEI




w         Procurement Offices Responsible for
          Contracting, continued

      l   Government National Mortgage
          Association (Ginnie Mae) awards and
          administers contracts in suppo.rt of ‘its
          programs.
      l   OFHEO awards and administers
          contracts in support of its programs.




                                     GAO/RCED-97-132R   HUD Contrarting
ENCLOSURE I                                              ENCLOSURE I




w        Role of Procurement Offices and
         Personnel
         l   Receive descriptions of need from
             program offices, solicit and receive
             offers, and award contracts.
         l   Personnel include:

             Contractina Officer: the focal point in
             the procurement office who is
             authorized to sign and modify
             contracts.




                                      GAO/RCED-97-132R    KUD Contracting
    14
ENCLOSURE I                                         ENCLOSURE I




G&J Role of Procurement Office and
    Personnel, continued

         Contracting Specialists: the
         contracting officer’s
         representatives in procurement
         matters, such as preparing
         solicitations or evaluating
         costs/prices.




                                 GAO/RCED-97-132R   HTJD Contracting
15
ENCLOSURE I                                             ENCLOSURE I




W        Role of Program Offices and Personnel in
         Procurement

l       Program offices identify need to contract and
        prepare a Request for Contract Services
        (RCS).
l       Program office personnel involved in
        procurement include:
    l    Government Technical Representative
         (GTR) acts as the contracting officer’s
         representative in all matters concerning the
         technical aspects of the contract.




                                     GAO/RCED-97-132R    HUD Contracting
 16
ENCLOSURE1                                         ENCLOSURE1




(XI     Role of Program Offices and Personnel
        in Procurement, continued

  l   Government Technical Monitor (GTM\ may
      be delegated mani of the -GTR’s duties,
      usually a narrower range of technical
      expertise than a GTR.
  l   Technical Evaluation Panel (TEP) provides
      expert, impartial, comprehensive evaluation
      of the technical and management aspects of
      proposals. Appointed by the head of the
      program office.




 17                              GAO/RCED-97432R   HUD Contracting
 ENCLOSURE I                                                                                  ENCLOSURE I




            Key Steps in Contract Award
                                                           ?
 Program office identifies need to                                 Program office appoints
 contract and prepares the RCS,                                    the GTR to monitor the
 including the statement of work.                     -w            contractors technical
                                                                        performance.




 Procurement off ice receives                    Contracting officer              Contracting officer approves
   and reviews RCS. (The                   prepares for a competitive              or rejects justification for
  contracting officer, who is      -+c     procurement or reviews the               other than full and open


                                                                                I
authorized to sign and modify               justification for other than                  competition. .
 contracts, is the focal point.)            full and open competition.
                                                                                                                  I




                                          TEP evaluates the technical                  Authorized program/
                                          and management aspects of                      contracting office
                                         proposals. (The TEP is usually                   official selects
                                             composed of program
                                                                                        successful offeror.
                                                   off ice staff.)
                                                                            i




                                                                           GAO/RCED-97-132R    HUD Contracting
   18
ENCLOSURE I                                            ENCLOSURE I




        Key Steps in Contract Administration
   GTR monitors contractor
   performance and reviews
 invoices. (GTM may provide                GTR performs final
      GTR with technical                 performance evaluation
          assistance.)                         of contractor.




  Contracting officer receives           L
   information from GTR and                Contracting Officer
contractor, resolves problems,           determines whether all
  and takes needed contract               contract requirements
actions, including modifications.         have been met, takes
                                          administrative actions
                                         needed to close out the
                                         contract, including any
                                          applicable audits, and
        Contractor may appeal                authorizes final
     disputes to HUD’s Board of                  payment.
       Contract Appeals or the       L

                courts.




19                                  GAOfRCED-97-132R   HUD Contracting
ENCLOSURE I                                           ENCLOSURE I




GAQ Overview of HUD’s Procurement Data

      l   Between fiscal years 1990-96 (the scope
          of our review), HUD did not maintain
          uniform, centralized procurement data.
      l   HUD is working to integrate and
          centralize data on headquarters and field
          offices’ procurement (although these
          efforts do not include Ginnie Mae).




                                   GAO/RCED-97-132R    HTJD Contracting
 20
ENCLOSURE I                                          ENCLOSURE I




w        HUD Headquarters Procurement
         Information Database
     l   Management Information System
         (MIS/PC) tracks headquarters-directed
         contracts.
     l   Contains data from fiscal year       1977        to
         present.




                                  GAO/RCED-97-132R   HUD Contracting
21
ENCLOSURE I                                              ENCLOSURE I




w         Other Headquarters Procurement
          Information
      l       Numerous other information systems
              track pieces of headquarters
              procurement information, such as
          a purchase requisitions,
          l    preaward planning documents, and
          l    audit information.




                                                                            ,


                                      GAOLRCED-97-132R    HUD Contracting
22
ENCLOSURE1                                                         ENCLOSURE1




@K) Summary Statistics on Headquarters
    Contracting From Fiscal Years 1991-96

       l   There were 572 open
           contracts (398 awarded during
           the period and 174 previously
           awarded).
       l   The total amount obligated
           under these contracts was
           $1 .7 billion.
Note: Dollars reported are nominal.


Source: Unverified data from MIS/PC database.




23                                              GAOLRCED-97-132R   HUD Contracting
ENCLOSURE1                                                                  ENCLOSURE1




0                   Summary Statistics on Headquarters
                    Contracting From Fiscal Years 1991-96

         398 new contracts were awarded.
         New contracts
         80




         60




         40




         20/    -




          CI-
                      1991   1992   1993                                        1996
                                           Fiscal year



Source: Unverified data from MIS/pc database.




                                                         GAO/RCED-97-132R    HUD Contracting
    24
  ENCLOSURE1                                                                             ENCLOSURE1




w                       Summary Statistics on Headquarters Contracting
                        From Fiscal Years 1991-96, continued

Annual contract obligations grew from $213 million in
fiscal year 1991 to $376 million in fiscal year 1996
Dollars   in millions
400   r




                                      I           7




                                                                      ~
                               1992       1993                 1994          1995            1996
                                                 Fiscal year


Note: Includes only purchases over $25,009. Obligations are expressed in constant
1996 dollars.
Source: Unverified data from MIS/PC database.




  25                                                                  GAO/RCED-97-132R   HUD Contracting
 ENCLOSURE I                                                                                 ENCLOSTJRE I




c&W               Summary Statistics on Headquarters Contracting
                  From Fiscal Years 1991-96, continued

  HUD awarded 130 task-order contracts (indefinite
  quantity contracts against which orders for specific tasks
  are issued)
    Number   of new tad-r   contmc~~




     ”

                   1991                1992   1993                 1994           1995              1996
                                                     Fiscal year

Note: An additional 46 task-order contracts, probably awarded prior to 1991, were also open during the
period.

Source: Unverified data from MIS/PC database.




  26                                                                      GAOIRCED-97-132R    HUD Contracting
 ENCLOSURE I                                                                             ENCLOSURE I




GAc>      Summary Statistics on Headquarters Contracting
          From Fiscal Years 1991-96, continued

                                 Type of competition           used
                          a Full & open   n   &;M;zed   by m All other types



          406
                                                         136




         7                                               pw8
                All contracts                                  Task-order contracts
Note: Data reflect all contracts open at any time during fiscal years 1991 to 1996,
including contracts awarded before that period.
Source: Unverified data from MIS/PC database.




 27                                                                   GAOIRCED-97-132R   FlUD Contracling
ENCLOSURE I                                                 ENCLOSLTE I




w             Types of Competition


      l       The standard for federal procurement
              is full and open competition; that is,
          l    all responsible sources are permitted
               to submit offers on a procurement or
          l    all responsible sources are permitted
               to submit offers, after a specific
               source or class of sources is
               excluded.




 28                                      GAO/RCED-97-132R    HUD Contracting
ENCLOSURE I                                                 ENCLOSURE I




w           Types of Competition, continued


l        Other than full and open competition is
         authorized by FAR and other federal
         procurement laws only under certain
         circumstances, for example,        -
     l    if there is only one source,
     l    if the contract is a follow-on contract, or
     l    if use of a noncompetitive award is
          authorized by statute (e.g., sole-source
          awards to small, disadvantaged businesses).




29                                       GAOLRCED-97-132RHUDContracting
   ENCLOSURE I                                                                             ENCLOSURE I




 GA!3         Typical Goods and Services Purchased by
              Headquarters in Fiscal Year 1996

                                                                                      Dollars in
          Type of good or service                                                     millions
          Information technology hardware/
          office automation equipment/related services*                                    $80.8
          Information technology software developmentl                             -
          system maintenance                                                               $54.4
          Mortgage accounting/claims processing                                            $47.2
          Advertising for sale of HUD properties                                           $44.7
          Other professional/technical services                                            $41 .a
          Administrative management support services                              1
          Technical assistance to HUD funding recipients                          1        $20
                                                                                                  C
                                                                                                 .U

Note: This is a partial list of goods and services purchased in 1996, which totaled approximately $381 million.
*These services and equipment are being provided under a single major contract (no. #C-14703) with
Lockheed Martin Information Systems.

Source: Unverified data provided by HUD.




                                                                        GAO/RCED-97-132R    HUD Contracting
    30
ENCLOSURE1                                                                           ENCLOSZTREI




              Evolution of Field Procurement
                                (Prior to fiscal year 1992)
                  Housing staff in each field office perform contracting




                                 (Beginning in fiscal year 1992)
                          10 Regional Contracting Divisions perform
                                property disposition contracting




                           .
                                      (Beginning in fiscal year 1996)
       3 Administrative        Service Centers perform contracting for fieid offices in their
                                            geographic region




31                                                                GAOIRCED-97-132R   HUD Contracting
ENCLOSURE1                                               ENCLOSURE1




w            Field Procurement Databases

         0 Prior to 1995, field offices used a variety
           of systems to track field-directed
           contracts (ranging from handwritten logs
           to automated spreadsheets). .
         l   In 1995, Administrative Service Centers
             began using the National Contract
             Administrative Procurement System
             (NCAPS).




    32                                GAO/RCED-97-132R    HUD Contracting
ENCLOSURE I                                          ENCLOSURE I




GAJ Field Procurement Databases,
    continued
     l   When NCAPS was implemented, offices
         entered data differently. (Some entered
         historical data; others only entered new
         contracts. In some cases, new’task
         orders on contracts initiated prior to 1995
         were not entered.)
     l   NCAPS is so unreliable that it contains
         no reportable data.




33                                 GAO/WED-97-132R   HUD Contracting
ENCLOSURE I                                          ENCLOSURE I




QQ        Field Procurement Databases,
          continued
      l   NCAPS is a transitional system that was
          replaced during fiscal year 1997 by the
          HUD Procurement System.




34                                GAOiRCED-97-132R    HUD Contracting
ENCLOSURE I                                                   ENCLOSURE I




w            Program Information Systems That Contain
             Some Contracting Data
l        Numerous property‘ management and
         accounting information systems contain pieces
         of contracting data,, including:
     0 Single-family housing’s property management and
       accounting information system.
     l    Multifamily housing’s property management and
          accounting information system.
     l    The Federal Housing Administration’s (FHA)
          budget and accounting information system.




    35                                     GAO/RCED-97-132R   HUD Contracting
ENCLOSURE I                                                 ENCLOSURE I




~            Program Information Systems That Contain
             Some Contracting Data, continued

         l   Data from these systems cannot be
             pieced together to obtain a complete
             picture of field contracting because they
             contain
              0 property-specific rather than
                contract-specific information,
              l   data from different time periods, and
              0 data of variable reliability and
                completeness.




    36                                   GAOLRCED-97-132R    HUD Contracting
ENCLOSURE I                                          ENCLOSURE I




@Q Typical Goods and Services
   Purchased by HUD Field Offices
     0 Purchases related to real estate
       management activities, for example,
       l   general maintenance and repairs;
       l   roofing, plumbing, painting, and
           electrical work; and
       l   appraisals, advertising, and real estate
           closing services.




37                                 GAO/WED-97-132R   HUD Contracting
ENCLOSURE I                                              ENCLOSURE I




w           Typical Goods and Services Purchased
            by HUD Field Offices, continued

    l   Purchases related to mortgage insurance
        processing activities, for example,
        l   appraisals   and appraisal reviews;
        l   mortgage credit, underwriting, and
            construction cost analyses; and
        l   mortgage insurance endorsement
            processing.




38                                    GAO/RCED-97-132R    HUD Contracting
ENCLOSURE I                                          ENCLOSURE I




GJU Ginnie Mae Procurement Information
    Systems
     l   As of February 3; 1997, Ginnie Mae did
         not have an automated system for
         tracking its contracts.
     l   An automated tracking system is
         currently under development and
         expected to be operational by July 1997.




                                  GAO/RCED-97-132R   HTJD Contracting
39
ENCLOSURE I                                                        ENCLOSURE I




w          Summary Statistics on Ginnie Mae
           Contracting (as of Feb. 3, 1997)
      l    Open contracts totaled approximately
           $275.3 million.*
      l    Total number of current contracts was
           41 .
       l   Of the current contract dollars, 99
           percent were awarded using full and
           open competition.

*Total value of open contracts includes prior- and future-year
obligations.

Source: Unverified data provided by Ginnie Mae.




 40                                              GAO/WED-97-132R    HUD Contracting
 ENCLOSURE I                                                            ENCLOSURE I




GAB       Typical Goods and Services Purchased by
          Ginnie Mae (as of Feb. 1997)


                                                                            Dollars in
 Tvpe of good or service                                                     millions
 Central paying, factor collection, Real Estate Mortgage
 Investment Conduit                                                             $71.3
 issuer monitoring and monthly accounting                                       $50.1
 Master subservicer for manufactured, multifamily, and single                   $26.1
 family housina
 Legal services                                                                 $25.7 -
 Pool processing, certification, and transfer agent                             $24.1
 Financial assistance tasks                                                     $23.9
 Comoliance reviews of issuers and document custodians                          $22.4
1Financial advisor for multiclass securities                            I       $19.2 I
1Contract audit and compliance reviews                                  I         $5.0I
 Note: This is a partial list of goods and services purchased by open contracts as
 of February 1997. Total open contracts were valued at $275.3 million.

 Source: Unverified data provided by Ginnie Mae.




                   .
 41                                                  GAO/RCED-97-132R   HUD Contracting
ENCLOSURE I                                                       ENCLOSURE I




w    Summary Statistics on OFHEO
     Contracting (end of Mar. 1997)

     l    OFHEO had seven open contracts
          totaling approximately $14.4 million.*
      l   Three contracts were awarded.
          competitively, three were small business
          set asides, and one was awarded
          noncompetitively.


*Total value of open contracts includes prior- and future-year obligations.


Source: Unverified data provided by OFHEO.




42                                              GAWRCED-97-132R   HUD Contracting
 ENCLOSURE I                                                     ENCLOSURE I




@%3 Typical Goods and Services Purchased
    by OFHEO (as of Mar. 1997)

                                                   Dollars in
      Type of good or service                       millions
       ADP-related work                                         $6.0
       Financial simulation model                                4.5
       Information systems and technical                         1.5
       examinations
       Temporary personnel services                          1 .o
       Analysis of simulated cashflows                       0.7
       Study of executive compensation                       0.5
      1Credit ratings of enterprises                         0.2 1
      I Total                                              $14.4 I


Source: Unverified data provided by OFHEO.




 43                                          GAOIRCED-97-132R    HUD Contracting
ENCLOSURE I                                                   ENCLOSURE I




w              How HUD Appoints Experts and
               Consultants
      l       HUD’s Executive Personnel Management
              Division appoints experts and consultants
              for all offices.
          l    Consultants provide valuable and
               pertinent advice based on broad
               administrative, professional, or technical
               knowledge and experience.
          0 Experts have specialized education and
            experience enabling them to perform
            difficult tasks in a particular field.




                                           GAO/RCED-97-132R    HUD Contracting
 44
ENCLOSURE I                                              ENCLOSURE I




                                                                    --

c;zAQHow HUD Appoints Experts and
     Consultants, continued
 l       Appointments are governed by federal law
         (5 U.S.C. section 3109) and Office of
         Personnel Management regulations (5
         C.F.R. part 304).
 l       Appointments must be temporary or
         intermittent.
 l       Appointments may not be made
     l    to positions requiring Presidential
          appointment (unless individual is awaiting
           .        .            .    .       .      .
           ml aCtion on a PresI&ntiaI   vtment)-                         I




46                                    GAO/RCED-97-132R   HUD Contracting
ENCLOSURE I                                               ENCLOSURE I




w         How HUD Appoints Experts and
          Consultants, continued
     0 to Senior Executive Services positions;
     l   to managerial or supervisory positions;
     l   to perform work done by the agency’s regular
         employees;
     l   to fill in during staff shortages; or
     l   in anticipation of an individual’s being given a
         career appointment.




46                                     GAO/RCED-97-132R    HUD Contracting
ENCLOSURE I                                                         ENCLOSURE I




w        Summary Statistics on HUD’s Use of
         Experts and Consultants
     l   Between September 23, 1990, and February
         15, 1997, HUD hired 53 consultants and 37
         experts (typically about IO to 12 per year).
     l   HUD offices used the following number of experts
         and consultants during this period: Housing (26),
         Community Planning and Development (19), Public
         and Indian Housing (13), Administration (7), Fair
         Housing and Equal Opportunity (6), Office of the
         Secretary (5), Planning Development and Research
         (5), Congressional and Intergovernmental Relations
         (3), all other offices (6).


Source: Unverified data provided by Executive Personnel Management Division.




47                                               GAOIRCED-97.132R   HUD Contracting
ENCLOSURE I                                                             ENCLOSURE I




0           Summary Statistics oh HUD’s Use of
            Experts and Consultants, continued
        l    About 81% of the appointments were
            intermittent and about 16% were full-time.*
        l   The experts and consultants paid on an
            hourly basis (62%) averaged about .
            $39/hour; those paid on a daily basis (33%)
            averaged about $173/day; 4% of the experts
            and consultants were uncompensated.
        l   Obligations for appointments for fiscal years
            1993 to 1996 averaged about $171,000 per
            fiscal year.
    *Note: These percentages do not total 100 because these data were
    not readily available for three experts and consultants.
    Sources: Unverified data provided by Executive Personnel Management
    Division and the Office of Budget.




                                                     GAO/RCED-97-132R    HUD Contracting
 ENCLOSURE I                                                         ENCLOSURE I




m          Summary Statistics on OFHEO’s Use of
           Experts and Consultants
       l   Between September 23, 1990, and February
           15, 1997, OFHEO hired nine experts and no
           consultants.
       l   The experts were paid on an hourly-basis at an
           average rate of about $8l/hour.




Source: Unverified data provided by Executive Personnel Management Division.




 49                                               GAO/RCED-97-132R   HUD Contracting
ENCLOSURE II                                                                                                    ENCLOSURE II



            COMMENTS FROM THE U.S. DEPARTMENT OF HOUSING AND URBAN
                                 DEVELOPMENT

                                               U. S. Department   of Housing     and Urban Development
                                                              Washuglm.     D.C. 20410-2.x0




         OFFICE OF THE ASSISTANT   SECRETARY
         FOR ADMlNlSTRATlON




          Ms. Judy A. England-Joseph
          Director,   Housing and Community Development   Issues
          Resources,   Community and Economic Development    Division
          United States General Accounting    Office
          Washington,   DC 20548
          Dear Ms. England-Joseph:
                This is in response         to your letter     dated April   10, 1997,
          which forwarded     your proposed       report   Procurement:     Overview  of
          HUD's Contractina      Activities      (GAO/RCED-97-132R)     for review   and
          comment prior     to its release.         Our comments are enclosed.
                We appreciate             the opportunity                   to comment and you can expect
          our full     cooperation           on any further                   audit work that you deem
          appropriate.
               Please direct              any       questions             concerning          these      comments   to me
          on (202) 708-1290.
                                                                  Sincerely,



                                                                  Craig&.    Durkin
                                                                  Director
                                                                  Office   of Procurement                  and Contracts
          Enclosure




50                                                                                             GAO/RCED-97-132RHUD          Contracting
ENCLOSURE11                                                                                     ENCLOSURE II



       HUD Comments on Draft             GAO Report qqProcurement:              Overview      of HUD's
       Contractina Activities             (GAO/RCED-97-132R).
       Transmittal            Letter
       1.       The characterization           of NCAPS data as "incomplete                and
                unreliable"       should be tempered by the recognition                    that it
                was a transitional          system designed        in 90 days.          Its purpose         SW   CoIIlIIIctl~   1,
                was to provide        the newly created          Administrative        Service
                Centers      (ASCs) a means to track their              contract      workload     with
                a common set of data fields              and definitions.           System edits
                were minimal        in recognition       that NCAPS was an incremental
                step towards ONE system that would contain                      Headquarters       and
                Field contract        data, contain        all required       data fields        and
                necessary      edits    (e.g.,    those established          by the Federal
                Procurement       Data System),       as well as provide          links      to
                program customers and HUD's core accounting                      system.        The new    Seecomment 2.
                HUD Procurement        System (HPS) is now operational                 for OPC and
                the three ASC Contracting             Divisions.       This comment also
                applies     to the slides       describing       WField.Procurement
                Databases*,       pages 27 through         29.
       Slides
       i.       The pie charts          on page 22 ("Type of Competition                Used") may         See comment3.
                lead to the distorted             conclusion       that HUD used non-
                competitive        means to contract          for 29 percent       of its new
                contracts       and 22.7 percent         of its task orders.            More
                accurately,        24.3 percent        (new contracts)        and 18.2 (task
                orders)     were awarded via the SBA-8(a) program,                    a category
                viewed as "not available              for competition".           (This reporting
                convention        was established        by the Office        of Federal
                Procurement        Policy     when agencies        were required      to file    an
                "Annual Report on Competition"                 pursuant     to the Competition
                in Contracting          Act of 1984.'       That reporting       requirement      was
                eliminated       'by the Federal        Acquisition      Streamlining      Act of
                1994 * NOTE: HUD's averaue performance                      documented in the
                reports     filed     from FY 1991 through            1994 was:     ACTIONS
                COMPETED = 94.25%; DOIJXIS COMPETED = 95.75%; EXCLUSIONS =
                103 actions        obligating      $134 million.         These reports       are
                available       for review      in the Office         of Procurement      and
                Contracts.)

              Executive      agency use of the 8(a) program is authorized                          by
              statute     (the Small Business             Act)    and the FAR doesn't           require
              a written      justification         outlining        the rationale        for p&
              using competitive            procedures.         From your pie charts,            only
              4.7 percent        (new.contracts).         and 4.5 percent          (task orders)
              were awarded based on a required                    kitten     justification         for'
             .using    "Other than Pull and Open Competition"                        procedures.
              That is amore           accurate     portrayal        of ElJD's competitive
            . contracting       performance.
                                 -
                                                                       .




51                                                                           GAO/RCED-97-J32R         HUD Contracting
ENCLOSURE Ii                                                                                        ENCLOSURE II



         2.      Similar    to the comments immediately               above, the slide     on page                  See commcn
                 24 should     indicate       that the instances          used by HUD to award
                 contract     actions      using the 8(a) program are "not available
                 for competitionI@.           When the 8(a) program is used, the FAR
                 doesn't    require       competition      for acquisitions      of services      if
                 the anticipated          contract     award price      is not expected    to
                 exceed $3 million.             Further,     SBA treats     this threshold     as a
                 requirement,       i.e.,     they do not want 8(a) firms to incur              bid
                 and proposal       costs for acquisitions            under the $3 million
                 threshold     and generally          will   not accept agency offers        to
                 conduct    an 8(a) competition            below that amount.
         3.      The slides         on pages 27 through            29 concerning          "Field                   See comment 1
                 Procurement         Databases"          should be revised         to deal with the
                 comments made above concerning                    the transmittal            letter      and
                 its discussion             of the NCAPS system.            NCAPS was designed
                 quickly      to meet a pressing              need for a Field-only               procurement
                 tracking       system because there was no existing                        system-        The
                 lack of an existing                system was due to a variety                 of factors
                 that HUD has successfully                   addressed.       Originally,          Field
                 contracting         in support          of FHA's Real Estate Owned (REO)
                 programs was performed                  by Housing program staff               as a
                 collateral         duty.       During that time, REO contract                    actions
                 were recorded            in the SAMS (single           family)      and PMS
                  (multifamily)          systems which are referenced                 on the charts           on
                 pages 30 and 31.               These systems have a property                   management
                 focus-       They were never intended                as contract         reporting,
                 tracking       or management systems (like                 the OPC MIS, NCAPS or
               - now, HPS).          The transfer           of the contracting          function        to a
                 full-time        staff       of contracting       professionals          closed       a long-
                 standing       finding        of material       weakness (Federal           Managers
                 Financial        Integrity         Act).     Once realigned,         Field       and
                 Headquarters           procurement        managers worked together                to develop
                 a short-term           (NCAPS) and long-term             (HPS) plan to address
                 HUDfs procurement               information      needs.
                  That plan resulted           in the development         and implementation       of
                  NCAPS within         SO days.      NCAPS was an intentional          short-term,
                  limited     use system (internal          procurement      tracking     and
                  workload      management)       that would be discarded          once the new,
                  single,     client-server         system (HPS) was developed.            While the
                  GAO report       is accurate       in characterizing       the flaws in NCAPS
                  data,    it leaves       the impression      that N$APS was supposed to
                  address the flaws,          which it was noto           NCAPS was never
                  intended      to have the kinds of edits             and controls     that GAO
                  would.expect         to find in a Department-wide            procurement
                  management system.             HPS does have those features           and is now
                  operational        in Headquarters       and the Field.




52                                                                                 GAO/BCED-97-132RHUDContracting
ENCLOSURE II                                                                              ENCLOSUREII



       4.   The charts       characterizing         the single      family    and multifamily          See comment 4.
            property      management and accounting              information      systems on
            pages 30 and 31 imply that these systems (SAMS and PMS,
            respectively)         are contract        management systems that are
            flawed.       This is not the case (see comment 4. above).                       These
            systems fulfill          their    intended     function--      to track
            properties       in the FHA inventory            and their     associated    costs.
            They do not contain            contract     management information,
            although      various      *lworkaroundsl*     have been used over the years
            to derive      or estimate        Field    contract     data because it could
            not be obtained          through     any other means.
       5.   A clarifying      comment should be added to the asterisked
            footnote     at the bottom  of page 35, as follows:
                   "Total    payments to GNMA contractors              averages     $38
                   million    per year."




53                                                                       GAO/RCED-97-132R       HUD Contracting
ENCLOSURE II                                                             ENCLOSURE II

The following are GAO’s comments on the Department of Housing and Urban
Development’s letter, which was forwarded on April 29, 1997.


GAO’S COMMENTS

1.    HUD acknowledges that our characterization of the data provided from the
      National Contract Administrative Procurement System (NCAPS) as “incomplete
      and unreliable” is accurate but states that the system was never intended to
      have the kinds of edits and controls that GAO would expect to tid in a
      Department-wide procurement management system. Instead, HUD notes that
      the system was intended to be a transitional system and that it was recently
      replaced by the HUD procurement system, a system containing both
      headquarters and field contract data. Our report recognized NCAPS’
      transitional nature. However, the system’s limitations contiued to leave the
      agency in a position of not having reliable information on field procurement
      activities.

2.    HUD states that the new procurement system is now operational in
      headquarters and the field. However, field contracting officials told us that as
      of the end of April 1997 they were stiu resolving problems that arose when
      NCAPS data were put into the system. They hoped these problems would be
      resolved quickly, but until then they were not entering data on current
      contracts into the system.

3.    To categorize the t3Tpeof competition used in HUD contracting, we used the
      data fields contained in HUD’s headquarters procurement information database
      (MIS/pc). HUD’s award of contracts under the provisions of the Small Business
      Administration’s S(a) program are included in the category “authorized by
      statute.” The data we presented were not intended to imply that HUD was
      making inappropriate use of noncompetitive contract awards. In fact, our
      report clearly notes that awards to small, disadvantaged businesses is a
      noncompetitive award category that is authorized by statute.

4.    We disagree. Our report clearly labels the single-family and multifamily
      property management and accounting information systems as “program
      information systems that contain some contracting data.” We mention them
      only to highlight the point that, while they contain some limited contracting
      data, historical information on field contracting comparable to the information
      available on headquarters contracting does not exist.



 54                                                         GAOIRCED-97-132R   HUD Contracting
ENCLOSURE III                                           ENCLOSURE III

                MAJOR CONTRIBUTORS TO THIS REPORT

HOUSING AND COMMTJNITY DEVELOPMENT ISSUE AREA
Richard Hale, Assistant Director
Robert Antonio
Janet Boswell
Eugene Chuday
Patricia Donahue
Larry Goldsmith
Woodliff Jenkins
Joan Mahagan

DESIGN, METHODOLOGY, AND TECHNICAL ASSISTANCE GROUP
Barbara Johnson

GRAPHICS ASSISTANCE GROUP
Lynne Goldfarb

OFFICE OF THE GENERAL COUNSEL
John T. McGrail




(385662)


55                                          GAO/RCED-97-132R   HUD Contracting
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