January 27, 2010

On January 21, HUD held a conference call with Section 8 Performance-Based Contract Administrators (PBCA) and HUD contract administration staff on its proposed new Annual Contributions Contract (ACC) ACC and PBCA rebidding process.  Their presentation was similar to the one they gave at NCSHA’s HFA Institute on January 14. 

Deborah Lear, Director of HUD’s Office of Housing Assistance Contract Administration Oversight  (HACAO), and Lewis Suiter, HACAO Deputy Director, provided an update on HUD’s revision of the ACC and its plans to rebid all the PBCA contracts.  Lear explained that HUD needs to respond to the two recent reports from the HUD Inspector General (IG), which found that HUD’s PBCA contract was not cost-effective and HUD’s monitoring of the PBCAs was inadequate.  The first report stated that HUD failed to adequately control costs, protect resources from waste, emphasize quality in performance standards, and require sufficient collection of information.  The IG stated that HUD needs to determine the most cost-effective method of obtaining contract administration services.  The second report concluded that HUD’s Annual Compliance Reviews (ACRs) and monthly remote monitoring were inadequate and that HUD’s policies and procedures were unclear and inconsistent.

Lear also provided an updated timeline for the PBCA program revisions.  She explained that HUD is still accepting comments on the draft revised ACC, including the information most recently presented.  PBCAs may send comments to:  PBCA_ACC_Revisions@hud.gov.  Lear estimated that the revised ACC will be released within the next few weeks and that HUD will accept final external comments for 30 days after its issuance.  She expects to publish the Invitation for Application in the second quarter of Fiscal Year (FY) 2010, approximately on March 1.  There will be a 60-day posting period before PBCA applications are due.  HUD plans to award all PBCA contracts by September 2010 and transition the portfolio to new PBCAs by January 1, 2011.

Lear and Suiter’s presentation described several critical new changes to the ACC, which will impact the bidding process as well as the PBCAs’ long-term budgeting and resource management.  These changes include:
 

  • All PBCAs must achieve 100 percent Acceptable Quality Level (AQL) performance in all program activities or risk being penalized with a Disincentive Deduction, or a reduction in the monthly fee amount;
  • Applicants must ensure that profit does not exceed 10 percent of total costs;
  • The ACC will be for a two-year initial term, with two one-year renewal options;
  • Performance will be evaluated on a monthly basis;
  • Applicants must define and document their direct and indirect costs based on directives from the federal Office of Management and Budget (OMB);
  • If program costs increase, the PBCA’s administrative fee amount may increase, but the profit percentage and fee percentage cannot exceed the percentage proposed and accepted by HUD.  There is no “floor” or minimum established for the profit or fee percentages; and
  • Incentive fees have been eliminated.
     

Following Lear’s presentation, many state HFAs attending the HFA Institute expressed strong concerns about these changes to the PBCA program.  Many expressed dismay that HUD seems to be responding to the IG’s criticism of HUD’s poor management practices by imposing onerous cost controls and significant risk upon the PBCAs, which historically have performed extremely well and saved the federal government significant costs over the past 10 years.  Some states raised concerns that they may not be able to cover their costs in administering the PBCA program under these new directives.

Lear said the proposed ACC is still in draft form and HUD welcomes suggestions for improving it.  NCSHA will provide written comments to HUD, expressing the concerns raised by state HFAs, as quickly as possible.  Please send any recommendations to Ellen Lurie Hoffman as soon as possible.  In addition, we encourage all state HFAs planning to participate in the PBCA bidding process to send in your own comments to HUD. 

NCSHA will continue to inform key congressional staff about the PBCA program as events unfold and enlist congressional support as necessary to achieve NCSHA’s priorities.