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Posted by on Sep 25, 2012

GAO Sustains Housing Agencies’ Protest for HUD’s Improper Use of Cooperative Agreements

The Government Accountability Office (GAO) recently sustained protests by several housing agencies who asserted that the Department of Housing and Urban Development’s (HUD) use of a notice of funding availability (NOFA) was improper in seeking to obtain contract administration services.   Instead, the protesters contend, HUD should have used a procurement instrument for these services. (GAO B-406738)

In March of this year, HUD issued a NOFA providing for cooperative agreements to be issued to public housing agencies (PHA) for the administration of Project-Based Section 8 Housing Assistance Payment (HAP) contracts.  The NOFA stated that the awards would be a contract between the PHA and HUD to administer Section 8 contracts as a Performance-Based Contracts Administrator.  The PHAs would receive an administrative fee to pay for operating expenses while administering the contracts under HUD regulations.

The protesters argue that HUD improperly used a NOFA for contract administration services that should be solicited through a procurement instrument.  The GAO noted that its jurisdiction does not extend to disputes over cooperative agreements, so it must first determine whether the instrument was correctly used.  Contending that cooperative agreements were the appropriate instrument, HUD maintained that the principal purpose of the contracts between the agency and the PHAs was to assist states and local governments by having the PHAs administer the contracts.  The agency further argued that the NOFA transfers a thing of value to the PHAs by providing the administrative fees.

The GAO rejected HUD’s arguments and found that the PHAs act only as a conduit for the funds and that they have “no right to retain or use for the purposes any of the funds it receives for payment to the property owners.”  The GAO agreed that the administrative fee could be considered a “thing of value”, but did not agree that the principal purpose of the fee was to assist the PHAs in the performance of their mission.  The GAO concluded that the “principal purpose of the NOFA and [contracts] to be awarded under the NOFA is for HUD’s direct benefit and use.”

The GAO’s recommended that HUD cancel the NOGA and instead use a procurement instrument  that will result in the award of contracts.

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