On September 28, LeadingAge submitted comments to HUD on its draft solicitation for Project-Based Contract Administrators (PBCAs), to be renamed Housing Assistance Payment Contract Support Services (HAPPS). Because of the Contract Administration program’s close relationship with housing providers, HUD’s planned overhaul of the program will have an enormous impact on project-based Section 8 residents and communities.

Under the project-based Section 8 program, HUD provides monthly rental assistance payments to 1.2 million households through Housing Assistance Payment (HAP) contracts with private property owners. To support these contracts, HUD procures services of contract administration, including to conduct Management and Occupancy Reviews (MORs), renew HAP Contracts, adjust HAP Contract rents, investigate and address tenant concerns, process monthly vouchers, and provide monthly, quarterly, and annual reports on an assigned portfolio of projects.

Currently, HUD partners with PBCAs to conduct 90% of the day-to-day monitoring and oversight of the HAP contracts. PBCAs provide enhanced oversight and strong relationships between stakeholders – including housing organization sponsors, front-line operators, state-based contractors, and HUD asset management and oversight compliance staff.

After years in the making, HUD took official steps earlier this summer to develop a new solicitation for the contract administrators. HUD suspended PBCA management and occupancy reviews from 2011 to 2016 in response to litigation filed against HUD over how it chose PBCAs; HUD last published a draft solicitation in 2016, but never finalized it.

LeadingAge’s comments to the agency state: “LeadingAge remains a strong advocate for the value of the Contract Administration program; while the current PBCA contracting and financial payment structure needs improvement, we urge HUD to reconsider several proposed new approaches to contract administration as outlined in the agency’s draft solicitation.”

The comments go on to say that “in addition to ensuring quality contract administration and robust oversight of housing provision throughout the HUD Multifamily Housing portfolio, LeadingAge’s primary interest in the proposed new HAP contract services procurement effort is to ensure a non-disruptive transition to improved, stabilized, and streamlined contract administration.”

Proposed Changes to the Contract Administration Structure

The current draft solicitation proposes several major changes to HUD’s contract administration structure. Among other changes, HUD has proposed a shift in procurement based on regional geography, which would reorganize the contract administration along the five HUD MF regions, each with three subregions. This will take the current state-driven PBCA universe of more than 50 contractors down to 15, and significantly alter the eligible entities for the procurement, which currently consist to a large extent of public housing authorities and state housing finance agencies that represent state-wide (or territory-wide) jurisdictions. HUD appears to be filling the role of a national oversight body over the regional and sub-regional contract administrators, although its unclear from the draft solicitation how HUD plans to manage staff capacity.

LeadingAge’s comments to the agency state that “a shift of this nature will have massive impacts on the administration of project-based Section 8 contracts held by affordable senior housing providers,” with many thousands of housing communities throughout the country shifting administrators.

The proposed approach also seems to indicate a recapture by HUD of authority presently granted solely to the contract administrators. This shift involves an additional layer of involvement by HUD in approving certain standard property transaction processing and appeals requests by owners, among other routine tasks.

Lastly, HUD also proposes a change in the payment structure to “task order” contracts under which a contractor is assigned a specific task and payment amount, rather than a scope of work or time. The draft solicitation misses opportunities to implement improvements recommended by a Deloitte report, prepared for HUD in 2016, such as requiring standardized data aggregation or implementing a national oversight structure.

Recommended Improvements to HUD’s Draft Solicitation

LeadingAge’s comments to the federal agency recommend the following changes:

• Minimizing Disruptions in Transition: Many thousands of housing communities throughout the country will be shifting to new contract administrators next year if HUD’s solicitation becomes final, and many housing organizations will experience a split in their respective administrators throughout their portfolios, even within the same metro area, based on the subdivision along subregional lines. HUD should anticipate, and take steps to minimize, the expected loss of valuable state/local knowledge, long-standing relationships, and commitment to a common mission; HUD should prioritize steps that avoid issues related to data transfer to new contractors, disruptions of operational processing, communication breakdowns, and gaps in oversight that impact resident quality of life.
• Requiring Standardized Data Transfers: HUD’s current draft solicitation to overhaul the contract administration procurement does not clarify how HUD intends to implement a Deloitte report recommendation to advance aggregate data oversights of HUD’s contracts and processes nationwide. Each contract administrator current navigates data based on their own systems, which does not support consolidation or cohesion across HUD’s portfolio. LeadingAge urges HUD to use the rebid process as an opportunity to strengthen data sharing, leveraging, and oversight throughout the portfolio’s contract administration.
• Streamlining Contract Administration: Sustainability of assisted housing properties depends on timely renewals, adequate adjustments to reserves, and accurate rent setting and yet HUD’s current draft solicitation seems to indicate a recapture by HUD of authority presently granted solely to the contract administrators. This shift involves authority to approve several routine property transaction processing and appeals requests by owners, such as Special Claims processing and MOR follow-ups. Requiring HUD sign-off on Special Claims requests and other standard property operations will only add layers of delay and disruption to asset management. Instead, HUD should continue to delegate authority where possible to streamline the contract administration process, while retaining the authority to intervene as needed to promote property viability and resident wellbeing.
• Achieving Stability and Consistency: We seek clarity on HUD’s approach with regard to creating country-wide consistency and cohesion regarding contract administration, and through it, quality assurance over HUD MF’s affordable rental housing. HUD does not fully explain how it intends to achieve national-level oversight of regional contractors in its newly proposed capacity. The new structure, paired with HUD’s proposal to recapture certain authorities (as described above), necessitates an increase in HUD staffing capacity to meet demand. We urge HUD to provide more information about its intended quality assurance and national cohesion plan for CA oversight.
• Adjusting Payment Structures: HUD has proposed initial 12-month contracts with four 12-month renewal options. To enhance stability and consistency among contracts, we instead recommend multi-year contracts with additional renewal options, with the already included explicit ability for HUD to cancel contracts for non-performing contract administrators. The contract structure is further described as being “secured through the issuance of task orders.” The task order approach is vulnerable to disruptions in work that exceeds the initially-projected scope, timing, or funding of a specifically contracted task. We urge HUD to clarify how time-sensitive tasks related to HAP contracts will be completed should they be disrupted through the task order approach to contract administration.

Most PBCA contracts expire in 2023, with options for term extensions. HUD says it will assess all comments received to develop a final, formal solicitation, with the intention of having new contracts in place before any lapse of service to residents.

Read LeadingAge’s comments to the agency here, and stay tuned for more updates on the contract administration rebid.