HUD Management
Actions Needed to Improve Acquisition Management Gao ID: GAO-03-157 November 15, 2002In the 1990s the Department of Housing and Urban Development (HUD) dramatically downsized its staff, however, its mission did not decrease. As a consequence, HUD relies more heavily on private contractors, and needs to hold its contractors accountable for results. GAO was asked to determine if HUD has processes and practices in place to effectively oversee contractors, strategically manages its acquisition workforce, and has management information systems that support its acquisition workforce.
HUD's contracting has increased significantly in recent years. Although HUD has taken actions to improve its acquisition management--such as instituting full-time contract monitoring positions and improving its contracting information system--weaknesses remain that limit HUD's ability to identify and correct contractor performance problems, assure that it is receiving the services for which it pays, and hold contractors accountable for results. HUD, in particular, its multifamily housing program, does not employ processes and practices that could facilitate effective monitoring. For example, HUD's monitoring process does not consistently include the use of contract monitoring plans or risk-based strategies, or the tracking of contractor performance. HUD has not ensured that individuals responsible for managing and monitoring contracts have the appropriate workload, skills, and training that would enable them to effectively perform their jobs. For example, according to HUD's records, over half of the staff who are directly responsible for monitoring contractor performance have not received required acquisition training. HUD's management information systems do not adequately support its acquisition workforce in their efforts to manage and monitor contracts. Specifically, key information in HUD's contracting system is not reliable and HUD's financial systems do not readily provide complete and consistent contracting obligation and expenditure data.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-03-157, HUD Management: Actions Needed to Improve Acquisition Management
This is the accessible text file for GAO report number GAO-03-157
entitled 'HUD Management: Actions Needed to Improve Acquisition
Management' which was released on November 15, 2002.
This text file was formatted by the U.S. Government Accountability
Office (GAO) to be accessible to users with visual impairments, as part
of a longer term project to improve GAO products' accessibility. Every
attempt has been made to maintain the structural and data integrity of
the original printed product. Accessibility features, such as text
descriptions of tables, consecutively numbered footnotes placed at the
end of the file, and the text of agency comment letters, are provided
but may not exactly duplicate the presentation or format of the printed
version. The portable document format (PDF) file is an exact electronic
replica of the printed version. We welcome your feedback. Please E-mail
your comments regarding the contents or accessibility features of this
document to Webmaster@gao.gov.
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed
in its entirety without further permission from GAO. Because this work
may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this
material separately.
United States General Accounting Office:
GAO:
Report to Congressional Requesters:
November 2002:
HUD Management:
Actions Needed to Improve Acquisition Management:
GAO-03-157:
GAO Highlights:
Highlights of GAO-03-157, a report to the Senate Committee on Banking,
Housing and Urban Affairs and Subcommittee on Housing and
Transportation.
Why GAO Did This Study:
In the 1990s the Department of Housing and Urban Development (HUD)
dramatically downsized its staff, however, its mission did not
decrease. As a consequence, HUD relies more heavily on private
contractors, and needs to hold its contractors accountable for results.
GAO was asked to determine if HUD has processes and practices in place
to effectively oversee contractors, strategically manages its
acquisition workforce, and has management information systems that
support its acquisition workforce.
What GAO Found:
HUD‘s contracting has increased significantly in recent years. Although
HUD has taken actions to improve its acquisition management--such as
instituting full-time contract monitoring positions and improving its
contracting information system--weaknesses remain that limit HUD‘s
ability to identify and correct contractor performance problems, assure
that it is receiving the services for which it pays, and hold
contractors accountable for results.
* HUD, in particular, its multifamily housing program, does not employ
processes and practices that could facilitate effective monitoring. For
example, HUD‘s monitoring process does not consistently include the use
of contract monitoring plans or risk-based strategies, or the tracking
of contractor performance.
* HUD has not ensured that individuals responsible for managing and
monitoring contracts have the appropriate workload, skills, and
training that would enable them to effectively perform their jobs. For
example, according to HUD‘s records, over half of the staff who are
directly responsible for monitoring contractor performance have not
received required acquisition training.
* HUD‘s management information systems do not adequately support its
acquisition workforce in their efforts to manage and monitor contracts.
Specifically, key information in HUD‘s contracting system is not
reliable and HUD‘s financial systems do not readily provide complete
and consistent contracting obligation and expenditure data.
Figure: Photograph of sidewalks at HUD property.
What GAO Recommends:
GAO makes several recommendations regarding HUD‘s management of its
acquisitions. For example, (1) HUD staff should systematically use
contract monitoring plans as well as a risk-based approach to
monitoring, (2) HUD should address workload disparities among its
acquisition workforce and ensure that appropriate training is provided,
and (3) HUD should improve the usefulness of its contracting
information system by providing training to staff.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-03-157].
To view the full report, including the scope and methodology, click on
the link above. For more information, contact Stanley J. Czerwinski
(202) 512-5535.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
HUD Has Increased Contracting Activities and Taken Steps to
Improve Acquisition Management:
HUD Does Not Employ Certain Processes and Practices that Would
Facilitate Effective Contractor Monitoring:
HUD Does Not Strategically Manage Its Acquisition Workforce:
Weaknesses in Programmatic and Financial Management Information
Systems:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: Scope and Methodology:
Appendix II: Sampling Methodology for GAO Survey of HUD‘s Acquisition
Management Reforms:
Objectives:
Scope and Methodology:
Study Population:
Sample Design:
Estimates:
Sampling Error:
Nonsampling Error:
Survey Development:
Survey Administration:
Appendix III: Analysis of the HUD Procurement System (HPS) Identified
Discrepancies in HUD‘s Contracting Data:
Appendix IV: HUD‘s Financial Management Information Systems that
Contain Contracting Obligation and Expenditure Information:
Appendix V: Comments from the Department of Housing and Urban
Development:
GAO Comments:
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Acknowledgments:
Tables:
Table 1: Contract Obligation Data from HUD‘s Programmatic and Financial
Management Information Systems for Fiscal Years 1999 and 2000:
Table 2: Description of Sample:
Figures:
Figure 1: HUD Contracting Dollars by Category of Service for Fiscal
Year 2000:
Figure 2: HUD Contracting Obligations for Fiscal Years 1995 to 2000 in
2001 Constant Dollars:
Figure 3: Sidewalk Repairs at HUD Property:
Abbreviations:
CO: Contracting Officer:
CCARS: Cash Control Accounting Report System:
CS: Contract Specialist:
CSMS/PMS: Comprehensive Servicing and Monitoring System/Property
Management System:
FAR: Federal Acquisition Regulation:
FCO: Field Contracting Operations:
FHA: Federal Housing Administration:
FPDC: Federal Procurement Data Center:
GAO: General Accounting Office:
GNMA: Government National Mortgage Association:
GTM: Government Technical Monitor:
GTR: Government Technical Representative:
HOC: Homeownership Center:
HPS: HUD Procurement System:
HUD: Department of Housing and Urban Development:
HUDAR: HUD‘s Acquisition Regulation:
HUDCAPS: HUD‘s Central Accounting and Program System:
LOCCS: Line of Control and Credit System:
NAPA: National Academy of Public Administration:
OIG: Office of the Inspector General:
OCPO: Office of the Chief Procurement Officer:
OFPP: Office of Federal Procurement Policy:
PAS: Program Accounting System:
REAP: Resource Estimation and Allocation Project:
REO: Real Estate Owned:
SAMS: Single Family Acquired Asset Management System:
[End of section]
United States General Accounting Office:
Washington, DC 20548:
November 15, 2002:
The Honorable Paul S. Sarbanes:
Chairman:
Committee on Banking, Housing, and Urban Affairs:
United States Senate:
The Honorable Jack Reed:
Chairman:
Subcommittee on Housing and Transportation:
Committee on Banking, Housing, and Urban Affairs:
United States Senate:
The Honorable Wayne Allard:
Ranking Minority Member:
Subcommittee on Housing and Transportation:
Committee on Banking, Housing, and Urban Affairs:
United States Senate:
The Department of Housing and Urban Development (HUD) assists millions
of Americans through programs that help to encourage home ownership,
house the poor, and promote economic development. To accomplish its
mission, HUD relies on the integrity of thousands of third parties”such
as private lenders, contractors, nonprofit organizations, and local
governments. As HUD dramatically downsized its staff in the 1990s” from
about 13,500 people to around 9,000 today”the scope of its mission
and the needs of the people it serves did not decrease. As a
consequence, HUD came to rely more and more on private contractors to
help carry out its mission. These contractors deliver programs and
perform many functions that used to be done by HUD‘s staff, including
those in its mortgage insurance and rental assistance program
areas”areas we have found to be at high risk for fraud, waste, abuse,
and mismanagement.[Footnote 1] To guard against fraud, waste, abuse,
and mismanagement, HUD needs effective oversight processes and staff
with the right skills and training who are equipped with the right
tools and information to ensure the fulfillment of HUD‘s mission and to
protect the integrity of and accountability over its programs.
You asked us to study HUD‘s acquisition management as part of your
broad request for a series of our reports on HUD management issues.
[Footnote 2] In this report we discuss the challenges HUD faces in
overseeing its contractors, focusing specifically on (1) trends in
HUD‘s contracting activity and efforts to improve its acquisition
management; (2) whether HUD has effective processes and practices to
effectively manage and monitor contracts; (3) whether HUD ensures that
its acquisition workforce has the appropriate workload, skills, and
training to manage and monitor contracts; and (4) whether HUD‘s
programmatic and financial management information systems support the
acquisition workforce in managing and monitoring contracts.
To assess HUD‘s oversight of its contracts, we reviewed HUD‘s
contracting policies and procedures. We focused on contracts in the
Office of Multifamily Housing because, among other things, in fiscal
year 2001, Multifamily Housing processed the second highest number of
purchase orders and contracts that obligated funds”about 25 percent of
these transactions. In a related assignment, we also reviewed fiscal
year 2001 disbursements under multifamily housing‘s property
disposition contracts using an automated approach to identify unusual
transactions and payment patterns.[Footnote 3] To assess the workload,
skills, and training of the acquisition workforce, we conducted a
survey of HUD‘s acquisition workforce and obtained information on
training and certification of the acquisition workforce, both in the
Office of the Chief Procurement Officer (OCPO) and at the program
level. To determine whether HUD‘s programmatic and financial management
systems support contract oversight, we analyzed contracting data from
the various systems that record contracting transactions.
Results in Brief:
HUD contracting has increased significantly in recent years and the
department has taken corrective actions to improve its acquisition
management. According to HUD, its commitments for contract work
increased by about 62 percent between fiscal years 1997 and 2000, from
about $786 million to almost $1.3 billion (in 2001 constant dollars).
Much of this increase in contracting activity is attributed to the
decline in the number of HUD staff and the need to contract for
activities previously done by HUD employees and new functions, such as
the physical building inspections of public housing and multifamily
projects that were initiated under recent management reform. HUD
expects contracting to increase, partially due to a presidential
initiative to increase competition between the public and private
sectors for work currently done by federal employees. In response to
criticisms of past contracting practices, HUD undertook corrective
actions to improve acquisition management. These included instituting
full-time technical positions at the program level with responsibility
for monitoring contractor performance, a certification training program
for HUD staff filling those positions, and a contracting information
system to improve consolidation of contracting data and its integration
with HUD‘s financial systems. HUD also hired a chief procurement
officer and created a Contract Management Review Board to improve
contract administration and procurement planning. While HUD has taken
actions to improve its acquisition management, it still faces
significant challenges monitoring contractor performance, managing its
acquisition workforce, and ensuring the quality of data in its
programmatic and financial management systems.
The department, in particular its multifamily housing program, does not
employ certain processes and practices that could facilitate effective
monitoring and ensure contractors‘ accountability.[Footnote 4] HUD‘s
monitoring of its contractors is not systematic and is largely remote.
HUD‘s monitoring process does not consistently include the use of
contract monitoring plans or risk-based strategies, or the tracking of
contractor performance”which would be helpful in the administration of
such plans and strategies. According to our survey, only 23 percent of
HUD staff responsible for contract monitoring use a contract
administration plan, which the Office of Federal Procurement Policy
(OFPP) describes as essential for good contract administration. HUD‘s
monitoring of contractors consists mainly of reviews of progress
reports and invoices, telephone calls, and emails. When on-site visits
are conducted, they are often not conducted as intended, per HUD
guidance, and HUD staff are limited in their ability to follow up on
identified problems.[Footnote 5] In the absence of a systematic
approach to oversight and adequate on-site monitoring, the department‘s
ability to identify and correct contractor performance problems and
hold contractors accountable is reduced. The resulting vulnerability
limits HUD‘s ability to assure itself that it is receiving the services
for which it pays. In October 2002, we testified that a related review
of improper payments at HUD identified several examples of contractor
performance problems that illustrate the problems that can occur as a
result of these vulnerabilities.[Footnote 6] In one case, HUD paid five
invoices totaling $227,500 for 15,000 square feet of concrete to be
replaced when only about one third of that amount was actually
replaced. In another case, HUD paid for apartment renovations that were
not done. These examples demonstrate the need for HUD to adopt more
effective monitoring procedures.
In addition, HUD has not taken steps to ensure that individuals
responsible for managing and monitoring contracts have the appropriate
workload, skills, and training that would enable them to effectively
perform their jobs. For example, while a recent resource allocation
study identified workload disparities within HUD‘s primary contracting
office, HUD has not yet addressed the issues raised in that study.
While HUD has undertaken an organization-wide workforce planning
effort,[Footnote 7] HUD has not assessed the skills and capabilities of
its acquisition workforce to ensure that it has the skills to manage
and monitor the contracts for which they are responsible. In addition,
according to HUD‘s records, over half of the staff who are directly
responsible for monitoring contractor performance have not received
required acquisition training. HUD‘s procurement office management was
not aware that the staff were serving in that capacity without the
required training.
HUD‘s programmatic and financial management information systems do not
readily provide accurate and consistent data that supports its
acquisition workforce in their efforts to manage and monitor contracts.
The department‘s centralized contracting system does not contain
reliable information on the number of active contracts, the expected
cost of the contracts, or the types of goods and services acquired. In
addition, HUD‘s financial management information systems do not readily
provide complete and consistent obligation and expenditure information
for HUD‘s overall contracting activities or for individual contracts.
Five months after our request, HUD was unable to provide spending
information on 33 contracts. To compensate for weaknesses in formal
information systems, HUD staff overseeing contracts have developed
informal or ’cuff“ systems”personal spreadsheets to fulfill their job
responsibilities. While helping staff perform their jobs, these informal
systems are not subject to HUD‘s policies, procedures, or internal
controls to ensure that the information maintained in them”and used by
HUD‘s acquisition workforce to manage and monitor individual
contracts”is accurate. In addition, the programmatic and financial
management information systems do not provide HUD managers accurate and
timely information needed to oversee the department‘s contracting
activities, make informed decisions about the use of HUD‘s resources,
and ensure accountability in the department‘s programs.
HUD has already taken some actions to improve its acquisition
management. Many of the deficiencies we identified, particularly
related to HUD‘s human capital management and programmatic and financial
information systems, are long-standing and will likely require years to
resolve. However, HUD can take immediate steps to address certain
acquisition management deficiencies. In fact, many of the tools that
would help HUD address these deficiencies already exist, through HUD and
federal acquisition initiatives. This report makes recommendations that
HUD use some of these tools, which would lead to more systematic
contract monitoring, address planning and training requirements for its
acquisition workforce, and take steps to improve the accuracy and
utility of its centralized contracting management information system.
We provided a draft of this report to HUD for its review and comment.
HUD agreed that it faces significant long-standing challenges in
monitoring the performance of its contractors, managing its acquisition
workforce, and addressing weaknesses in its information systems. HUD
stated that it is taking actions to address our recommendations. For
example, to improve contract oversight and monitoring, HUD will require
each of its program organizations to review its policies and procedures
to ensure that they are clear, consistent, and risk-based. The
department also stated that it plans to take action to improve
management of its acquisition workforce and address weaknesses in its
information systems.
While HUD agreed with our recommendations, HUD said it believes that
its acquisition workforce is receiving required training because (1) it
has developed acquisition training for Government Technical
Representatives (GTR) in accordance with federal requirements and (2)
Government Technical Monitors (GTM) do not require the same level of
training as GTRs and are provided acquisition training appropriate to
their duties when needed.[Footnote 8] We agree that the department has
developed an acquisition training program for GTRs in response to
federal requirements. However, we found that a significant portion of
the department‘s GTRs have not had this training, and HUD did not
disagree with our finding. Furthermore, while we agree that GTMs may
not require the same level of training as GTRs, HUD policies permit the
duties and responsibilities of GTRs to be delegated to GTMs; and its
draft Acquisition Career Management Plan”which establishes training
requirements for HUD‘s acquisition workforce”states that the GTR
training requirements also apply to GTMs. Therefore, we remain
concerned that, according to HUD‘s records, 93 percent of HUD‘s GTMs
have not received any specialized acquisition training. We are,
however, encouraged by HUD‘s comment that it will continue to assess
the training needed for GTMs to more effectively monitor contractor
performance. The full text of HUD‘s comments and our response appear in
appendix V.
Background:
HUD encourages homeownership by providing mortgage insurance for single
family housing and makes rental housing more affordable for about 4.8
million low-income households by insuring loans to construct or
rehabilitate multifamily rental housing and by assisting such households
with their rent payments. In addition, it has helped to revitalize over
4,000 localities through community development programs. To accomplish
these diverse missions, HUD relies on third parties, including
contractors, to administer many of its programs. As shown in figure 1,
according to data HUD reported to the Federal Procurement Data Center
(FPDC), for fiscal year 2000, HUD obligated the bulk of its contracting
dollars”over 96 percent”in three categories of contracting: automated
data processing and telecommunications services for about $254 million;
operation of government-owned facilities for about $195 million for one
of its multifamily contractors; and over $600 million for professional,
administration, and management support services contracts, such as real
estate brokerage services, technical assistance, and other services.
Figure 1: HUD Contracting Dollars by Category of Service for Fiscal
Year 2000:
[See PDF for image]
This figure is a pie-chart depicting HUD contracting dollars by
category of service for fiscal year 2000. The following data is
depicted:
Professional, administrative, and management support: 56%;
Automatic data processing and telecommunications: 23%;
Operation of government-owned facilities: 18%;
Other: 3%.
Source: FPDC.
[End of figure]
According to HUD data, about $640 million of the $1.2 billion contract
obligations for fiscal year 2000 are for Office of Housing contracts;
much of this contracting was for services HUD needs to manage its
foreclosed single-family and multifamily housing inventory, which HUD
acquires when borrowers default on mortgages insured by the Federal
Housing Administration (FHA). According to HUD‘s fiscal year 2001 annual
performance report, the Secretary holds single-family property with a
value of about $2.4 billion and multifamily property with a value of
about $750 million as of September 30, 2001.[Footnote 9] In its single-
family program, HUD contracts for management and marketing contractors
who are responsible for securing, maintaining, and selling the houses
that HUD acquires when the owners default on their loans. HUD also
contracts for property management services, such as on-site management,
rent collection, and maintenance, for multifamily properties it
acquires through foreclosure. HUD‘s two largest multifamily property
management contractors have an obligated value of about $650 million
over 5 years.
Contracting is conducted in HUD‘s Office of the Chief Procurement
Officer (OCPO) in Washington D.C., or by one of HUD‘s three Field
Contracting Operations (FCO) offices located in Philadelphia,
Pennsylvania; Atlanta, Georgia; and Denver, Colorado. OCPO contracts
for information technology and other services in support of HUD
headquarters. FCO offices primarily contract for services related to
the business operations of HUD‘s field offices and specialized centers.
For example, contracting officers in one FCO assist HUD‘s two
Multifamily Property Disposition Centers (located in Atlanta, Georgia,
and Ft. Worth, Texas) in contracting for and overseeing the property
management contractors that are responsible for the day-to-day
management of foreclosed multifamily properties.
HUD‘s Office of Multifamily Housing field offices and two Property
Disposition Centers are responsible for the oversight of various
programs to provide affordable multifamily housing. The largest
multifamily contracts in the field are for the Property Disposition
Centers, which are responsible for management of foreclosed multifamily
properties. HUD‘s multifamily housing field offices”comprising 18 hub
offices and their associated 33 program centers”also contract for
inspections of the construction of multifamily properties built under
its FHA-insured and assisted multifamily housing programs, which are
for the construction of housing for the elderly and disabled. [Footnote
10] Multifamily Housing has four full-time GTRs located in Atlanta and
Ft. Worth who are responsible for monitoring most field multifamily
contracts; two GTRs are assigned to the Property Disposition Centers
and two are responsible for the construction inspection contracts. Most
of the field contracts are also assigned at least one GTMs, who is
designated to assist, on a part-time basis, the GTRs on the day-to-day
technical oversight of the contractors‘ performance.
Various federal laws, regulations, and policies govern contracting
operations and procedures. The Federal Acquisition Regulation (FAR)
establishes uniform policies and procedures for acquisitions by all
executive agencies. The FAR establishes procedures for all aspects of
the contracting process, from solicitation to post award monitoring,
including responsibilities of the various members of the acquisition
team such as the contracting officer. Also in 1974, the Office of
Federal Procurement Policy (OFPP) Act created OFPP within the Office of
Management and Budget to provide, among other things, government-wide
policies for agencies in procurement matters. OFPP‘s Guide to Best
Practices for Contract Administration recommends the use of a contract
administration plan for good contract administration. According to the
guide, this plan should specify the performance outputs and describe
the methodology used to conduct inspections of those outputs.
HUD supplements the FAR through its own regulations called HUD‘s
Acquisition Regulation (HUDAR) and its Procurement Policies and
Procedures Handbook. The handbook specifies various monitoring tools
that the GTR may use to monitor contractor performance, such as a
quality assurance plan, a contractor‘s work plan and schedule of
performance, or progress reports. The purpose of the monitoring is to
ensure that (1) the contractor performs the services and/or delivers the
products of the type and quality that the contract requires, (2)
performance is along the most efficient lines of effort, (3) performance
and deliverables are timely, (4) performance is within the total
estimated cost, and (5) HUD will be able to properly intervene when
performance is deficient. For example, according to the handbook, often
the best way for a GTR to determine the quality of the contractor‘s
performance is through an actual inspection of work or products.
Inspections may be routine, unannounced, or a combination of the two,
and the contract should specify any requirement for routine
inspections, such as the frequency and dates, or other occurrences that
would trigger an inspection. The handbook does not establish specific
monitoring requirements, such as timetables for review or numbers of
site visits; however, some of the policies established by individual
program offices do include such requirements. For example, the Office
of Multifamily Housing‘s Standard Operating Procedures No. 5 requires
that HUD staff visit construction sites at least twice during
construction to verify the performance of the inspection contractor who
is responsible for inspecting actual construction of the project.
The Clinger-Cohen Act of 1996 requires executive agencies, through
consultations with OFPP, to establish education, training, and
experience requirements for acquisition workforces at civilian
agencies. Under implementing guidance issued by OFPP, an agency‘s
acquisition workforce”including its contracting officers, contract
specialists, purchasing agents, contracting officer representatives,
and contracting officer technical representatives”must meet an
established set of contracting competencies.[Footnote 11] In addition,
OFPP has identified specific training requirements for personnel in the
contracting and purchasing occupation series. OFPP further required
that agencies have policies and procedures that specify career paths
and mandatory training requirements for acquisition positions and that
agencies collect and maintain standardized information on the training
of its acquisition workforce.[Footnote 12]
A strong internal control system provides the framework for
accomplishing management objectives, accurate financial reporting, and
compliance with laws and regulations. Effective internal controls,
including monitoring, serve as checks and balances against undesired
actions, thereby providing reasonable assurance that resources are
effectively managed and accounted for. A lack of effective internal
controls puts an entity at risk of fraud, waste, abuse, and
mismanagement. Monitoring is a particularly critical management control
tool for HUD because its housing programs rely extensively on various
third parties, such as contractors, to achieve HUD‘s goals. For many
years, HUD has been the subject of criticism for management and
oversight weaknesses that have made its programs vulnerable to fraud,
waste, abuse, and mismanagement. In January 2001, we recognized the
credible progress that HUD had made in improving its management and
operations, and we reduced the number of HUD program areas deemed to be
high risk to two of its major program areas”single family mortgage
insurance and rental housing assistance. These program areas include
the single family and multifamily property disposition activities cited
earlier and comprise about two-thirds of HUD‘s budget.
We, HUD‘s Office of Inspector General (OIG), and the National Academy
of Public Administration (NAPA) have reported on weaknesses in HUD‘s
contract administration and monitoring of contractors‘ performance over
several years. For example, starting in 1998, we reported on the
performance of HUD‘s single-family contractors”that HUD did not have
an adequate system in place to assess its field offices‘ oversight of
real estate asset management contractors. In three offices that we
reviewed, none of the offices adequately performed all of the functions
needed to ensure that the contractors met their contractual obligation
to maintain and protect HUD-owned properties. HUD‘s OIG completed a
comprehensive review of HUD‘s contracting operations in 1997 and found
that a lack of adequate planning, needs assessment, good initial
planning, monitoring, and cost control on several multimillion dollar
contracts left HUD vulnerable to waste and abuse. The OIG found
contract monitoring to be very lax throughout the program areas. The
GTRs and GTMs had a poor understanding of their roles and
responsibilities, allowing HUD to be overbilled, improperly authorizing
contract tasks, accepting less than complete contract work without
financial credits or adjustments, and could not document whether
certain tasks were completed. In a followup review in 1999, the OIG
reported that HUD‘s reforms had laid the groundwork for an effective
acquisition process; however, they concluded that HUD‘s contracting
attitudes and practices had not changed significantly. In May 1997,
NAPA, reported that HUD‘s procurement process took too long; FHA‘s
oversight of contracted services was inadequate; and FHA sometimes used
contracting techniques that limited competition.[Footnote 13] In 1999,
NAPA issued its final report on the results of their study and noted
that HUD had made progress toward improving its procurement processes.
[Footnote 14]
HUD Has Increased Contracting Activities and Taken Steps to Improve
Acquisition Management:
HUD‘s contracting obligations have been on an upward trend in recent
years; HUD reports that its contracting obligations increased from about
$786 million in fiscal year 1997 to almost $1.3 billion in fiscal year
2000 (in 2001 constant dollars), or about a 62 percent increase within
5 years.[Footnote 15] Much of this increase in contracting activity is
compensating for staff reductions in the early 1990‘s from about 13,500
to about 9,000 by March 1998 and the need to contract out for
activities previously done by HUD employees, and for new functions,
such as the physical building inspections of public housing and
multifamily insured projects, initiated under recent management
reforms. Figure 2 shows the change in HUD‘s contracting dollars from
fiscal year 1995 through fiscal year 2000 (in 2001 constant dollars).
Figure 2: HUD Contracting Obligations for Fiscal Years 1995 to 2000 in
2001 Constant Dollars (dollars in millions):
[See PDF for image]
This figure is a line graph depicting HUD contracting obligations for
fiscal years 1995 to 2000 in 2001 constant dollars. The vertical axis
of the graph represents dollars in millions from 0 to 1,400. The
horizontal axis of the graph represents fiscal years 1995 through 2000.
Notes: HUD reports that the contracting data are derived from various
procurement and financial reporting systems.
Source: HUD data.
[End of figure]
With recent management reform initiatives, HUD now contracts out for
many activities formerly done by HUD employees, as well as for new
functions. For example, HUD‘s Homeownership Centers (HOC) hired
contractors to review single-family loan files and issue mortgage
insurance. HUD staff, which formerly performed these functions, then
became contract monitors. HOCs also contracted out for a new type of
contractor to manage and market acquired single-family properties. They
also awarded other contracts to inspect 10 percent of the properties
handled by each of the management and marketing contractors and review
10 percent of the management and marketing contractors‘ property case
files each month. HUD‘s Office of Multifamily Housing contracted out
work previously done by HUD employees that included inspections of
repairs and inspections during construction of insured and assisted
multifamily properties.
The department expects its reliance on contracting to continue on an
upward trend. Although HUD‘s Deputy Secretary has expressed an interest
in possibly returning some of this contract work to HUD employees, the
President‘s fiscal year 2003 budget proposed that federal agencies make
at least 5 percent of the full-time equivalent positions that are
determined to be commercial activities subject to competition between
public and private sectors in fiscal year 2002 and an additional 10
percent in fiscal year 2003. HUD‘s fiscal year 2003 budget set a goal
of opening 290 additional HUD positions to competition in fiscal year
2003 and an additional 580 positions in fiscal year 2004. HUD is also
planning to renew some of its major contracts in the near future that
involve substantial financial commitments over an extended period of
time. HUD‘s fiscal year 2002 procurement forecast includes plans to
award new contracts for its major multifamily property management
activities, with an expected cost of $800 million over 5 years. HUD
also plans to award its new information technology systems contract
that is expected to cost about $2 billion over 10 years.
HUD Has Taken Several Steps to Improve Acquisition Management:
In response to weaknesses in its contracting administration and
monitoring reported by us, HUD‘s Office of Inspector General and NAPA,
HUD undertook a number of corrective actions to improve its acquisition
management in recent years.[Footnote 16] For example, HUD instituted
full-time GTR positions in its program offices to assist in contract
administration. HUD also created a GTR certification program in 1998 to
establish standard training requirements for HUD staff who serve as
GTRs and to provide them with an understanding of the federal
contracting process as implemented at HUD. In addition to classroom
training, HUD has also developed on-line GTR training to supplement the
classroom training.
In 1997, HUD created a centralized management information system,
called the HUD Procurement System (HPS), to assist in managing its
contracts. HUD upgraded the system in fiscal year 1998 to consolidate
and combine headquarters and field contracting data and to improve
integration with HUD‘s financial systems. As a result, for the first
time HUD had one source for contracting data. In 1999, the HUD Office of
Inspector General recognized that HUD had shown substantial strides in
automating the department‘s procurement data and establishing the
necessary financial linkages to integrate HPS with HUD‘s core accounting
system.[Footnote 17]
HUD also hired a Chief Procurement Officer and created a Contract
Management Review Board in 1998 to improve contract administration and
procurement planning. The Contract Management Review Board reviews all
contracts over $500,000 to provide a departmentwide planning
perspective. In addition, HUD has increased its training budget for
those in acquisition positions (i.e., $66,871 in fiscal year 2000 to
$163,537 in fiscal year 2002).
In addition, HUD has implemented a compliance and monitoring initiative
in order to assist staff in prioritizing their responsibilities and
directing their resources. This initiative, although not specifically
targeted to contract monitoring, emphasizes the importance of risk-
based approaches to monitoring. HUD reported that over 1,200 staff were
trained through fiscal year 2001, and the department‘s fiscal year 2003
annual performance plan anticipates increasing the number of trained
staff to more than 2,000.
Despite the improvements HUD has undertaken, we have continued to
identify deficiencies in HUD‘s acquisition management. For example, in
October 2001, we reported that HUD relied on contracting to address
staffing shortfalls rather than assessing whether contracting was a
better or more effective solution and problems continued in HUD‘s
oversight of its contractors. We concluded that HUD‘s acquisition
management was one of the significant challenges facing HUD in its
attempts to sustain the progress of its management reform and move
toward its goal of becoming a high-performing organization. [Footnote
18] Our current work has found that specific deficiencies remain in
HUD‘s oversight of contracts, management of the acquisition workforce,
and the reliability and availability of data needed to manage contract
operations.
HUD Does Not Employ Certain Processes and Practices that Would
Facilitate Effective Contractor Monitoring:
Holding contractors accountable for results requires processes and
procedures to facilitate effective monitoring. HUD, and in particular
the multifamily housing program, does not employ certain processes and
practices that would aid in oversight of its contractors. HUD does not
use a systematic approach for monitoring its contractors, which would
include the use of monitoring plans or a risk-based strategy, that
would help to guide its monitoring. And the monitoring that occurs is
generally remote; consisting mainly of reviews of progress reports and
invoices, telephone calls, and emails. Without a systematic approach to
oversight and adequate on-site monitoring the department‘s ability to
identify and correct contractor performance problems and hold
contractors accountable for results is reduced. The resulting
vulnerability limits HUD‘s ability to assure itself that it is
receiving the services for which it pays.
HUD‘s Monitoring of Contractors Is Not Systematic:
HUD does not employ a systematic process for monitoring its contractors
that consistently uses plans and risk-based strategies needed to guide
its monitoring; nor does HUD track contractor performance needed for
such plans and strategies. HUD‘s Procurement Policies and Procedures
Handbook provides a framework for the monitoring of contractors and
establishes various monitoring tools that GTRs should use to ensure that
contractors are held accountable for results, including a contract
administration plan, a quality assurance plan, and a contractor‘s work
plan and schedule of performance. However, our review of 43 active
contracts out of 49 contracts administered by HUD‘s Office of
Multifamily Housing found that the GTRs on 30 of these contracts”70
percent”did not make use of any of these plans. Among these plans,
OFPP‘s Guide to Best Practices for Contract Administration describes a
contract administration plan as essential for good contract
administration. According to OFPP, this plan must specify the
performance outputs and describe the methodology used to conduct
inspections of those outputs. According to our survey, only 23 percent
of HUD‘s GTRs use contract administration plans and 32 percent reported
that they had never heard of such a plan. In 1999, HUD‘s Inspector
General found that HUD‘s various offices did not consistently develop
and implement formal contract monitoring plans and recommended that HUD
develop and disseminate a model comprehensive contract-monitoring plan
for HUD-wide GTR use.[Footnote 19] In our review of active multifamily
housing contracts, we found that although HUD reported to the Inspector
General it had implemented this recommendation, there was no evidence
of such a model comprehensive contract-monitoring plan in use by
Multifamily Housing.
In addition to its limited use of monitoring plans, HUD has not
effectively incorporated a risk-based approach into its process for
overseeing contractors.[Footnote 20] In recent years, HUD has
emphasized developing risk-based approaches to managing and monitoring
its programs, including establishing a Risk Management Division within
the Office of the Chief Financial Officer, and developing a training
program and desk guide to help staff understand and prioritize their
monitoring responsibilities. However, we found little evidence that the
concept of risk-based management is used in HUD‘s oversight of its
contracts. Our past work found that HUD‘s efforts to perform risk-based
monitoring and performance evaluations on its single family property
disposition contractors met with limited results”some field offices did
not perform required assessments while, others did not perform them as
often as required.[Footnote 21]
Our more recent work in HUD‘s multifamily program found little evidence
that the concept of risk management or risk-based monitoring has been
applied to contract oversight. Acquisition workforce staff said they
were unaware of any requirements to apply a risk-based methodology to
their monitoring efforts, and we saw no evidence of any formal risk
assessments in our review of the Multifamily program‘s 43 active
contract files. While staff indicated that a risk-based approach would
be useful, they generally told us that monitoring is conducted based on
the availability of travel funds and location of staff, or after a
significant contractor performance problem has been identified.
A key component to developing effective monitoring plans and
incorporating risk-based approaches to monitoring is tracking past and
current contractor performance; however, we found little evidence that
HUD tracks contractor performance systematically. The HUD Procurement
System (HPS) allows its acquisition workforce across HUD‘s programs to
track contract milestones and deliverable dates, as well as document
and record contractor performance information”information that could
aid in the contract monitoring process. However, we found that these
data fields are often not used. The scheduled deliverable date data
field was left blank 35 percent of the time, and the contractor
performance data field was incomplete in 73 percent of contracts that
are inactive and closed. The Deputy Secretary directed that effective
January 2000 contractor products and performance would be tracked in
HPS, initially for all new contracts over $1 million.
Contractor oversight problems in HUD‘s multifamily housing programs are
further compounded by the lack of clearly defined GTR and GTM roles.
For example, in the Multifamily Property Disposition Centers, GTR and
GTM roles and responsibilities are not defined consistent with HUD‘s
policy, possibly resulting in gaps in the monitoring process. HUD‘s
Procurement Policies and Procedures Handbook states that ’a GTR or GTM
may not provide any direction to the contractor in those areas of
responsibility assigned to another GTR or GTM,“ so as to avoid providing
potentially conflicting guidance. However, the Multifamily Property
Disposition Centers modified their contracts to change any place where
the term ’GTR“ is used to the term ’GTR/GTM“ instead. The effect of this
change is that the GTRs and GTMs would have the same responsibilities,
which is what the guidance sought to avoid so that conflicting
instructions could not be given to the contractors. The roles are
further complicated by a decision the Property Disposition Centers made
to name managers as GTMs on the two property management contracts, in
one case assigning the Center Director as a GTM. HUD‘s handbook states
that the GTR is responsible for monitoring GTM activities. By
designating managers as GTMs, HUD has created a situation in which the
property management GTRs are essentially overseeing the work of their
supervisor or of someone in a management position, in a reporting line
above them.
As noted above, HUD is attempting to improve its oversight and
monitoring of contractors. For example, Multifamily Housing implemented
a structure in which four full-time GTRs will provide oversight for
procurement actions of more than $100,000 in the field. The Property
Disposition Center has also developed GTR and GTM protocols for the
various types of services for which it contracts out, in an attempt to
more clearly define the roles and responsibilities of these positions.
However, Multifamily‘s GTR program is still in transition and not all
the roles and responsibilities have been clearly delineated.
HUD‘s Monitoring of Contractors Is Generally Remote:
The monitoring that occurs in HUD‘s multifamily housing program is
generally remote. In our past work in other program areas, we have noted
that without adequate on-site inspections, HUD could not be assured that
it was receiving the services for which it had paid.[Footnote 22]
The GTRs and GTMs in Multifamily Housing who are responsible for
oversight of HUD‘s property disposition activities report being unable
to make regular visits. HUD‘s oversight and monitoring of contractors
consists mainly of reviews by HUD staff of progress reports and invoices
prepared by the contractors, as well as email correspondence and
telephone conversations between HUD staff and contractors. Site visits
to multifamily properties to oversee contractor activities do not occur
on a routine basis, particularly for the two largest multifamily
housing program contracts, which constitute a total value of almost
$650 million in obligations over 5 years for the management of HUD‘s
inventory of foreclosed multifamily properties. Although HUD‘s
multifamily property disposition handbook calls for GTRs or GTMs to
conduct quarterly on-site physical inspections of the properties, the
specific guidance related to that requirement has not yet been
developed.
Site visits do not routinely occur largely because the properties in
HUD‘s property disposition inventory are located throughout the
country, while the GTRs and GTMs responsible for the oversight of these
properties are located in Atlanta, Georgia, and Ft. Worth, Texas, with
the exception of one GTM located in New York City, New York. A
consistent theme among the GTRs and GTMs we interviewed is that they
believe that in order to effectively do their jobs, they should
probably be conducting a greater number of on-site visits, but they
lack the time and resources that would allow them to do so. Some noted
that the failure to visit the properties stems from the workload”the
GTM‘s are assigned multiple properties under the property management
contracts that are usually not in good condition and are located in
different parts of the country”and that it is difficult to keep up with
everything that needs to be done. Restraints on travel funds were often
cited as the reason for not making visits.
The property disposition center staff are not the only multifamily
housing staff experiencing difficulties making on-site visits to assess
contractor performance. HUD also contracts with inspectors who monitor
construction of HUD-assisted and insured multifamily projects throughout
the phases of construction and during the 1 year warranty period after
completion of construction.23 HUD‘s construction inspection guidance
requires that HUD employees make at least two site visits during
construction to assess the performance of the construction inspectors.
However, GTMs for these contracts also report being unable to make site
visits, due to other job responsibilities and because the projects are
dispersed over a wide geographic area and HUD lacks the necessary
travel funds.[Footnote 24] GTMs for these inspection contracts told us
that they primarily rely on reviews of reports from the contractors to
assess the contractors‘ performance.
To address its inability to do more on-site monitoring, the multifamily
housing program uses another inspection contractor to visit selected
properties and perform property management reviews of some properties
managed by the two property management contractors. However, according
to data maintained by HUD, this inspection contractor made 31 visits to
26 properties for the Atlanta Property Disposition Center since 1997,
although the property management contractor managed over 100 properties
during that period. The inspection contractor was not used at all by
the Ft. Worth Property Disposition Center for the almost 150 properties
in its inventory. We also found that in those cases where the
inspection contractor identified a problem, HUD does not routinely
follow up on those deficiencies to make certain the problems have been
resolved. Instead, the multifamily housing program staff accepted
correspondence from the property management contractors as evidence
that deficiencies were resolved. According to staff, HUD does not
routinely follow up because of limited resources. HUD will sometimes
make a site visit to verify that the problems have been resolved, but
field staff told us that there normally are not enough travel funds to
make a special follow-up visit.
Weaknesses in Monitoring Limit HUD‘s Ability to Prevent Contractor
Fraud, Waste, or Abuse:
Weaknesses in HUD‘s monitoring processes limit the department‘s ability
to identify and correct contractor performance problems, hold
contractors accountable, and assure itself that it is receiving the
services for which it pays.
We have reported that HUD has experienced similar difficulties
monitoring the contractors that are responsible for managing and
disposing of its foreclosed single-family properties for several years.
In 1998, we reported that although HUD‘s single-family guidance
establishes various methods for monitoring the performance of its
single-family real estate asset management contractors, such as
conducting monthly on-site property inspections, these methods were not
consistently used in a way that would assure HUD that contractors were
meeting their contractual obligations.[Footnote 25] Without adequate on-
site inspection, HUD could not be assured that it was receiving the
services for which it had paid. We found similar conditions in May 2000
when we reviewed the new marketing and management contractors HUD
acquired to replace the earlier contractors, and in July 2001, we found
that HUD‘s oversight of these contractors remained inadequate.
[Footnote 26] As recently as February 2002, in audits of HUD‘s
consolidated financial statements, the independent auditor identified
HUD‘s monitoring of its single-family property inventory as a
significant internal control deficiency. The auditors recommended that
HUD, among other things, (1) improve monitoring by enhancing
comprehensive oversight tools and management reporting and (2) use risk-
based strategies in the oversight process.
In our October 2002 testimony before the House Government Reform and
Operations Committee, Subcommittee on Governmental Efficiency,
Financial Management and Intergovernmental Relations, we reported
improper payments identified during the review of the $214 million in
disbursements made under HUD‘s multifamily property management
contracts.[Footnote 27] As we reported, one of HUD‘s multifamily
property management contractors bypassed HUD‘s controls on numerous
occasions by (1) alleging that construction renovations were
emergencies, thus not requiring multiple bids or HUD pre-approval, and
(2) splitting renovations into multiple projects to stay below the
$50,000 threshold of HUD required approval. Over 18 months HUD
authorized and paid for approximately $10 million of renovations, of
which each invoice was for less than $50,000, at two properties. HUD
did not verify that any of the construction renovations were actually
performed or determine whether the emergency expenditures constituted
such a classification.
As we testified, our review of these payments indicates that HUD paid 5
invoices totaling $227,500 for emergency replacement of 15,000 square
feet of concrete in front of 5 buildings; however, we visited the site
and determined that only about one-third of the work HUD paid for was
actually performed. As a result, more than $164,000 of the $227,500
billed and paid for ’emergency“ installation of concrete sidewalk
appeared to be improperly paid. As an example, figure 3 illustrates
that only portions, the lighter shaded section, of the sidewalk were
replaced in front of one of the buildings and not the entire sidewalk
as was listed on the paid invoices.
Figure 3: Sidewalk Repairs at HUD Property:
[See PDF for image]
HUD paid $227,500 for 15,000 square feet of sidewalk repairs at five
buildings; however, GAO determined that only about one-third of the
work HUD paid for was performed. Therefore, it appeared that HUD
improperly paid its contractor $164,000. One of the buildings is shown
above. Only the lighter shaded section of the sidewalk was replaced and
not the entire sidewalk as was listed on the paid invoices.
Source: GAO photograph of HUD property.
[End of figure]
At this same property, we found instances where HUD paid construction
companies for certain apartment renovations, deemed ’emergency
repairs,“ that were not made. Three of the 10 tenants that we
interviewed told us that some work listed on the invoice that the
property management firm submitted was not performed at their homes.
For instance, while one invoice indicated that the apartment floor and
closet doors had been replaced at a cost of $10,400, the tenant stated
that the floors and doors were never replaced.
On several other occasions, HUD paid the same amount to perform
’emergency renovations“ of apartments of varying sizes. For example,
HUD paid three identical $32,100 invoices for the emergency renovation
of a one bedroom (600 square feet), a two bedroom (800 square feet),
and a three bedroom (1,000 square feet) apartment. All three invoices
listed identical work performed in each unit. For example, each invoice
listed a $4,500 cabinet fee, yet the one bedroom unit had five fewer
cabinets than the three bedroom unit. We, and the independent
construction firm we hired, questioned the validity of the same charge
for units of varying sizes and the likelihood of numerous apartments
being in identical condition and in need of the same extensive
renovations.
These cases are now being investigated by the HUD Inspector General and
our Office of Special Investigations. The potential for these and other
types of problems would be reduced with improved monitoring and
oversight.
HUD Does Not Strategically Manage Its Acquisition Workforce:
Holding contractors accountable requires the appropriate number of
people in the right positions with the right skills and training. HUD
does not strategically manage its acquisition workforce to ensure that
individuals have the appropriate workload, skills, and training that
allows them to effectively perform their jobs.[Footnote 28]
Specifically, HUD has not yet addressed workload issues, assessed the
skills and capabilities of its acquisition workforce, or provided
required training to substantial numbers of its acquisition workforce.
Workload Issues Not Yet Addressed and Skills and Capabilities Not Yet
Assessed:
Although HUD identified workload disparities, the department has not yet
determined the appropriate workload allocation for its acquisition
workforce. To assist in the department‘s efforts to address human
capital issues resulting from HUD‘s diminishing staffing levels, HUD
undertook a Resource Estimation and Allocation Project (REAP) to
determine current workload levels agencywide. The resulting study
determined that serious staffing shortages exist within OCPO and
recommended an additional 31 full-time equivalent positions for OCPO in
headquarters and no change for the field. The study recommended that
headquarters staffing be increased from the 54 full-time equivalent
staff to 85 and that field staff remain at 68 full-time equivalent
staff. The study observed that the OCPO in headquarters is ’an
organization in crisis,“ and that the majority of supervisors and
contract specialists reported working a very high number of
uncompensated hours. HUD has taken steps to shift workload around to
address some disparities, but has not yet utilized the study results to
determine the appropriate allocation and workload levels of its
acquisition workforce. OCPO has shifted some activities to the field
contracting operations, such as closing out contracts, or assigned
field staff to details in headquarters to assist in addressing workload
distribution issues and keep field staff fully occupied.
Our survey results and other work also show that acquisition staff
across HUD perceive they have too much work to do. According to our
survey, 55 percent of respondents overall said that their contracting
workload has increased over the past 2 years. Further, 31 percent of
HUD‘s acquisition workforce who manage and monitor more than five
contracts believe that the number of contracts they monitor is ’too
many.“ Finally, 18 percent of HUD‘s acquisition workforce reported that
they spend ’too little“ time on their contracting related
responsibilities.
Although HUD has taken steps to identify the knowledge, skills, and
abilities needed by its acquisition workforce to do their work, HUD has
not assessed the skills and capabilities of its acquisition workforce”a
critical step in successful workforce management. We have identified an
agency‘s development of a comprehensive strategic workforce plan that
includes both an analysis of the knowledge, skills, and abilities
needed by staff to do their work as well as the capabilities of its
staff as a crucial part of a strategic human capital management
approach.[Footnote 29] HUD has taken some steps toward that goal by
drafting an Acquisition Career Management Plan that discusses the
knowledge, skills and abilities needed by staff; however, HUD has not
yet specifically assessed the skills and capabilities of its
acquisition workforce.[Footnote 30] Consequently, HUD is not as
prepared as it could be to address the human capital challenges, such
as skill gap deficiencies, within its acquisition workforce. Further,
the ability for HUD management to make informed decisions, such as
recruiting and hiring as well as planning for training, is hampered.
Many of HUD‘s Acquisition Workforce Not Receiving Required Training:
Over half of HUD‘s GTRs”who are directly responsible for monitoring
contractors”may not have received acquisition training required by the
Clinger-Cohen Act and OFPP. In response to the Clinger-Cohen Act of
1996 and OFPP policies that require specific training for GTRs, in 1998,
HUD developed and implemented a GTR training curriculum. During our
review, we identified 251 individuals serving as full or part-time GTRs
on contracts; however, according to HUD‘s training records, 143
individuals who have not taken HUD‘s required GTR training are
currently serving as GTRs on contracts. OCPO management stated that
they were not aware that these individuals were serving in this
capacity.
HUD‘s acquisition workforce also includes about 495 individuals serving
as GTMs; according to HUD‘s training records, only 7 percent of these
individuals”35 out of 495”have received specialized acquisition
training. Although the Clinger-Cohen Act and OFPP policies do not
establish specific training requirements for GTMs and HUD does not
explicitly require that GTMs receive acquisition training, HUD
documents indicate that providing acquisition training to GTMs is
necessary and is part of OCPO‘s intent. Specifically, in discussing the
roles and responsibilities of GTMs, the department‘s procurement
handbook states, ’many of the duties of the GTR can be delegated to
GTMs.“ Further, HUD‘s draft Acquisition Career Management Plan
indicates that it intends the plan to apply to GTMs”it states ’the term
GTR shall include GTM.“ However, according to OCPO managers, HUD is not
currently requiring GTMs to fulfill any acquisition training
requirements.
HUD does not accurately track the training of some of its acquisition
workforce and has not finalized its acquisition workforce career
management planning as required by OFPP. According to HUD‘s centralized
training records maintained by OCPO, 89 percent of HUD‘s contracting
officers, contract specialists, procurement analysts, and purchasing
agents do not meet federal training requirements.[Footnote 31] In
response to our observations, the OCPO Director of Policy and Field
Operations said that while it is likely that some of these individuals
do not meet the training requirements, it is probable that many of the
individuals have met the training requirements. The director offered
the following reasons. For example, the centralized information system
maintained by OCPO has not been updated, partly because HUD is waiting
for a new governmentwide system to be completed that will track such
information. Further, the training requirements were mandated after
some staff had been in an acquisition position for a number of years
and therefore have not taken the training because they possess
necessary skills. As a result of our review, HUD will institute a
training waiver to capture this scenario. Also, HUD has not finalized
its draft Acquisition Career Management Plan that specifies career
paths and mandatory training for acquisition positions and shows how
HUD‘s training courses correlate with those required by OFPP.[Footnote
32] This plan has been in draft form since June 2000. Further, the draft
plan does not meet OFPP requirements because it does not specify
training requirements for purchasing agents. As a result of our review,
HUD officials told us they intend to revise their draft plan to reflect
OFPP requirements.
Weaknesses in Programmatic and Financial Management Information
Systems:
Holding contractors accountable requires tools and information to ensure
that HUD staff can monitor contracts and that HUD management can
oversee departmentwide contracting activities. HUD‘s centralized
contract management information system and several financial management
information systems lack complete, consistent, and accurate
information”thus, these systems do not adequately support the
department‘s efforts to manage and monitor contracts. For example, the
centralized contracting system does not contain reliable information on
the number of active contracts, the expected cost of the contracts, or
the types of goods and services acquired. To compensate for the lack of
information, HUD staff have developed informal spreadsheet systems to
fulfill their job responsibilities. The systems deficiencies also mean
that HUD managers lack reliable information needed to oversee
contracting activities, make informed decisions about the use of
resources, and ensure accountability in the department‘s programs.
HUD‘s Centralized Contracting Information System Does Not Provide
Reliable Information on Contract Activities:
To improve its ability to manage and oversee contracts, HUD implemented
a contracting management information system”the HUD Procurement System
(HPS)”to track and manage both field and headquarters contracts.
[Footnote 33] HUD uses HPS to (1) monitor workload levels of contracting
officers and contract specialists; (2) track events throughout the life
of a contract”such as the award, obligation of funds, contract
modification, milestones, contractor performance, and close out; (3)
identify outstanding procurement requests; and (4) report to the Federal
Procurement Data Center (FPDC) to comply with federal reporting
requirements so that the Office of Management and Budget (OMB) and the
General Services Administration (GSA) can manage contracting
governmentwide”for example, establishing contracting goals for federal
agencies. In addition, a significant number of HUD‘s acquisition
workforce, such as contract specialists and GTRs, also use HPS to manage
and monitor contracts.
However, the data in HPS are not reliable”that is, the data are not
consistent, complete, or accurate. We found that:
* Over a quarter of those contracts shown as currently active had dates
in a date completion field, which would indicate that the contract had
expired, making it difficult for HUD to identify the active contracts
it is managing.[Footnote 34] For example, when we asked for a list of
active multifamily contracts, HUD had to call various field offices and
GTRs to compile the complete list of multifamily contracts.
* HPS showed that for 4 percent of HUD‘s active contracts, HUD has
obligated a total of $197 million more than the stated total value of
the contracts because HPS contains errors in the contract value fields.
Because HPS is a programmatic information system, this discrepancy does
not necessarily mean that HUD has or will spend more than planned for
the contracts, but indicates that HUD does not readily know the correct
obligated amounts or total value of its contracts.
* The types of goods or services HUD contracts for is not readily
apparent because HPS contains three separate data fields to capture the
type of good or service being provided and none of them are utilized in
such a way to provide a picture of the good and services HUD purchases.
One field is used only by field office staff; another contains
narrative descriptions of services but no standard terminology is
specified; and the third field uses governmentwide codes for external
reporting, rather than HUD-specific codes. (See app. III for a more
detailed illustration of discrepancies identified in HPS.)
According to HUD officials, the inconsistencies in HPS are due to data
entry problems, misunderstandings among staff about what data to record
and how to record it, and limited verification procedures. For example,
staff inconsistently record data on multi-year contracts with ’base“ and
’option“ years. HUD currently has limited verification procedures in
place to ensure that HPS data are reliable. According to the HPS
administrator, OCPO staff are not required to routinely verify the
accuracy of the data they are responsible for maintaining in HPS.
HUD‘s Financial Management Information Systems Do Not Readily Provide
Contracting Obligation and Expenditure Data:
HUD‘s program offices also record contracting obligation and expenditure
information in various financial management information systems.
However, these systems do not readily provide consistent and complete
information for either HUD‘s overall contracting activity or individual
contracts. Concerns about the effectiveness of HUD‘s programmatic and
financial management information systems are not new. We have reported
that HUD lacks the programmatic and financial management information
systems necessary to ensure accountability over its programs since 1984.
The lack of readily available, consistent, and complete contracting
information is one example of these concerns with HUD‘s programmatic
and financial management information systems.
To obtain aggregate information on HUD‘s contract obligations and
expenditures, HUD managers must manually query several financial
management systems. However, according to a HUD official, these ad hoc
queries are only useful in identifying transactions that ’look like“
contracts. These queries do not reliably produce obligation and
expenditure data on all HUD‘s contracting activity and also include
obligation and expenditure data for activities other than contracts.
After attempting to obtain data for us over a period of about 5 months,
HUD was able to provide only partial data. HUD officials provided
multiple reasons for this, including that several of HUD‘s financial
management information systems do not track obligation data and HUD
does not have ready access to some FHA data for fiscal years 1998 and
1999 because FHA no longer uses the systems.[Footnote 35] As a result,
HUD‘s different information systems provide widely different pictures
of HUD‘s contracting activity. Specifically, as shown in table 1, the
aggregate obligation data from HUD‘s financial management systems were
not consistent with the data HUD reported from in its centralized
contracting management information system, HPS (discussed further in
page 27). (See app. IV for a listing and brief description of the
various financial systems that maintain contracting information.)
Table 1: Contract Obligation Data from HUD‘s Programmatic and Financial
Management Information Systems for Fiscal Years 1999 and 2000:
Fiscal year 1999:
HUD Procurement System: $1.1 billion;
HUD‘s financial management information systems: $485 million.
Fiscal year 2000:
HUD Procurement System: $1.2 billion;
HUD‘s financial management information systems: $924 million.
Total:
HUD Procurement System: $2.3 billion;
HUD‘s financial management information systems: $1.409 billion.
Source: HUD data as shown.
[End of table]
After over 5 months of working on our request, HUD was also unable to
provide us obligation and expenditure data on 33 of 115 individual
contracts, and what it could provide was often not consistent with data
maintained in HPS. [Footnote 36] We requested data on two groups of HUD
contracts; for one we judgmentally selected 66 active contracts from
all HUD program offices and for the second we used all 49 active
multifamily contracts with an obligated value over $100,000. HUD staff
cited several reasons why they could not identify data on specific
contracts, including the fact that HUD tracks some obligation and
expenditure information using the contractor‘s Tax Identification
Number. As a result, when HUD has multiple contracts with one
contractor, it often cannot separate obligations and expenditures by
individual contract.
Of the 82 contracts for which HUD was able to provide information on
contract obligations and expenditures, the obligation information in the
financial management systems was consistent with HPS for only 37.
[Footnote 37] Some of the inconsistencies included cases where the
amount shown in the financial systems as spent on the contract exceeded
the amount shown in HPS that was obligated for the contract. In the HUD-
wide group, for example, the expenditure information in the financial
management systems exceeded the obligation amount shown in HPS for 13
of the contracts, indicating that HUD paid a total of $59 million more
than what HPS recorded was obligated. For the multifamily contracts, 3
of the 49 contracts had obligated amounts in the financial management
systems that exceeded that shown in HPS with a total difference of $1.4
million.
System Limitations Impede Efforts of HUD‘s Acquisition Workforce and
HUD Management:
As a result of the systems limitations, HUD‘s acquisition workforce do
not have basic information about the contracts for which they are
responsible readily available to them. This is particularly significant
because, as previously discussed, HUD relies extensively on remote
monitoring strategies, which would be most effective with readily
available and reliable contract information. In the absence of such
data, HUD‘s acquisition workforce have developed informal or ’cuff“
systems”personal spreadsheets to track, manage, and monitor contracts.
While helping staff perform their jobs, these informal systems are not
subject to HUD‘s policies, procedures, or internal controls to ensure
that the information maintained in them”and used by HUD‘s acquisition
workforce to manage and monitor individual contracts”is accurate.
Further, the use of informal spreadsheets indicates that duplicate data
collection efforts may be occurring (e.g., some data maintained in the
spreadsheets are identical to data maintained in HPS), which in an
environment of decreasing resources and increasing workload is not an
efficient use of resources. Since the spreadsheets are maintained and
used by individuals, this information is not readily accessible by HUD
management to support their oversight responsibilities. Finally, since
HPS data are not reliable and the accuracy of the data maintained in the
personal spreadsheets is not known, HUD does not have a dependable
’early warning system“ to alert staff to contracts with high-risk
characteristics. As a result, HUD‘s ability to ensure that its contract
resources are protected from waste, fraud, abuse, and mismanagement is
reduced.
HUD‘s programmatic and financial management information systems also
do not provide managers with accurate and timely information needed to
effectively manage and monitor the department‘s programs. HUD cannot
readily obtain complete aggregate contracting obligation and expenditure
information from the department‘s financial systems to oversee the
agency‘s activities, make informed decisions about the best use of HUD‘s
resources, and ensure accountability on an ongoing basis. Because HPS
does not contain reliable data, HUD management cannot readily obtain
accurate information on HUD‘s contracting activity to report contracting
information, assist in making management decisions, and ensure the
proper stewardship of public resources. Without reliable data on the
number of active contracts, management cannot accurately analyze HPS
for trends, which would assist in assessing and/or realigning staff
workload, or making decisions about what activities to contract and or
retain. Finally, because the department uses HPS to report acquisition
data to FPDC to comply with federal contract activity reporting
requirements, HUD‘s submissions to FPDC are inaccurate.
Conclusions:
Ensuring that HUD‘s mission is accomplished and its contractors are held
accountable requires (1) processes and practices that effectively
monitor contractors‘ performance; (2) an acquisition workforce with the
right workload, training, and tools to carry out its mission; and (3)
effective programmatic and financial management information systems.
HUD has already taken steps toward improving its acquisition management;
however, weaknesses remain in HUD‘s monitoring processes, management of
its acquisition workforce, and programmatic and financial management
systems that support its contracting. Many of the tools that would help
improve how HUD monitors its contractors already exist, either through
plans and strategies HUD already developed or through OFPP guidance.
Using these tools and employing a systematic, risk-based approach to
contractor oversight would allow HUD to target its scarce resources to
areas posing the greatest risk and to identify potential problems, such
as those we have identified in this report, before they become more
serious.
In large measure, the challenges HUD faces in relation to its
acquisition workforce and contracting information systems are
symptomatic of the larger challenges the department faces to
strategically manage its human capital and to improve its programmatic
and financial management systems. Both are complex, long-standing
management challenges that we have identified in our high-risk work
that will be addressed on a departmentwide basis over a period of many
years. Nevertheless, to improve its management of acquisitions, HUD can
take shorter term and more immediate actions to maximize the
effectiveness of the department‘s acquisition workforce by completing
existing career planning and training activities. It could also enhance
the information and tools available to that workforce by improving the
accuracy and utility of its centralized contracting management
information system.
Recommendations for Executive Action:
To address weaknesses we identified, we recommend that the Secretary of
HUD:
* Implement a more systematic approach to HUD contract oversight that
(1) uses monitoring/contract administration plans; (2) uses a risk-based
approach for monitoring to assist in identifying those areas where HUD
has the greatest vulnerabilities to fraud, waste, abuse, and
mismanagement; and (3) tracks contractor performance.
* Clarify the roles and responsibilities of the multifamily housing
GTRs and GTMs, including the need to (1) clearly define reporting lines
and (2) reduce overlap of responsibilities consistent with HUD
guidance.
* Improve management of HUD‘s acquisition workforce by (1) addressing
workload disparities, (2) finalizing and implementing the Acquisition
Management Career Plan, (3) assessing the skills and capabilities of the
existing acquisition workforce, and (4) ensuring that appropriate
training is provided to staff with contract oversight responsibilities
and that staff meet federal training requirements.
* Improve the usefulness of HUD‘s centralized contracting management
information system by (1) providing training to staff on the
definitions of data intended to be captured; (2) providing training to
program office staff on the functions, such as tracking milestones,
deliverables and contractor performance, of the system, and (3)
developing and implementing verification procedures.
Agency Comments:
We provided a draft of this report to HUD for its review and comment.
HUD agreed that it faces significant long-standing challenges in
monitoring the performance of its contractors, managing its acquisition
workforce, and addressing weaknesses in its information systems. HUD
stated that it is taking actions to address our recommendations. For
example, according to HUD, the department is requiring each program
organization to review its contracting oversight and monitoring polices
and procedures to ensure that they are clear, consistent, and risk
based. To strengthen oversight of the multifamily program‘s property
management contractors, HUD stated that when the multifamily property
management contracts are renewed and awarded again in 2003, HUD plans
to strengthen their oversight requirements. For example, the
contractors will be required to provide a quality control plan to,
among other things, monitor the work assignments of employees and
subcontractors.
The department also stated that it is taking action to improve
management of its acquisition workforce and address weaknesses in its
information systems. HUD stated that it expects to finalize its
Acquisition Career Management Plan during 2003, and is clarifying the
roles, responsibilities, and reporting lines of GTRs and GTMs in the
multifamily program. For example, HUD said that it would ensure that
staff are not overseeing the work of a supervisor or management
personnel. HUD also said that it agreed with our findings and
recommendations concerning its centralized contracting management
information system, and would implement our recommendations to improve
its usefulness by revising its training to provide better definitions
of data to be captured and more emphasis on the system‘s functions.
While HUD agreed with our recommendations, HUD said it believes that
its acquisition workforce is receiving required training because (1) it
has developed acquisition training for GTRs in accordance with federal
requirements and (2) GTMs do not require the same level of training as
GTRs and are provided acquisition training appropriate to their duties
when needed. We recognize that the Clinger Cohen Act does not establish
a specific training curriculum for GTRs; however, the act requires
executive agencies, through consultations with OFPP, to establish
training requirements for positions in their acquisition workforces and
HUD has defined its acquisition workforce to include both GTRs and
GTMs. We agree that the department has developed an acquisition
training program for GTRs in response to federal requirements. However,
we found that a significant portion of the department‘s GTRs have not
had this training, and HUD did not disagree with our finding.
Furthermore, while we agree that GTMs may not require the same level of
training as GTRs, HUD policies permit the duties and responsibilities
of GTRs to be delegated to GTMs; and its draft Acquisition Career
Management Plan”which establishes training requirements for HUD‘s
acquisition workforce”states that the GTR training requirements also
apply to GTMs. Therefore, we remain concerned that, according to HUD‘s
records, 93 percent of HUD‘s GTMs have not received any specialized
acquisition training and we did not change the report in response to
this comment. We are, however, encouraged by HUD‘s comment that it will
continue to assess the training needed for GTMs to more effectively
monitor contractor performance.
HUD also provided technical comments, which we have incorporated as
appropriate. The full text of HUD‘s comments and our response appear in
appendix V.
We are sending copies of this report to other interested congressional
committees and the Secretary of Housing and Urban Development. We will
also make copies available to others upon request. In addition, the
report will be available at no charge on the GAO Web site at
[hyperlink, http://www.gao.gov].
If you or your staffs have any questions about this report or need
additional information, please contact me or Steve Cohen at 202-512-
2834. Major contributors to this report are listed in appendix VI.
Signed by:
Stanley J. Czerwinski:
Director, Physical Infrastructure:
[End of section]
Appendix I: Scope and Methodology:
To determine whether HUD has the processes in place to facilitate
managing and monitoring its contractors, and the extent to which HUD
monitors its contractors to ensure that they are held accountable for
results, we focused on HUD‘s policies, procedures, and data related to
activities after a contract is awarded to a successful bidder. We first
reviewed HUD‘s guidance for managing and monitoring its contracts,
including HUD-wide guidance, as well as that for the Office of
Multifamily Housing. We also interviewed HUD officials at the Office of
Chief Procurement Officer, Office of Administration, Office of Housing,
Office of Public and Indian Housing, Community Planning and
Development, and Fair Housing and Equal Opportunity to obtain
information on their oversight and management of contracts. We also
interviewed officials at HUD‘s Atlanta, Philadelphia, Denver, and Ft.
Worth Field Contracting Operations (FCO) to obtain an understanding of
their oversight of the contract process and relationship with the
multifamily program operations in their jurisdiction.
To identify potentially improper payments made by HUD, we used computer
analysis and data mining techniques to identify unusual transactions
and payment patterns in the department‘s fiscal year 2001 disbursement
data. We focused our review on the $214 million of payments made for
the goods and services at HUD‘s multifamily properties during fiscal
year 2001.[Footnote 38]
To obtain a more detailed understanding of the practices associated with
monitoring and oversight of contracts, we selected contracts in the
Office of Multifamily Housing to review. We selected Multifamily Housing
contracts because (1) of the contracting dollars associated with
multifamily housing activity; (2) of the value of the inventory,
insurance and grants associated with HUD‘s multifamily programs; and
(3) we recently completed reviews that addressed acquisition issues in
HUD‘s single-family housing program and systems acquisition and
development efforts. The Office of Multifamily Housing contracts for
services associated with HUD‘s multifamily insurance program, as well as
management of those properties that HUD acquires when owners default
on insured mortgages. We reviewed the GTR files for 43 of the 49 active
multifamily housing program contracts over $100,000, and then conducted
structured interviews with the 17 GTRs responsible for administering
these contracts.[Footnote 39] These contracts included both
headquarters and field-administered contracts. For the 43 GTR files, we
obtained and reviewed documentation that described the extent to which
the GTRs are able to monitor HUD contractors. The structured interviews
focused on (1) the processes HUD has in place to facilitate managing
and monitoring its contractors, (2) the extent to which the GTRs
monitor the contractors, (3) the types of information and data systems
used by the GTRs to help them manage and monitor the contractors, and
(4) the types of contracting-related training the GTRs have received.
We also interviewed selected government technical monitors.
To supplement our work in the multifamily program and obtain
information from a cross-section of HUD‘s acquisition workforce, we also
conducted a telephone survey to gather information on HUD‘s contracting
activities. Our objectives were to obtain information on workload, the
availability and perceived usefulness of training, the extent to which
programmatic and financial management information systems support
contract oversight, and oversight methods. We completed 185 interviews
with randomly selected employees who were currently working in
acquisition positions. In the survey, we asked questions about the
training HUD provides its acquisition workforce, the opinions of the
acquisition workforce of the data systems they use, and HUD‘s
monitoring of contractor performance. (See app. II for the survey scope
and methodology.)
To assess HUD‘s management of its acquisition workforce and compliance
with federal procurement requirements and policies, we reviewed related
federal laws and policies, including the Clinger-Cohen Act and OFPP
Policy Letters 92-3 and 97-01. Further, we asked HUD for the
department‘s definition of its acquisition workforce and asked the
department to identify the names of staff meeting that definition. HUD
defined its acquisition workforce to include those staff serving as
GTMs. Since HUD did not centrally maintain a listing of staff currently
serving as GTRs and GTMs in the program offices, we contacted each
program office and requested that they identify staff currently serving
in that capacity. Using the definition of acquisition workforce that
HUD provided and the lists of staff provided by program offices, HUD‘s
acquisition workforce totals 833 people. Additionally, we requested
data on HUD‘s training records for contracting officers, contract
specialists, purchasing agents, and GTRs; HUD provided a spreadsheet
that contained summary information. We then compared HUD‘s training
records to OFPP training requirements to determine whether HUD‘s
acquisition workforce is meeting federal training requirements. We also
reviewed HUD‘s training requirements and policies as well as the GTR
training manual.
To obtain information on the adequacy of the data systems that support
HUD‘s acquisition workforce, we obtained and analyzed data from several
of HUD‘s programmatic and financial management information systems.
We obtained data from HUD‘s centralized system, the HUD Procurement
System (HPS). Our analysis of HPS was two-fold. First, we performed
reliability assessments on several data fields for all contracts that
were identified as ’active/awarded,“ that is, currently active
contracts. The data fields we analyzed were as follows: contract value,
obligated amount, contract status, completion date, last completion
date, and type of service. Second, we identified two groups of active
contracts and purchase orders and downloaded the total dollar amounts
obligated for these procurements from HPS. The first group was a
judgmentally selected sample of 66 contracts and purchase orders from
various HUD program offices.[Footnote 40] The second group was all
active contracts in HUD‘s multifamily housing program with an obligated
value over $100,000 as of March 2002. We also obtained obligation and
expenditure data from numerous HUD financial management systems for
these contracts and purchase orders. (See app. IV for a description of
these systems.) We then compared HPS data on those contracts and
purchase orders to the data maintained in HUD financial management
information systems. We requested aggregate data on HUD‘s contract
obligations and expenditures. We also obtained data from the Federal
Procurement Data Center (FPDC) to which HUD reports detailed
information on its contracting activity over $25,000 in accordance with
federal requirements.
[End of section]
Appendix II: Sampling Methodology for GAO Survey of HUD‘s Acquisition
Management Reforms:
Objectives:
Our primary objectives in the survey were to (1) assess the acquisition
workforce workload, (2) assess the availability of training and the
perceived usefulness of the training that the staff receive, (3)
determine the extent to which HUD‘s data systems are used to support
its contract management and monitoring, and (4) determine the ways in
which the acquisition workforce monitor HUD‘s contractors.
Scope and Methodology:
To attain our objective, we surveyed a statistically representative
sample of HUD‘s acquisition workforce. We developed and administered a
survey designed to estimate characteristics of HUD‘s acquisition
workforce relating to contract monitoring, training and workload
issues, and data systems. The survey was administered from April to
June 2002 by trained GAO employees to a stratified sample of 250 HUD
acquisition workforce employees through telephone interviews that were
entered into a computer-assisted data collection instrument. Our work
was conducted in accordance with generally accepted government auditing
standards.
Study Population:
The study population for this survey consisted of 833 employees in HUD‘s
acquisition workforce as of March 2002. We developed a list of
acquisition workforce employees based on data from two sources. The
first source used was the training records compiled by HUD‘s OCPO, the
office responsible for providing the training required for acquisition
workforce employees. In further audit work with HUD program offices
that have contracts, we discovered that this list was not complete. We
then supplemented the OCPO list by contacting 15 program offices to
identify the number of acquisition workforce staff in each office, and
the positions that those individuals hold.
When we administered the survey, we found that not all of the employees
we identified in our study population were in HUD‘s acquisition
workforce at the time of contact. Respondents who were no longer
members of the acquisition workforce were ’out of scope,“ and were
excluded from the analysis.
Sample Design:
The sample design for this study is a single-stage stratified sample of
acquisition workforce employees in the study population. The strata were
based on reported job position categories, based on the list we compiled
from program office records. Of the total sample of 250, we received 185
completed responses from employees who were in the acquisition
workforce at the time of the survey (in scope). We obtained sufficient
information for an additional 28 employees to determine that they were
not in the acquisition workforce at the time of the survey (out of
scope).
The remaining 37 cases could not be contacted or refused to participate.
These results are summarized by sampling stratum in table 2. Overall,
we obtained a response rate of 85 percent, and of those respondents,
all estimates are based only upon the in scope respondents (in the
acquisition workforce).
Table 2: Description of Sample:
Stratum: (1) Contracting Officers;
Population size[A]: 33;
Sample size: 25;
Respondents[B]: 20;
In scope respondents [C]: 19;
Response rate (%)[D]: 80.
Stratum: (2) Contract Specialists;
Population size[A]: 50;
Sample size: 34;
Respondents[B]: 30;
In scope respondents[C]: 29;
Response rate (%)[D]: 88.
Stratum: (3) Government Technical Monitors (GTM);
Population size[A]: 500;
Sample size: 82;
Respondents[B]: 67;
In scope respondents[C]: 55;
Response rate (%)[D]: 82.
Stratum: (4) Government Technical Representatives (GTR);
Population size[A]: 187;
Sample size: 65;
Respondents[B]: 57;
In scope respondents[C]: 47;
Response rate (%)[D]: 88.
Stratum: (5) Both GTR and GTM;
Population size[A]: 69;
Sample size: 42;
Respondents[B]: 37;
In scope respondents[C]: 34;
Response rate (%)[D]: 88.
Stratum: (6) Purchasing Agents;
Population size[A]: 2;
Sample size: 2;
Respondents[B]: 2;
In scope respondents[C]: 1;
Response rate (%)[D]: 100.
Stratum: Total;
Population size[A]: 841;
Sample size: 250;
Respondents[B]: 213;
In scope respondents[C]: 185;
Response rate (%)[D]: 85.
[A] Based upon GAO compilation of HUD office records.
[B] Total number of questionnaires for which at least some sample data
were obtained.
[C] ’In-scope“ responses exclude respondents misidentified as part of
the acquisition workforce, and those respondents who were away on
extended leave at the time of the survey.
[D] This is the ratio of the respondents to the sample size for each
stratum.
Source: GAO.
[End of table]
Estimates:
All estimates produced in this report are for a target population
defined as HUD‘s acquisition workforce during the study period.
Estimates were determined by weighting the survey responses to account
for the effective sampling rate in each stratum. The weights reflect
both the initial sampling rate and the response rate for each stratum.
Sampling Error:
Because we surveyed a sample of HUD‘s acquisition workforce, our
results are estimates of actual acquisition workforce characteristics
and thus are subject to sampling errors that are associated with
samples of this size and type. Our confidence in the precision of the
results from this sample is expressed in 95 percent confidence
intervals. The 95 percent confidence intervals are expected to include
the actual results for 95 percent of the samples of this type. We
calculated confidence intervals for our study results using methods
that are appropriate for a stratified probability sample. For the
percentages presented in this report, we are 95-percent confident that
the results we would have obtained if we had studied the entire study
population are within +/- 10 or fewer percentage points of our results,
unless otherwise noted. For example, our survey estimates that 54.5
percent of the acquisition workforce believes that their contracting
workload has increased over the past 2 years. The 95 percent confidence
interval for this estimate would be no wider than +/- 10 percent, or
from 44.5 percent to 64.5 percent.
Nonsampling Error:
In addition to these sampling errors, the practical difficulties in
conducting surveys of this type may introduce other types of errors,
commonly referred to as nonsampling errors. For example, questions may
be misinterpreted, the respondents‘ answers may differ from those of
people who did not respond, or errors could be made in keying
questionnaires. We took several steps to reduce such errors.
Data were collected using computer-assisted telephone interviewing, and
the GAO staff who administered the survey over the telephone attended a
training session to familiarize them with the use of the computer-
assisted survey instrument. In addition, computer analyses were
performed to identify inconsistencies and other indicators of errors,
and a second independent analyst reviewed all computer programs.
Survey Development:
We identified areas to cover in the survey based on the congressional
request and initial interviews with top-level HUD managers and staff.
The survey was pretested at HUD headquarters, through a simulated
telephone interview. A GAO analyst administered the survey to two
members of HUD‘s acquisition workforce over the telephone from an
offsite location, while another GAO analyst observed the HUD employee
onsite. The HUD employees were debriefed after the pretest, and the
audit team was able to make appropriate changes to the questionnaire
prior to implementation. The final survey contained 165 questions.
Survey Administration:
A team of 30 GAO staff conducted the survey in April, May, and early
June of 2002, through a computer-assisted telephone survey, the results
of which were entered simultaneously in our computer-assisted data
collection instrument. We called all initial nonrespondents at least
three times in order to encourage a high response rate.
We performed our work between February and June 2002 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix III: Analysis of the HUD Procurement System (HPS) Identified
Discrepancies in HUD‘s Contracting Data:
Reliability problems identified with HPS data elements: Obligated
amount is greater than the overall value of the contract;
Examples: A portion of HUD‘s active contracts contain a total obligated
amount that is greater than the contract total value amount;
* The two relevant data fields in HPS are ’total value amount“ and
’total obligated amount.“
- The total value amount data field represents the total value of the
contract;
- The total obligated amount represents the total amount of funds that
have been obligated to date;
* According to the HPS administrator, the figure in the total value
amount field should be greater than or equal to the figure in the total
obligated amount data field; as funds should not be obligated in excess
of the value of the contract;
* According to HPS, 4 percent of HUD‘s active contracts contain a total
obligated amount that is greater than the overall contract total value
amount, which means that according to HPS, HUD has obligated $197
million in excess of the contracts‘ value.
Reliability problems identified with HPS data elements: Overall value
of the contract and obligated amount is greater than the Indefinite
delivery Indefinite quantity (IDIQ) Maximum;
Examples: About a quarter of HUD‘s active IDIQ contracts contain
inconsistent data within three HPS data fields; according to HPS, HUD
has obligated about $14 million in excess of the maximum associated
with the contract:
* The three relevant data fields in HPS are ’total value amount,“
’total obligated amount,“ and ’IDIQ Max;“
- The total value amount data field represents the total value of the
contract;
- The total obligated amount represents the total amount of funds that
have been obligated to date;
- The IDIQ Max identifies the maximum dollar amount for the contract;
specifically, according to the HPS administrator, the IDIQ Max
represents a ceiling and therefore the contract total value amount and
total obligated amount should not exceed the IDIQ Max;
* According to the HPS administrator, the figure in the IDIQ maximum
field should be greater than or equal to the total contract value and
the total obligated amount data fields;
* According to HPS:
- 24 percent of active awarded IDIQ contracts have a total obligated
amount that exceeds the IDIQ maximum;
- 28 percent of active awarded IDIQ contracts have a total value amount
that exceeds the IDIQ maximum.
Reliability problems identified with HPS data elements: Status of
contract not consistent with date information and significant number of
data fields blank;
Examples: About a quarter of all active awarded contracts contain
inconsistent contract status and date information, and some date fields
are blank;
* The three relevant data fields in HPS are ’status,“ ’completion
date,“ and ’last completion date;“
- The status represents the current status of the contract (e.g., pre-
award, active: awarded, and inactive: closed-out);
- The completion date tracks the completion date by which the
contractor will deliver product(s) and /or service(s);
- The last completion date indicates the very end of the contract,
including option periods.
* According to the HPS administrator:
- All of these data fields should be populated;
- If a contract has a status of active: awarded, then the last
completion date should be in the future;
- The completion date should be prior to or equal to the last
completion date.
* According to HPS:
- For 27 percent of contracts identified as active: awarded, the last
completion dates are in the past;
- For 21 percent of the contracts identified as active awarded, the
completion date is after the last completion date;
- For 17 percent of the contracts identified as active awarded, the
last completion date data field is blank.
Reliability problems identified with HPS data elements: Service Type
data fields not Complete or not Consistent:
Examples: The data does not readily lend itself for analysis because
the data is not complete or consistent. HPS contains three separate
data field to capture the ’type of good or service“ being provided by
the contractor;
* The three relevant data fields in HPS are the ’type of service,“
’deliverable description,“ and ’product service code;“
- The type of service field is populated by HUD field staff when they
select the appropriate description from a drop down menu;
- The deliverable description data field is populated by all HUD staff
when they are entering information on individual deliverables;
- The product service code field is populated by all HUD staff. The
codes are based on the Federal Procurement Data System‘s (FPDS)
codebook.
* According to the HPS administrator, HUD conducts analysis on the type
of service and deliverable description data fields;
* According to HPS:
- The type of service data fields are blank for about a third of the
active awarded contracts because only field staff are required to
complete this field;
- The deliverable description data field contains narrative entries
generated by HUD staff who do not use standard terminology to describe
the service being purchase.
Source: GAO analysis of HUD data.
[End of table]
[End of section]
Appendix IV: HUD‘s Financial Management Information Systems that Contain
Contracting Obligation and Expenditure Information:
Financial system: HUD‘s Central Accounting and Program System
(HUDCAPS):
Description: HUDCAPS is the department‘s General Ledger and Funds
Control System, and it serves as a focal point for integrating other
HUD financial systems. The Chief Financial Officer sponsors the system.
All HUD offices use HUDCAPS to control and manage administrative and
program budgets. For example, since fiscal year 2000, the obligations
and expenditures for all of FHA‘s administrative contracts (i.e.,
headquarters and field) are processed from the HUDCAPS system.
Financial system: Program Accounting System & Line of Control and
Credit System (PAS & LOCCS);
Description: PAS & LOCCS are two financial systems that are integrated.
PAS is the project level funds control system and is used to record,
control, and report on the commitment, obligation, and expenditure of
funds. LOCCS is the payment control system that is used by those
requesting payments. Together, PAS& LOCCS is an accounting system that
tracks the reservation, obligation, and expenditure of funds, and it is
the department‘s primary disbursement and cash management system for
the majority of HUD programs. For example, obligations and expenditures
associated with the Office of Public and Indian Housing‘s (PIH)
contracts are tracked in these systems. Further, prior to fiscal year
2000, LOCCS was the financial system that maintained information on
FHA‘s administrative contracts in the field. The Chief Financial
Officer sponsors this system.
Financial system: Single Family Acquired Asset Management System
(SAMS);
Description: SAMS tracks information on single-family properties that
HUD acquires due to foreclosure; the system tracks the property from
acquisition to sale and the system is used to manage the properties.
For example, this system tracks the expenditures that are associated
with contracts for services provided by closing agents; this system
does not track obligations.
Financial system: Cash Control Accounting Report System (CCARS);
Description: CCARS tracks and disburses funds received by FHA, from the
Department of the Treasury, to various internal FHA offices. These
funds are received electronically and are downloaded into the CCARS
database daily. Prior to FY 2000, CCARS maintained obligation and
expenditure information on FHA‘s administrative contracts in
headquarters.
Financial system: Comprehensive Servicing and Monitoring
System/Property Management System (CSMS/PMS);
Description: CSMS/PMS tracks HUD-held Multifamily properties and
certain HUD-held defaulted notes, which are in mortgagee-in-possession
(MIP) status.[A] CSMS/PMS performs several management and accounting
functions for these properties (e.g., property management, tax
servicing, tenant leases, accounts receivable, accounts payable and
disbursements processing, financial accounting, and management
reports). A HUD contractor maintains CSMS/PMS.
Financial system: Macola;
Description: Macola is Ginnie Mae‘s financial system. The system is
commercial off-the-shelf software and tracks obligations and
expenditures of funds.
[A] An MIP case occurs when HUD takes over property management
responsibilities from the mortgagor, but the loan has not yet gone into
foreclosure.
Source: HUD data.
[End of table]
[End of section]
Appendix V: Comments from the Department of Housing and Urban
Development:
Note: GAO comments supplementing those in the report text appear at
the end of this appendix.
U.S. Department of Housing and Urban Development:
Office Of The Assistant Secretary For Administration:
Washington. D.0 20410-3000:
Mr. Stanley J. Czerwinski:
Director, Physical Infrastructure Issues:
United States General Accounting Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Czerwinski:
Thank you for the opportunity to provide comments on the draft report
HUD Management: Actions Needed to Improve Acquisition Management (GAO-
03-157). The report contains GAO's assessment of HUD's acquisition
management, focusing on contracts for the Office of Multifamily Housing
as representative of those awarded by the Office of the Chief
Procurement Officer (OCPO) for the entire Department.
We appreciate GAO's recognition in the "Results in Brief' comments on
page 5 that "HUD has taken actions to improve its acquisition
management," and we concur that the Department "still faces significant
challenges..." which are "long-standing and will likely require years
to resolve."
In this response, I will discuss the steps the Department is taking to
address the specific recommendations made in the draft report. Although
additional comments on several statements in the report are included as
Enclosure 1, we should also emphasize here that HUD is focused on
pursuing contractor oversight as a major tool in its program of
management controls for preventing fraud, waste, abuse and
mismanagement. The enclosure describes how this management controls
emphasis is reflected in our ongoing improvements to the oversight of
contractors providing property management services for the Department's
Multifamily Housing programs.
Recommendation:
* Implement a more systematic approach to HUD contract oversight that
(1) uses monitoring/contract administration plans; (2) uses a risk-
based approach for monitoring to assist in identifying those areas
where IIUD has the greatest vulnerabilities to fraud, waste, abuse, and
mismanagement; and (3) tracks contractor performance.
Response:
(1) The Department agrees that it should make greater use of contract
administration plans as recommended in the Office of Federal
Procurement Policy's (OFPP's) Best Practices for Contract
Administration. The importance of the preparation of, and compliance
with, such plans will be emphasized in the Department's Government
Technical Representatives (GTR) and Government Technical Monitor (GTM)
training. The OCPO will prepare a publication on contract monitoring,
featuring a sample contract administration plan, for distribution to
GTRs and GTMs with direction to prepare a plan for each contract or
task order.
(2) The Department will require each program organization to review its
current contract oversight and monitoring policies and procedures to
ensure that they are clear, consistent and risk-based. In addition, the
Department will examine the feasibility of including contract
monitoring performance goals and measures, along with resource
requirements in its management planning process. This strong focus on
contractor oversight is a key element of the management controls
structure for all IIUD programs where contracting plays a major role.
(3) The Department has entered into an agreement with the National
Institutes of Health (NIH) to access its Contractor Performance System
(CPS), beginning with Fiscal Year 2003. The Department will enter
contractor performance data into the CPS, and it will be able to access
its data and the contractor performance data provided by most Federal
civilian agencies, such as the Departments of Agriculture, Commerce,
Justice, State, and Transportation, the Environmental Protection
Agency, and the General Services Administration. The Department will
take appropriate steps to ensure the timeliness, accuracy, and
reliability of the data entered by HUD staff.
Recommendation:
* Clarify the roles and responsibilities of the Multifamily Housing
GTRs and GTMs, including the need to (1) clearly define reporting lines
and (2) reduce overlap of responsibilities consistent with HUD guidance.
Response:
(1) HUD's Office of Multifamily Housing has assessed both the roles and
the reporting lines of the GTRs and GTMs in our Multifamily Property
Disposition Centers. Due to the nature (i.e. an elderly project loses
heat or air conditioning due to mechanical failures that need to be
repaired immediately in order to not endanger the welfare of the
residents) and magnitude of these property management contracting
activities, HUD has already taken some proactive steps to assure that
on-going procurement activities are being properly performed and the
Department's oversight of the contractors and procurement activities
are strengthened. Multifamily Housing is currently clarifying and
refining the roles and the reporting lines of the GTRs and GTMs to
ensure consistency with HUD's GTR/GTM policies and procedures to the
extent possible. As a result of the refinement, no GTR will oversee the
work of their supervisor or of someone in a management position that is
in a reporting line above them. This clarification and refinement
process, including the issuance of revised written policies and
guidance and the training of Multifamily staff, will be completed
within the next 90 days.
(2) As noted in the audit, the overlap of responsibilities between GTR
and GTM was in part, due to a transitional phase of restructuring our
contract management for property disposition services and to assure
that contractors could be given appropriate direction to respond to
property management emergencies expeditiously. The restructuring of the
contract management function, as mentioned above, and the training of
the Multifamily staff will eliminate the overlap of responsibilities.
The Department is currently conducting new procurements for property
management activities and the oversight of these activities. The new
contracts will clearly define the roles of the GTR and GTM and their
separate functions consistent with HUD guidance. We anticipate these
contracts will be executed early in calendar year 2003.
Recommendation:
* Improve management of HUD's acquisition workforce by (1) addressing
workload disparities, (2) finalizing and implementing the Acquisition
Management Career Plan, (3) assessing the skills and capabilities of
the existing workforce, and (4) ensuring that appropriate training is
provided to staff with contract oversight responsibilities and that
staff meet federal training requirements.
Response:
(1) The report noted that the Resource Estimation and Allocation
Project (REAP) undertaken by HUD determined that OCPO headquarters
staffing was inadequate. In response to the REAP study, and to
alleviate the workload disparities identified in the report, the Deputy
Secretary approved a fifty percent increase in staff resources devoted
to contract award and administration and increased training and
development of the acquisition workforces as required by the Clinger-
Cohen Act. HUD has hired a new Chief Procurement Officer to lead our
acquisition improvement efforts. The OCPO is currently taking action to
fill those additional positions and existing vacancies. This increase
will enable OCPO to implement an organizational structure that will be
capable of providing attention to each customer and its unique
challenges, and monitor contract performance more closely.
(2) The Department expects to finalize and implement its Acquisition
Career Management Plan (ACMP) in the second half of FY 2003.
(3) Implementation of the ACMP will include an assessment of the skills
possessed by those in the 1102 job series and the preparation of an
individual development plan for each employee. OCPO will use the
individual development plans to arrange for the training its employees
need to obtain required skills and keep those skills current. [See
comment 1]
(4) The report states that the "HUD acquisition workforce [is] not
receiving required training." It is difficult to assess the accuracy of
this statement because the report does not distinguish those in the
1102 series from GTRs and GTMs. Each has different functions and
different training requirements. The Clinger-Cohen Act does not mandate
any training for GTRs or GTMs, and OFPP Policy Letter 97-01 merely
states that contracting officer technical representatives (COTRs) must
have training that covers the competencies in the Federal Acquisition
Institute (FAI) COTR workbook. [See comment 2]
To qualify for GTR certification, the Department requires an individual
to attend a three-day FAI-compliant course. This has been supplemented
with specific courses on such topics as cost estimating, contract
administration, and performance-based statements of work. The OCPO has
posted on its intranet website [hyperlink,
http://hudweb.hud.gov/po/arc/cafe/gtr/gtrhome.htm an extensive
collection of GTR resources, including an on-line orientation/refresher
course with 23 job-specific lessons followed by a quiz, as well as
guidance on the preparation of statements of work and cost estimates.
We have enclosed, for your information, the main page of our intranet
"GTR Resources", the course index to our on-line GTR orientation, and a
fact sheet that highlights and distinguishes the roles and
responsibilities of the GTR and GTM (Enclosures 2, 3 and 4,
respectively).
Most GTMs monitor contractor performance as it relates to programmatic
requirements and perform inspections. The scope of their duties, in
terms of contract management, is more limited than that of GTRs. To
effectively manage its limited training funds, the Department gives
first priority to training GTRs. The GTMs are provided with the level
of training appropriate to their duties, including GTR Training when
warranted. The fact that both do not receive the same training is
appropriate and demonstrates that the Department manages its limited
training resources effectively. Furthermore, the amount of training
provided the "HUD acquisition workforce" has increased dramatically in
the last three years, from $66,871 in FY 2000, to $78,046 in FY 2001,
to $163,537 in FY 2002 (the figures for FY 2000 and FY 2001 were
provided to the GAO staff on March 14, 2002). The level of training
investment in FY 2002 represents an increase of over 144 percent
greater than the FY 2000 level. The FY 2002 allocation provided 141
individual training courses, three on-site Basic GTR/GTM courses for 75
individuals, and five on-site Performance-Based Work Statement courses
for 101 individuals. [See comment 3]
Based on this information, the Department believes that the HUD
acquisition workforce is receiving required training. OCPO will
continue to assess the GTR and GTM program to define more clearly and
differentiate the functions and training needed to more effectively
monitor contractor performance. [See comment 4]
Recommendation:
* Improve the usefulness of HUD's centralized contracting management
information system by (1) providing training to staff on the
definitions of data intended to be captured; (2) providing training to
program office staff on the functions, such as tracking deliverables
and contractor performance of the system, and (3) developing and
implementing verification procedures.
Response:
The Department is in agreement with the findings and the
recommendations, and is taking action to implement the recommendations.
The training will be revised to provide more detailed definitions of
data to be captured and more emphasis on the functions available in the
HUD Procurement System (HPS). The OCPO has already conducted three
sessions for GTRs on using HPS for contract oversight during the 4th
quarter of FY 2002, and intends to expand its offerings in FY 2003. The
verification procedures will be implemented in FY 2003.
HPS is an acquisition tracking system, and it is intended to track and
manage procurement actions through procurement planning, request for
services, solicitation, award, contract administration, and contract
closeout. In addition, HPS interfaces with the Department's core
financial system (HUDCAPS) to reserve and obligate funds. In contrast,
management information systems for large programs, such as the Property
Management System (PMS) used to track multifamily properties, are
specifically designed to perform management and accounting functions
that are unique to that program. Appendix IV of the report lists the
various financial management information systems at HUD, and it
indicates that PMS provides information on "property management, tax
servicing, tenant leases, accounts receivable, accounts payable and
disbursements processing, financial accounting, and management
reports." Tracking and providing this information is well outside the
scope and capabilities of HPS; however, it is central to the management
of the contracts that support multifamily property disposition.
Mandating the use of HPS to track deliverables under those contracts
would represent a duplication of effort. [See comment 5]
Thank you once again for the opportunity to comment on the draft
report. If you have questions, please contact Dexter J. Sidney, Chief
Procurement Officer at (202) 708-0600.
Sincerely,
Signed by:
Vickers B. Meadows:
Assistant Secretary for Administration:
Enclosures:
1. Additional Comments:
2. GTR Resources Page from CPO's Intranet:
3. The outline of our on-line GTR Orientation Training:
4. Fact Sheet on GTR & GTM responsibilities:
[End of letter]
GAO Draft Report: HUD Management: Action Needed to Improve Acquisition
Management:
Additional Comments:
Location: Page 14, Paragraph 2, second sentence.
GAO Draft Report Citation: The Contract Management Review Board was to
review all contracts over $250,000 to provide a departmentwide planning
perspective.
Departmental Comments and Requested Changes: On August 16, 2002, The
Deputy Secretary issued revised CMRB rules and procedures. Among the
changes was an increase in the dollar threshold for the Board's review
of planned procurement actions. Accordingly, this sentence should be
revised to read as follows: At present, the Contract Management Review
Board reviews all proposed contract actions over $500,000 to provide a
departmentwide planning perspective.
Location: Page 16, paragraph 2; Page 20, paragraph 1.
GAO Draft Report Citation: Our more recent work in HUD's multifamily
program found little evidence that the concept of risk management or
risk-based monitoring has been applied to contract oversight (P.16).
Weaknesses in HUD's monitoring processes limit the department's ability
to identify and correct contractor performance problems, hold
contractors accountable, and assure itself that it is receiving the
services for which it pays (P. 20).
Departmental Comments and Requested Changes: Since the GAO conducted
its initial reviews with HUD's Atlanta and Fort Worth Property
Disposition Centers and discussed its areas of concern, the Department
has modified the current contract with the property management
Oversight Contractor to include new inspection and procurement
assessment requirements that will assist the Centers in their oversight
of the Property Management Contractor's procurement activities. The new
requirements require the Oversight Contractor to perform the following
activities:
* Review the Property Manager's procurement activities, including
subcontracting activities;
* Perform on-site reviews of subcontract work, services and
deliverables to assure compliance with the terms and conditions of the
Property Manager's subcontracting requirements, on a random sampling
basis;
* Perform on-site comparisons of subcontractor billings to work
performed, on a random sampling basis;
* Review the Property Manager's subcontracting file documentation and
on-site invoices to assure that work orders were not deliberately split
to avoid competition and/or HUD approval;
* Perform physical inspection of completed subcontracted work to
compare work orders to actual work performed, and produce both written
and photographic records of significant work items actually completed,
on a random sampling basis.
HUD is currently procuring new property management contractors nation-
wide to manage the mortgagee-in-possession and HUD-owned properties.
These new contractors should begin work early in calendar year 2003.
The Department has significantly strengthened the requirements for
oversight and management in the new property management contract
solicitation. The new contracts have increased the contractor's
oversight responsibilities, particularly in the areas of quality
control and subcontracting activities. Some of these new
responsibilities include:
* Provide an upfront Quality Control (QC) Plan for the overall
operation of the Property Management Contract. The Plan will establish
written procedures to monitor work assignment of employees and
subcontractors, inspect work completed, and ensure compliance with the
Property Management Contract as well as Federal, State, and local laws
and regulations;
* Provide photographic documentation to accompany all inspection of
significant work or subcontracted work;
* Perform yearly audits of on-site subcontracting activities, on a
project-by-project basis. (See comment 6)
Other revisions were made to the new contract documents to better
address the Department's need for improved quality control under these
contracts, such as:
* A definition of what constitutes an emergency repair, which was
lacking in the old Property Management Contracts. (Emergency repair is
defined as a situation where life, health, or property is in danger and
immediate action is needed to eliminate or mitigate the dangerous
conditions.);
* Additional language to emphasize the importance of procurement
planning to avoid costly emergency acquisitions;
* The use of long-term indefinite delivery subcontracts to consolidate
the purchase of routine supplies and recurring services;
* An expanded list of the types of documents to be included in
subcontract files;
* Expanded requirements for monthly subcontracting reports and
inspection requirements;
* The Property Manager must conduct internal audits of the
subcontracting activities performed at each project site and submit
annual reports to HUD's Contracting Officer.
Management oversight by HUD staff is a critical component on reducing
the risk to both the Department and residents residing in HUD-managed
projects. HUD's Property Disposition Centers have the responsibility
for the management of both the oversight and property management
contractors. Further, HUD has to ensure that these contractors are
performing their duties to ensure that residents live in decent, safe,
and sanitary housing in projects that are HUD-owned or where the
Department is Mortgagee-In-Possession. In order to ensure that the
residents live in decent, safe, and sanitary units, the roles and
responsibilities for HUD staff in the management of the contracts for
this program must adhere to HUD's contracting procedures but also have
built-in flexibility to address the management of this inventory. HUD
mandates that the contractor be as responsive to emergencies that
impact tenant safety and well being as HUD staff would be on a 24-7-365
basis. Under the new contract discussed above, this responsiveness will
be built in, as well as controls that address the types of issues that
GAO identified.
In addition, while the GAO audit was helpful, it was targeted to review
all potentially problematic transactions, rather than a random
selection. The FHA annual financial audit takes a broader look at our
control on a more systematic basis. While we are focused on addressing
GAO's concerns, HUD managers in the PD Centers will manage both the
contracts and the GTRs and GTMs that are responsible for the contracts
as part of their responsibilities as asset managers and the management
of the HUD inventory of multifamily properties. (See comment 7)
HUD is also taking immediate steps to reduce its HUD-owned and managed
resources. Five years ago, HUD owned and managed 66 properties with
8,571 units over 35 different offices. HUD's current policy calls for
immediate transfer of foreclosed properties to local government or sale
of the mortgage note in HUD's note sales. As of October, 2002, this
inventory is less than 40 properties. This and the new contracts have
long-term implications for staff and financial resources to meet HUD's
responsibility for property management. It also lessens the overall
exposure to the types of errors identified by GAO and possibly the need
for more elaborate controls beyond those currently envisioned.
Location: Page 25, paragraph 3, line 6;
GAO Draft Report Citation: In response to our observations, the OCPO
Director of Policy and Field Operations said that while it is likely
that some of these individuals do not meet the training requirements,
it is probable that many of the individuals have not met the training
requirements but the centralized information system maintained by OCPO
has not been updated, partly because HUD is waiting for a new
government wide system to be completed that will track such
information.
Departmental Comments and Requested Changes: HUD would like to clarify
this issue. The majority of the HUD contracting community (1102-series
personnel) has ten or more years of experience. While a review of our
training records may have disclosed the absence of some entry-level
courses, by the time those courses were mandated by OFPP, the employees
had either mastered the required skills (through on-the-job training
and experience) or taken other equivalent courses. Accordingly, there
was no reason to expend limited training resources on duplicative
training. To ensure that this information is captured, a training
waiver will be developed, as authorized by the OFPP, and the waiver
will be incorporated in OCPO's Acquisition Career Management Program.
(See comment 8)
Regarding the record-keeping issue, the Federal Acquisition Institute
(FAI) was given responsibility, under the Clinger-Cohen Act, to develop
the Acquisition Career Management Information System (ACMIS). The ACMIS
has been n development since FY 2000, and was tentatively schedules for
government-wide availability and access on October 1, 2002, although
implementation appears to be delayed. HUD, along with many other
federal agencies, including the General Services Administration, has
determined that it would not be beneficial to invest agency resources
into developing a separate agency-specific system since all agencies
will be required to utilize the government-wide system. As an interim
measure, OCPO has tracked 1102 skills and training with a spreadsheet.
This has allowed management to determine the most critical training
needs and plan accordingly.
Location: Page 41, section 1, paragraph 2;
GAO Draft Report Citation: Obligated amount is greater than the overall
value of the contract: According to the HPS administrator, the figure
in the total value amount field should be greater than the figure in
the total obligated amount data field; as funds should not be obligated
in excess of the value of the contract.
Departmental Comments and Requested Changes: Obligated amount is
greater than the overall value of the contract: According to the HPS
administrator, the figure in the total value amount field should be
greater than or equal to the figure in the total obligated amount data
field; as funds should not be obligated in excess of the value of the
contract. (See comment 8)
Location: Page 41, section 2, paragraph 2;
GAO Draft Report Citation: Overall value of the contract and obligated
amount is greater than the Indefinite delivery Indefinite quantity
(IDIQ) Maximum: According the HPS administrator, the figure in the IDIQ
maximum field should be greater than the total contract value and the
total obligated amount data field.
Departmental Comments and Requested Changes: Overall value of the
contract and obligated amount is greater than the Indefinite delivery
Indefinite quantity (IDIQ) Maximum: According the HPS administrator,
the figure in the IDIQ maximum field should be greater than or equal to
the total contract value and the total obligated amount data field.
(See comment 8)
Location: Page 41, section 3, paragraph 2, bullet 3;
GAO Draft Report Citation: Status of contract not consistent with date
information and significant number of data fields blank: The completion
date should be prior to the last completion date.
Departmental Comments and Requested Changes: Status of contract not
consistent with date information and significant number of data fields
blank: The completion date should be prior to or equal to the last
completion date.
[End of enclosure]
The following are GAO‘s comments to HUD‘s letter dated October 23,
2002.
GAO Comments:
1. HUD has defined its acquisition workforce to include contract
officers, contracting specialists, purchasing agents, GTRs, and GTMs.
Therefore, our report recommends that HUD assess the skills and
capabilities of its existing acquisition workforce, not simply the
contract officers and contracting specialists in the 1102 series.
2. We believe that the report accurately and properly distinguishes the
different acquisition positions at HUD--including GTRs, GTMs, and
various OCPO staff--and accurately reflects the federal training
requirements associated with these positions. Specifically, the Clinger-
Cohen Act mandates that executive agencies, through consultations
with OFPP, establish specific education, training, and experience
requirements for acquisition workforces. Under implementing guidance
issued by OFPP, an agency‘s acquisition workforce”including its
contracting officers, contract specialists, purchasing agents,
contracting officer representatives, and contracting officer technical
representatives, which HUD calls GTRs”must meet an established set of
contracting competencies. HUD has developed a GTR training program in
response to federal requirements; however, we found that a significant
portion of staff serving in this capacity have not received this
training. In addition, HUD has identified GTMs as part of its
acquisition workforce and HUD‘s policies permit the duties and
responsibilities of GTRs to be delegated to GTMs; and its draft
Acquisition Career Management Plan”which establishes training
requirements for HUD‘s acquisition workforce”states that the GTR
training requirements also apply to GTMs. Therefore, we remain
concerned that, according to HUD‘s records, a significant portion of
the department‘s GTRs have not received training and that 93 percent of
GTMs have not received any specialized acquisition training.
3. We agree that GTMs may not require the same level of training as
GTRs; however, HUD policies and handbooks indicate that providing
acquisition training to GTMs is necessary and is part of its intent. And
therefore, as discussed in comment 2, we remain concerned that,
according to HUD‘s records, 93 percent of GTMs have not received any
specialized acquisition training. We revised the report to reflect the
increases in HUD‘s training budgets discussed in its response.
4. As discussed in comment 2, we recognize that HUD is providing
required training to some members of its acquisition workforce and we
are encouraged by HUD‘s plans to assess the training needed for GTRs
and GTMs to more effectively monitor contractor performance. However,
we remain concerned that not all components of HUD‘s acquisition
workforce are receiving the required training and, based on the reasons
discussed in comment 2, we made no changes to our conclusions or
recommendations.
5. We recognize that HUD has multiple information systems that are used
to manage and monitor the department‘s contracting activities and that
some might be better suited to track the deliverables of specific types
of contracts than others. However, we found that HUD staff were not
utilizing HPS to its fullest potential, including its ability to track
deliverables. We clarified the wording in our report to make clear that
we are not suggesting that HPS be used to track specific deliverables
for all HUD contracts.
6. HUD‘s emphasis on reviewing subcontractor work would not necessarily
identify the improper payments we found. The improprieties occurred, in
part, because the vendors split the work into multiple invoices to fall
below HUD‘s established threshold of review and subcontractor
requirements. HUD‘s plan to review the property management
subcontracting file documentation and on-site invoices to assure that
work orders were not deliberately split to avoid competition and/or HUD
approval is a step to assist in catching such irregularities; however,
we believe that part of developing a risk-based approach and monitoring
contractor performance is to include monitoring those disbursements
made by the property management contractors that are under the dollar
threshold for individual anomalies and unusual disbursement patterns to
identify potentially improper billing practices.
7. The review of improper payments that HUD refers to was part of a
separate congressional request to review disbursement processes that
are particularly susceptible to improper payments and determine whether
improper payments occurred. Based on our review of the multifamily
disbursements, it was evident that the existing internal controls would
not prevent and detect improper payments in the normal course of
business. Consequently, a random sample approach was unnecessary, and
we used our data mining approach to search for and identify
irregularities that indicated the existence of possible improper
payments. While the annual financial statement audit is designed to
broadly assess internal controls, the auditors would not necessarily
focus their work on payments not expected to have a material impact on
the financial statements. Our improper payments review was not limited
by such constraints and therefore, could be a much more detailed
analysis of the areas that we determined to be particularly susceptible
to improper payments.
8. We modified the report to reflect these clarifications.
[End of GAO comments]
[End of section]
Appendix VI: GAO Contacts and Staff Acknowledgments:
GAO Contacts:
Stanley J Czerwinski, (202) 512-5535:
Steve Cohen, (202) 512-2834:
Acknowledgments:
In addition to those named above Amy Bevan, Dan Blair, J Bryant, Anne
Cangi, Bonnie Derby, Eric Diamant, Colin Fallon, Evan Gilman, Barbara
Johnson, Irvin McMasters, Andy O‘Connell, Mark Ramage, and Nico Sloss
made key contributions to this report.
[End of section]
Footnotes:
[1] U.S. General Accounting Office, Major Management Challenges and
Program Risks: Department of Housing and Urban Development, GAO-01-248
(Washington, D.C.: Jan. 1, 2001)
[2] In response to this request, we have also issued reports on HUD‘s
information technology acquisition efforts, the status of HUD
management reforms, and HUD‘s human capital planning. U.S. General
Accounting Office, HUD Information Systems: Immature Software
Acquisition Capability Increases Project Risks, GAO-01-962 (Washington,
D.C.: Sept. 14, 2001). U.S. General Accounting Office, HUD Management:
Progress Made on Management Reforms, but Challenges Remain, GAO-02-45
(Washington, D.C.: Oct. 31, 2001). U.S. General Accounting Office, HUD
Human Capital Management: Comprehensive Strategic Workforce Planning
Needed, GAO-02-839 (Washington, D.C.: July 24, 2002).
[3] U.S. General Accounting Office, Financial Management: Strategies to
Address Improper Payments at HUD, Education, and Other Federal
Agencies, GAO-03-167T (Washington, D.C.: Oct. 3, 2002).
[4] We have defined monitoring as an internal control function that is
performed continually and is ingrained in the agency‘s operations. It
includes regular management and supervisory activities, comparisons,
reconciliations and other actions people take in performing their
duties. U.S. General Accounting Office, Standards for Internal Control
in the Federal Government, GAO/AIMD-00-21.3.1 (Washington, D.C.:
November 1999).
[5] HUD‘s Multifamily handbook indicates that quarterly inspections are
to occur, but the specific sections in the handbook that are to discuss
those inspections have not yet been developed and are currently blank.
[6] GAO-03-167T.
[7] In July 2002, we reported that HUD has undertaken some workforce
planning and has determined how many staff it needs to meet its current
workload, but it does not have a comprehensive strategic workforce plan
to guide its recruiting, hiring, and other key human capital efforts.
GAO-02-839.
[8] The GTR at HUD is the equivalent of a Contracting Officer Technical
Representative at other agencies, and acts as the Contracting Officer‘s
representative in all matters concerning the technical (i.e., not
contractual) aspects of a contract. The GTR is often the department‘s
primary point of contact with a contractor; is responsible for giving
contractors technical advice and guidance related to the work required
by the contract, and is also the principal judge of contractor
performance, including the quality and timeliness of work and products,
and when appropriate, the contractor‘s ability to control costs of
performance. HUD uses GTMs to assist the GTRs, but does not equate them
to the contracting officer technical representatives or contracting
officer representatives specified in the FAR.
[9] U.S. Department of Housing and Urban Development, FY 2001
Performance and Accountability Report.
[10] FHA insures private lenders against losses on mortgages that
finance multifamily projects to develop affordable housing. The Section
202/811 Supportive Housing for the Elderly and Persons with
Disabilities programs provide grants for long-term supportive housing
for the elderly and disabled.
[11] Contracting officers have the authority to bind the government
legally by signing a contract. Contract specialists generally assist
contracting officers. Purchasing agents commonly issue delivery orders
against established contracts.
[12] To assist in meeting this requirement governmentwide, the Federal
Acquisition Institute is scheduled to implement the Acquisition Career
Management Information System in October 2002. This system is Web-based
and will collect standardized information on the acquisition workforce
for all civilian agencies.
[13] National Academy of Public Administration, A Preliminary Review of
Federal Housing Administration Acquisition Activities (Washington,
D.C.: May 1997).
[14] National Academy of Public Administration, HUD Procurement Reform:
Substantial Progress Underway (Washington, D.C.: April 1999).
[15] HUD obligated about $960 million in fiscal year 2001. According to
HUD officials, some decisions regarding planned contracts were delayed
as a result of the change in administration, resulting in a decrease in
obligations for 2001.
[16] U.S. General Accounting Office, Single-Family Housing: Stronger
Measures Needed to Encourage Better Performance by Management and
Marketing Contractors, GAO/RCED-00-117 (Washington, D.C.: May 12,
2000). U.S. General Accounting Office, HUD Management: Contracting
Issues Need Continued Attention, GAO/T-RCED-98-222 (Washington, D.C.:
June 5, 1998). U.S. Department of Housing and Urban Development,
Office of Inspector General, HUD Contracting Activity, 97-PH-163-0001
(Washington, D.C.: Sept. 30, 1997). National Academy of Public
Administration, HUD Procurement Reform: Substantial Progress Underway
(Washington, D.C.: April 1999).
[17] U.S. Department of Housing and Urban Development, Office of
Inspector General, Followup Review of HUD Contracting, 99-PH-163-0002
(Washington, D.C.: Sept. 30, 1999).
[18] GAO-02-45.
[19] Department of Housing and Urban Development, Office of Inspector
General, Follow-up Review of HUD Contracting, 99-PH-163-0002
(Washington D.C.: Sept. 30, 1999).
[20] We have defined risk assessment as the identification and analysis
of relevant risk associated with achieving the objectives and forming a
basis for determining how risks should be managed. GAO/AIMD-00-21.3.1.
[21] GAO/RCED-00-117.
[22] U.S. General Accounting Office, Single-Family Housing:
Improvements Needed in HUD‘s Oversight of Property Management
Contractors, GAO/RCED-98-65 (Washington, D.C.: Mar. 27, 1998).
[23] According to HUD‘s annual performance report, FHA endorsed over
700 multifamily loans during fiscal year 2001 and completed initial
approvals for 301 new assisted properties, all of which will require
inspections.
[24] The GTMs for these contracts are also responsible for oversight of
HUD‘s Multifamily Accelerated Processing (MAP) program. We recently
reported that the field office workloads for this program often
exceeded HUD‘s standard; one of the offices we visited in our
contracting review had more than doubled the standard cases for the MAP
program. U.S. General Accounting Office, Multifamily Housing:
Improvements Needed in HUD‘s Oversight of Lenders that Underwrite FHA-
Insured Loans, GAO-02-680 (Washington, D.C.: July 19, 2002).
[25] GAO/RCED-98-65.
[26] U.S. General Accounting Office, Single-Family Housing: Stronger
Measures Needed to Encourage Better Performance by Management and
Marketing Contractors, GAO-00-117 (Washington, D.C.: May 12, 2000);
U.S. General Accounting Office, Single-Family Housing: Better Strategic
Human Capital Management Needed at HUD‘s Homeownership Centers, GAO-01-
590 (Washington, D.C.: July 26, 2001).
[27] GAO-03-167T.
[28] We have defined strategic human capital management as an effort
that is consistent with two key principles. First, people are assets
whose value can be enhanced through investment, while maximizing value
and managing risk. Second, an organization‘s human capital approaches
should be designed, implemented, and assessed by the standard of how
well they help the organization achieve results and pursue its mission.
U.S. General Accounting Office, A Model of Strategic Human Capital
Management, GAO-02-373SP (Washington, D.C.: Mar. 15, 2002).
[29] U.S. General Accounting Office, Human Capital: A Self-Assessment
Checklist for Agency Leaders, GAO/OCG-00-14G (Washington, D.C.: Sept.
2000).
[30] HUD developed its Acquisition Management Career Plan to comply
with OFPP requirements that agencies have policies and procedures that
specify career paths and include certain mandatory training
requirements for its acquisition workforce.
[31] At HUD, procurement analysts perform a variety of administrative
functions for OCPO, such as managing training.
[32] Office of Federal Procurement Policy Letter No. 97-01, Procurement
System Education, Training and Experience Requirements for Acquisition
Personnel, September 12, 1997.
[33] HPS also tracks Purchase Orders, Interagency Agreements, and
Grants; however, this discussion is limited to contracts and purchase
orders.
[34] Active contracts may be shown in HPS as ’active: awarded,“
’active: expired,“ or ’active: closed out,“ depending on where they are
in the contract lifecycle. Our discussion of active contracts includes
only those contracts that are shown as ’active: awarded,“ meaning that
the contract is shown as being an actively managed contract.
[35] To be compliant with the core financial systems requirements
established by the Joint Financial Management Improvement Program
(JFMIP), and therefore be in substantial compliance with the Federal
Financial Managers Improvement Act (FFMIA) of 1996, financial systems
must track obligation data. In its audits of HUD‘s consolidated
financial statements, the Inspector General reports a material weakness
that ’HUD‘s financial systems are not compliant with federal financial
standards.“ HUD reports 17 of its 57 financial management systems do
not materially conform to the requirements of FMFIA and OMB Circular A-
127, including several of the systems used for this analysis.
[36] Of these 33 contracts, 29 were from the multifamily analysis and 4
were from the HUD-wide analysis.
[37] Of these 37, 31 were from the HUD-wide analysis and 6 were from
the multifamily analysis.
[38] U.S. General Accounting Office, Financial Management: Strategies
to Address Improper Payments at HUD, Education, and Other Federal
Agencies, GAO-03-167T (Washington, D.C.: Oct. 3, 2002).
[39] We did not review 6 of the 49 multifamily housing program GTR
files because of constraints resulting from HUD‘s ongoing transfer of
its multifamily housing program field contracts to two locations, and
the fact that these 6 contracts, which were not located at the offices
to which we did travel, were similar in nature to the contracts we did
review.
[40] This sample, although it contains procurements from numerous
program offices, is not representative of HUD‘s contracting actions as
a whole and we did not extrapolate our findings HUD-wide.
[End of section]
GAO's Mission:
The General Accounting Office, the investigative arm of Congress,
exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability
of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO's commitment to
good government is reflected in its core values of accountability,
integrity, and reliability.
Obtaining Copies of GAO Reports and Testimony:
The fastest and easiest way to obtain copies of GAO documents at no
cost is through the Internet. GAO's Web site [hyperlink,
http://www.gao.gov] contains abstracts and full-text files of current
reports and testimony and an expanding archive of older products. The
Web site features a search engine to help you locate documents using
key words and phrases. You can print these documents in their entirety,
including charts and other graphics.
Each day, GAO issues a list of newly released reports, testimony, and
correspondence. GAO posts this list, known as "Today's Reports," on its
Web site daily. The list contains links to the full-text document
files. To have GAO e-mail this list to you every afternoon, go to
[hyperlink, http://www.gao.gov] and select "Subscribe to e-mail alerts"
under the "Order GAO Products" heading.
Order by Mail or Phone:
The first copy of each printed report is free. Additional copies are $2
each. A check or money order should be made out to the Superintendent
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or
more copies mailed to a single address are discounted 25 percent.
Orders should be sent to:
U.S. General Accounting Office:
441 G Street NW:
Room LM:
Washington D.C. 20548:
To order by Phone:
Voice: (202) 512-6000:
TDD: (202) 512-2537:
Fax: (202) 512-6061:
To Report Fraud, Waste, and Abuse in Federal Programs:
Contact:
Web site: [hyperlink, http://www.gao.gov/fraudnet/fraudnet.htm]:
E-mail: fraudnet@gao.gov:
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director, NelliganJ@gao.gov:
(202) 512-4800:
U.S. General Accounting Office:
441 G Street NW, Room 7149:
Washington, D.C. 20548:
