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Updated April 14, 2005 

HUD Plans to Contract-Out More Multifamily Work


     On March 30, 2004, I attended a meeting with Jim Martin, Deputy Assistant CFO for Financial Management. He had asked Norman Mesewicz, Deputy Director of Labor and Employee Relations, to set up the meeting to discuss Management's intention to conduct an OMB A-76 study. Agencies conduct OMB A-76 studies when they are planning to contract out work that could lead to a Reduction in Force of ten or more employees. Although HUD contracts out more than $1 billion annually, none has involved an A-76 study and none has resulted in a RIF.

     According to Management, the A-76 study will involve "Non-Section 8 Contract Administration Activity" in the Office of Multifamily Housing. This involves approximately 4,000 contracts. After further inquiry, it is clear that this involves more than non-Section 8 contract administration, as the work to be considered for contracting out includes all Section 202, 811, 236, and rent supp RAP. The older Section 202 and 811 developments are clearly Section 8 subsidized.

     I reminded them that the Section 8 statute limits who may administer Section 8 contracts-private corporations and consortia are not permitted. Nonetheless, Management intends to open competition to such groups. They agree that if such a group is successful, HUD will need to secure changes to the Section 8 statute to permit this contracting out.


     The new OMB A-76 rules require that the entire process be completed within 12 months. Since the agency hasn't conducted an A-76 study in more than 15 years, OMB granted HUD a waiver and HUD will have 18 months.

     Management intended to publish the notice of A-76 competition in the FedBizOps by April 2, 2004, and provide affected employees with notice shortly thereafter.

     According to TEAM, approximately 60-80 FTE are used for this work. However, Management acknowledges that hundreds of Multifamily Asset Managers are doing this work as part of their portfolio management. Thus, hundreds of Multifamily Housing staff may be receiving notices that they are affected by Management's decision to put their work out for competition.

     Management is now creating a Performance Work Standard Team to develop the Scope of Work (SOW). The tentative date for completion of the SOW is September 30, 2004. The SOW will then be published and contractors will be invited to submit bids for the work.

     A draft SOW will be released to the Union for comment. At that time, we will need the swift input of our members in Multifamily Asset Management, as you are the experts in your job. We will add an icon to the home page of our website (www.afgecouncil222.com) to take you to the latest information on this A-76 competition. Although we may not have news for weeks at a time, please make it part of your routine to check the website.

     In the next couple months, Management is creating a Most Efficient Organization (MEO) Team to prepare the in-house bid. The bulk of the MEO Team's work will occur after the issuance of the SOW.

     The revised A-76 rules provide for no Union involvement in the MEO team. I advised Management that employees have little or no faith in Management to develop an accurate in-house bid. First, Management has demonstrated their bias for contracting-out in their so-called cost-benefit study of the Section 8 PBCAs. In that study, Management determined that it would take 1400 staff to manage a portfolio of 16,000 contracts, for a ratio of 1 Project Manager to less than 12 Section 8 contracts. The proper ratio under the former Resource Allocations Guidelines was 1 to 25, and the work included both Section 8 contract administration and asset management (the latter is work that hasn't been contracted out--yet). Even the IG found Management's in-house cost estimate to be inflated. Second, given that Management is currently responsible for organizing HUD and its work in the most efficient way possible, an employee only needs to look around to realize that we're in trouble when they don't include input from the people who actually do the work.

     And who will be responsible for determining the cost of contractor oversight in the event this work is contracted out? In a fair competition, the in-house bid is compared to the cost of the outside bid plus the cost of in-house contractor oversight.

     Management admits that they do not have experience in either creation of the SOW or the MEO. Therefore, they are hiring contractors to assist each team. They have selected five small business contractors from a list provided by GSA. With assistance from GSA, they are asking these five contractors to compete for the SOW and MEO assistance contracts. Management has agreed to provide the Union with the list of five, and we will confer with AFGE National in an effort to ensure that the contractor for the MEO team is more than competent.

Why A-76? Why the Rental Assistance Program? And what happened to the promised contracting-in studies?

     Perhaps to make us feel less hostile towards this announcement, Management advised that they believe the work takes more staff that the current 60-80 FTE. They hope the in-house bid wins, so they can go to Congress and seek authorization to hire the necessary staff.

     If that's so, then why not use the much touted REAP studies to support the need for more staff? Why do we cooperate with REAP if it isn't to be used to support more staff? Management advised that using A-76 will result in the use of competition with the private sector to create a "Most Efficient Organization."

     Of course, an A-76 study could also result in the contracting-out of more work and the RIFing of current staff, despite declarations by Secretary Jackson and former Administrator of the Office of Federal Procurement Policy Angela Styles that HUD probably already contracted out too much. So, what happened to the promised contracting-in studies? Perhaps not realizing the incongruity of their answer, Management advised that they had insufficient staff to conduct a contracting-in study (so they're using staff to conduct a contracting-out study).

     The remaining rental subsidy contracts are being targeted because GAO continues to list their administration as "high risk" and the IG Annual Financial Audit continues to include this as a weak area. Of course, Management admits that HUD employees are being compared to PBCAs, and that HUD provides PBCAs with resources far greater than HUD provides for its own work.

What's the Union doing now, and what can I do?

     We have several irons in the fire. First, we've contacted AFGE National for assistance. We're reviewing the five small business contractors to ensure that our MEO team isn't saddled with a dog for a contractor. We're also pressuring Management to ensure that the right people are on the MEO team.

     Second, we've contacted reporters with Government Executive about this. They did an excellent article on the PBCA debacle last summer, and have been closely following contracting out in general.

     Third, we're working with AFGE National to secure legislation requiring HUD to conduct two small-scale contracting in pilot programs-one involving the PBCAs and the other Single Family Property Disposition. We've gotten good responses on Capitol Hill, but now we need to secure appointments with key Senators and Representatives while they are home on Easter recess. Talk with your Local Presidents for more information.

     Fourth, if a non-PHA is the successful bidder, Management will need to secure congressional authority to contract out this work. We'll be contacting the National Alliance of HUD Tenants and other advocacy groups about this. NAHT has consistently opposed the PBCA contracts, and we believe they will help us oppose these contracts as well.

     Fifth, we'll be updating our website with all news as soon as we receive it. Look for the icon to be placed on the home page soon. We can't use government equipment to tell you to lobby your Congressperson. But your Local President is able to talk about it with you directly. So keep yourself in the loop. We'll post sample letters on the website and report on what's happening.

     The game is on!

Carolyn Federoff, President
AFGE Council 222

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