Office of Housing

            Single Family

            Property Disposition

 

Proposal to Address the Presidential Management Agenda

regarding Competitive Sourcing and HUD Management and Performance

in the Disposition of Single Family Properties  

 

 

Table of Contents:

 

            Summary          .           .           .           .           .           .           .           2

 

            Presidential Management Agenda          .           .           .           .           2

 

            Budget and Performance Integration      .           .           .           .           3

 

            Staffing Requirements   .           .           .           .           .           4

 

            The Proposal    .           .           .           .           .           .           .           4

 

            Performance/Means and Strategies       .           .           .           .           5

 

            Performance Reporting and Evaluation  .           .           .           5

 

 

 


 

Office of Housing

            Single Family

            Property Disposition

 

Proposal to Address the Presidential Management Agenda

regarding Competitive Sourcing and HUD Management and Performance

in the Disposition of Single Family Properties  

           

 

Summary: 

 

            The Proposal will create a measurable pilot program to compare the cost and quality of Single Family property disposition by outside contractors versus in-house staff.  It will involve a maximum allocation of ten (10) FTE.

 

            At this time, the agency has the ability to measure the cost of performance by outside contractors.  However, the agency has not agreed upon an estimated cost if the work were to be performed in-house.  Additionally, there is wide disagreement as to whether in-house staff could deliver the same quality work as contractors, especially with regard to the number of days properties are kept in the inventory and the total monetary losses.

 

            HUD continues to lose significant amounts in its property disposition activities.  The loss equals somewhere between $34 and $41 thousand per property per month in the Philadelphia HOC alone.[1]  According to the report, the national average time in inventory was 166 days.  While some have tried to argue that we are losing less money now than we did when this work was performed in-house, the contractor receives funds sufficient to maintain staffing levels and travel money far in excess of that provided to in-house staff.  To ensure that sufficient funds are received to maintain necessary staffing levels and travel money, the Proposal establishes a separate Capital Fund Account, similar to that which exists for IT staff, to insulate the pilot from being raided when HUD has to cut expenses.

 

            The Proposal will include Performance/Means and Strategies and Performance Reporting and Evaluation to allow for accurate comparison of property disposition by contractors versus in-house staff.  The Proposal will require two years for cost and quality comparison.

 

 

Presidential Management Agenda:

 

            The Proposal directly relates to the Presidential Management Agenda (PMA).  Of the five government-wide agenda items, the Proposal addresses Competitive Sourcing.  Furthermore, it is designed to meet the agenda goal of Budget and Performance Integration.

 

            HUD continues to be in red status with regard to Competitive Sourcing because it has completed no studies of public-private competitions to determine the best method to deliver services.  The Proposal would result in a public-private competition that could help the agency determine the best method for the delivery of services.

 

            Furthermore, the Proposal is designed to meet the goal of Budget and Performance Integration.  HUD is in red status because of a failure to integrate planning, budget and outcomes.  HUD’s current method of disposing of Single Family properties (by use of Management and Marketing, or M&M, contracts) is a prime example of a failure to integrate budget and outcome.  The present cost of the M&M contracts is greater than a hundred million annually, but HUD has done no studies to determine if the outcomes are sufficient for this large expenditure of funds.  The Proposal would result in a small-scale integration of planning, budget and outcomes.

 

 

Budget and Performance Integration:

 

            The Proposal fits with both the agency’s strategic goals as set forth in its FY ’04 Annual Performance Plan (APP).  Specifically, the Proposal addresses the APP at Goals H, C and EM. 

 

            Goal H of the APP seeks to “increase homeownership opportunities.”  This Goal includes six Objectives.  The Proposal meets two.  With regard to expanding national homeownership opportunities (Objective H.1), the Proposal will provide a methodology to determine if the agency can use the Single Family inventory in a cost effective manner to increase homeownership.  The Proposal will also provide the same with regard to increasing minority homeownership (Objective H.2).  The current track record of the M&M contracts indicates that the rate of purchase by owner-occupants has steadily declined, negatively impacting both of these Objectives. 

 

            Goal C seeks to “strengthen communities.”  Objective C.2.5 seeks to increase endorsement of FHA single-family mortgages in underserved communities, thus increasing owner-occupancy in these communities.  HUD’s Single Family inventory is the result of FHA endorsed single-family mortgages that have defaulted.  The Proposal will provide a method by which the agency can determine if there is a cost effective method of promoting owner-occupancy in the sale of HUD’s Single Family inventory wherever it may be located, including in underserved communities.

 

            The Proposal will address Goal EM, “embrace high standards of ethics, management and accountability.”  Additionally, the Proposal will provide a means to test Objective EM.2.9.  Objective EM.2.9 sets forth goals for the Accelerated Claim Program Demonstration (Section 601), an alternative method of Single-Family disposition.  The Proposal will provide the agency the means to determine the most cost efficient process for disposing of Single-Family properties, while also providing a method to compare the amount recovered and the persons served through the disposition process.  By doing a good cost and quality comparison, the agency will be embracing high standards of management and accountability for the use of scarce taxpayer dollars.

 

 

Staffing Requirements:

 

            The Proposal could be completed with no increase in staff or with an increase of up to 10 FTE to be added to the Deputy Assistant Secretary for Single Family Housing (DAS/SF).  All staff would be located in the Field in offices to be determined by management.  (The Proposal includes a discussion of how staffing numbers are to be determined.)

 

The Proposal:

 

            The Proposal would split the current M&M contract for Maryland and/or Pennsylvania in half for FY2005 and FY2006.  Half of the money (based on 2005 estimates of total cost) as well as half of the properties will still be processed by the current contractor.  The other half will be performed in house by HUD staff.  The existing inventory will likewise be split, and HUD staff will be expected to perform all duties required of the M&M contractor.  Additionally, HUD staff will take on the additional goal of targeting minority homeownership through non-computer generated advertising and bidding processes. 

 

In order to accurately compare the cost and quality of services, a Capital Expense Account will be established governing all travel, training, and other work related expenses for the work being performed in-house.  All costs commonly referred to as “pass through expenses,” as well as any other funds normally provided to the contractor shall be provided to the HUD staff by means of this Account.  Said Account will also be used to accept deposits of profits from sales calculated at the same rate as for the contractor.

 

            This proposal has no budget impact since it redirects funds from the housing contracting line item to a new Capital Expense Account.  A separate account is necessary to judge the actual effectiveness of bringing the work back.  As we have seen recently with the “excess” staff years in HUD’s current budget, this account needs to be insular from raids on the funds and staff years to make up for other mistakes in other departments within the agency.  It will also make crystal clear the advantages of one process or the other.

 

            HUD continues to lose significant amounts in its property disposition activities.  Somewhere between $34 and $41 thousand per property per month in the Philadelphia HOC alone.[2]  According to the report, the national average time in inventory was 166 days.  While some have tried to argue that we are losing less money now than we did when this work was performed in house before, staffing levels and travel money were never provided sufficient to accomplish the task.  Hence the need for a separate Capital Fund Account, similar to that which exists for IT staff, to insulate the pilot from being raided when HUD has to cut expenses.

 

            Under the union’s previous analysis, and given the current inventory of approximately 1800 properties, only 900 of which will be transferred to HUD staff, ten people will be needed (nine workers, one supervisor) in Maryland.  The major drawback to this proposal is that HUD no longer has seasoned staff in the office to pick up this workload.  So there would be at least a 6-month staff up and training transition period even if we could pick up some of the contractor’s existing Maryland staff.  (This represents less than a third of the total staff the contractor claims is dedicated to this project.  The balance of the contractor’s staff is in California.)

 

            Pennsylvania is a better choice in terms of immediate implementation and analysis of results.  With an inventory of approximately 1600 properties,  the office only needs eight knowledgeable staff to be dedicated, plus one supervisor.  And since it is a HOC state which absorbed our Camden staff, it is able to identify eight experienced staff and has supervisory capacity to not require additional positions at this time.

 

            The estimated savings of doing this work in-house has been previously provided by the Union.  Properly staffed and funded, HUD staff can save the taxpayer hundreds of millions over the M&M contractors. 

 

            HUD received a red rating on competition because it performed no studies on whether the work was better done in-house or by contractor.  This proposal is an important step in accomplishing that objective.  Other states can be substituted for the ones addressed here.  However, in order to be effective, an analysis of existing experienced staff in such offices needs to be done.

 

 

Performance/Means and Strategies:

 

            The means for performance shall include staff dedicated at a ratio of 1: 100 properties in the pilot jurisdiction.  They shall be provided with necessary training and travel money.  As described under the Proposal above, HUD employees assigned to the pilot jurisdiction shall perform the exact same tasks as expected of the M&M contractors, plus the additional goal of targeting minority homeownership through non-computer generated advertising and bidding processes.

 

 

Performance Reporting and Evaluation:

 

            The performance of the pilot jurisdictions shall be measured in the same manner as the performance of the M&M contractors.  HUD shall provide oversight in the same manner as it oversees the M&M contractors.  Any time spent by in-house staff on duties not required of the M&M contractor, including targeting minority homeownership, responding to Congressional inquiries and Freedom of Information Act requests, etc., shall be separately accounted for.  The HUD M&M contractor administrator shall report on the pilot jurisdiction performance in the same manner as if the pilot was a covered by an M&M contract.

 

            This method of reporting and evaluation will require no additional HUD staff in the Field or in HQ.

 

            At the end of the first and second years, the CFO shall request information from DAS/SF including, but not limited to: 

 

1.                            To determine the quality of service provided:

a.       all HUD contract administrator evaluations and reports for the pilot jurisdiction and the M&M contractor for the same geographical area;  and

b.      a comparison of the number of sales to owner-occupants, first time homebuyers and minority homebuyers between the pilot jurisdiction and the M&M contractor for the same geographical area.

2.                            To determine the actual cost of services provided:

a.       the staffing numbers assigned to the pilot jurisdiction, including position and grade, minus the total number of staff hours expended in activities not related to the M&M contract;  and

b.      the balances in the Capital Expense Account for the pilot jurisdiction.   

3.                            The actual cost of the M&M contractor for same geographical area.

 

With regard to the determination of actual cost, the CFO shall multiply by a factor that accommodates rents, utilities, and personnel and IT services that would not have been incurred by the agency but for the work of the pilot jurisdiction.      

 

This cost comparison shall be made available to the Secretary, Deputy Secretary, Assistant Secretaries for Housing and Administration, Deputy Assistant Secretary for Multifamily Housing, and congressional appropriators.

 

If the pilot jurisdiction is cost and quality effective, the agency shall continue the pilot.  Furthermore, the agency will expand the pilot as the M&M contracts come up for renewal.

 

 

 

 

 

 

 

 



[1] Single Family Acquired Asset Management System Report of the Department for the months of January through April 2003.

[2] Single Family Acquired Asset Management System Report of the Department for the months of January through April 2003.