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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] 

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