U. S. Department of Housing and Urban Development

Office of Public and Indian Housing

Special Attention of: NOTICE PIH 2003-24 (HA)

Public Housing Agencies; Issued: September 26, 2003

Regional Directors;

Regional Counsel; Expires: September 30, 2004

State/Area Coordinators;
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Public Housing Directors;

FO Counsel

> Cross Reference: 24 CFR Part 85; HUD Handbook 7460.8 REV 1,
> Procurement Handbook for Public Housing Agencies (REV 2 pending); HUD
> Litigation Handbook 1530.1 REV-4, dated May 8, 1981, as amended (CHG
> 1, February 17, 1994; CHG 2, February 15, 1996).

Subject: Procurement of Legal Services by Public Housing Agencies

1\. [Purpose and Applicability]{.underline}. This Notice sets forth
procedures for the procurement of legal services by Public Housing
Agencies (PHAs). This Notice supersedes similar guidance previously
provided to HUD staff and PHAs including PIH 90-47, Procedures for
Procuring Professional Services. This Notice is not intended as the
primary source of guidance in this area, but is provided to remind all
HUD Offices and PHAs of the proper procedures for procuring legal
services and to briefly review areas of common interest and concern.
This Notice applies to all PHA procurements of legal services that are
funded in whole, or in part, with HUD grant funds subject to 24 CFR part
85 (e.g., Operating Fund subsidies and Capital Fund).

2\. [Background]{.underline}. PHAs obtain required outside legal
services through procurement contracts. Such procurement is subject to
the requirements set forth in 24 CFR Part 85, "Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and Local
Governments," in particular, 24 CFR § 85.36. In accordance with 24 CFR §
85.22, the costs of legal services incurred under HUD grants (including
those obtained under contract) must be reasonable and necessary. Section
85.22(b) incorporates the Office of Management and Budget (OMB) Circular
A-87, which contains a set of cost principles that PHAs must use for
determining the allowability of costs they incur under Federal grants
and provides guidance in their use. Contracts for litigation services
are also to meet the requirements of the HUD Litigation Handbook 1530.1
REV-4 dated May 8, 1981 (the "Litigation Handbook"), as amended (CHG 1,
February 17, 1994; CHG 2, February 15, 1996).

3\. [Methods of Procurement]{.underline}. Section 85.36(d) permits PHAs
to use all of the contracting methods listed below. PHAs are expected to
choose the method of procurement, which is reasonable based on the facts
surrounding the particular situation. The methods of procurement
outlined in section 85.36(d) are:

> [Small purchase procedures (85.36(d)(1))]{.underline}. Those
> relatively simple and informal procurement methods for securing
> services, supplies or other property that do not cost more than
> \$100,000 (the simplified acquisition threshold fixed at 41 U.S.C.
> 403(11) and currently set at \$100,000) in the aggregate or a lower
> dollar amount as established by the PHA (e.g., to conform to State
> law). If small purchase procurements are used, price or rate
> quotations will be obtained from an adequate number of qualified
> sources.
>
> [Sealed bids (85.36(d)(2))]{.underline}. This method is normally not
> appropriate for securing legal services. Sealed bidding may only be
> used when it is possible to quantify the costs of the required
> services (e.g., number of hours) to permit the submission of firm bids
> and award a firm fixed-price contract to the lowest responsive and
> responsible bidder considering only price and price-related factors.
> In addition, it is often critical to consider other factors besides
> price (e.g., experience) when selecting a legal services contractor.
> Sealed bidding does not permit the use of other factors.
>
> [Competitive proposals (85.36(d)(3))]{.underline}. This method is
> generally preferred when procuring professional services because it
> allows for the consideration of technical quality or other factors (in
> addition to price) for securing services estimated to cost more than
> \$100,000 or a lower threshold as established by the PHA ( e.g., to
> conform to State law). Competitive offers are solicited, proposals are
> evaluated and award is made to the offeror whose proposal is most
> advantageous to the PHA, with price and other factors (as specified in
> the solicitation) considered. Either a fixed-price or cost
> reimbursement type contract may be awarded. This method is generally
> used when conditions are not appropriate for the use of sealed bids.
> If this method is used, the conditions in § 85.36(d)(3) must be
> followed.
>
> [Noncompetitive proposals (85.36(d)(4))]{.underline}. This method may
> only be used when the other methods of procurement are infeasible and
> the circumstances described in § 85.36(d)(4) are applicable (e.g.,
> legal services are available from only a single source; public
> exigency or emergency for the requirements will not permit a delay
> resulting from competitive solicitation; after solicitation of a
> number of sources, competition is determined inadequate; or HUD
> authorizes the use of noncompetitive proposals. An example of a
> situation considered to violate the requirements of full and open
> competition in § 85.36 would be noncompetitive award to an attorney
> for legal services on a retainer basis.

4\. [Time and Materials Contracts (85.36(b)(10))]{.underline}. Legal
services can

be procured on an hourly basis using a type of contract known as

time-and-materials (or sometimes, "labor-hour") contracts. Under

these contracts, the contractor's services are pre-priced (usually,

in terms of hours) in the contract, and the PHA orders services in

unit amounts (e.g., hours) as needed until the funds in the

contract are exhausted. PHAs may use this type of contract only

after the PHA determines that no other contract is suitable; and, if

the contract includes a ceiling price that the contractor exceeds at

its own risk.

5\. [Obtaining Legal Services by Procurement or Employment]{.underline}

> [Methods.]{.underline} PHAs may employ an attorney directly (house
> counsel), or the PHA may enter into a procurement contract with an
> attorney or firm. The procurement of legal services shall follow the
> procedures outlined in paragraph 3 above. The employment of house
> counsel is not covered by 24 CFR § 85.36. PHA house counsel are
> ineligible to receive procurement contracts for legal services. All
> services of a PHA house counsel would be part of his/her employment
> contract and are not to be procured separately. Where legal services
> are desired outside of the scope of services provided by the PHA house
> counsel, PHAs may use one of the procurement procedures described in
> paragraph 3 above.

6\. [Contracts for Litigation Services.]{.underline}

a.  [General Requirements and Regional Counsel Approval.]{.underline}

> In addition to the requirements described above in paragraph 3, the
> Litigation Handbook sets thresholds for Regional Counsel and
> Headquarters Program Associate General Counsel approval of litigation
> service contracts. With the exception of litigation involving a PHA
> acting as a section 8 private developer, a PHA must submit to HUD
> Regional Counsel for prior written concurrence any litigation service
> contract where the fee is expected to exceed \$100,000 with a private
> attorney involving PHA program, project, or activity receiving loan,
> grant or other subsidy assistance from HUD. Such contracts shall make
> provision for reasonable fees and reimbursement of necessary expenses.
> If additional funding or budget revision will be required to cover the
> cost of litigation services, the PHA shall consult appropriate Field
> and Regional Offices staff.
>
> Upon receiving a request for concurrence, if Regional Counsel is
> satisfied that the PHA has not violated HUD requirements or is
> otherwise not at fault (Note: In cases where the PHA is at fault, the
> Regional Counsel may authorize the limited use of program funds for
> the PHA's defense to facilitate settlement or obtain judicial
> definition of the required relief.), the Regional Counsel shall concur
> in a request received from the PHA for approval of a contract for
> litigation services if he/she is also satisfied that: the contract
> contains adequate protection against fraud and abuse; the contract
> contains all mandatory provisions for professional service contracts
> for the program or activity giving rise to the litigation; and the
> contract amount is reasonable. The contract amount will be considered
> reasonable if it does not exceed the rates prevailing in the same or
> similar localities for the same or similar services or the PHA can
> demonstrate special circumstances that require payment of a higher
> amount. Regional Counsel's concurrence signifies that the attorney's
> fee (proposed contract price) under the contract is an allowable
> project expense, but is not a certification that there are sufficient
> project funds available to cover the contract amount.

b.  [Headquarters Program Associate General Counsel
    Approval.]{.underline} No contract for attorney's fees for
    litigation services entered into by any PHA, which calls for an
    estimated maximum price in excess of \$200,000 may be approved by
    the Regional Counsel without the prior concurrence of the
    Headquarters Program Associate General Counsel.

c.  [Use of Fixed-Price Contracts.]{.underline} Fixed-price proposals
    will be

> approved only where the issues are uncomplicated, extensive
> preparation probably is not required, and any trial that may ensue
> probably will not be lengthy. Ordinarily, a fixed-price proposal in
> excess of \$100,000 shall not be approved but Regional Counsel may
> approve a higher amount for good cause. For additional information
> regarding the above litigation services requirements, consult
> paragraphs 2-2f(3), 3-3b(3) and 5-4 of the Litigation Handbook.

7\. [Contract Addendum -- Legal Services Protocol.]{.underline} As
indicated

> above, recent attention to the key role that attorneys play in PHA
> activities prompt the following guidance to promote and improve the
> Department's partnership with PHAs. Attached to this Notice is a form
> of addendum to an engagement letter, which the Department urges to
> follow in procuring and utilizing legal services. The form of
> engagement letter is intended to set a course that will be helpful to
> both PHA and HUD partners, clarifying a method of operation for HUD's
> statutory oversight responsibilities while optimizing the statutory
> directive in section 2(a)(1)(C) of the United States Housing Act of
> 1937 "to vest in public housing agencies that perform well, the
> maximum amount of responsibility and flexibility in program
> administration, with appropriate accountability to public housing
> residents, localities, and the general public."

8\. [Legal Fee Management Service Contracts.]{.underline} PHAs may also
find it

helpful to engage a legal fee management firm when heavy

demand or high local priorities or other conditions merit secure

oversight of legal services.

\_\_\_\_/s/\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

##  Michael M. Liu

## Assistant Secretary

##  for Public and Indian Housing

Attachment

> ATTACHMENT

LEGAL SERVICES CONTRACT PROTOCOL

The Department urges inclusion of the following provisions into all
legal services contracts executed and/or administered by Public Housing
Agencies, unless no federally provided funds will be used to administer
the contract.

\* \* \* \*

ADDENDUM TO ENGAGEMENT AGREEMENT

1\. The \[name of Public Housing Agency\] (PHA) and \[name of legal
service individual or firm\] (LSP) engaged to provide professional legal
services to the PHA in connection with \[briefly and precisely describe
the nature, scope and limits of the legal services to be provided by the
LSP\] agree that the provisions of this Addendum to the Engagement
Agreement are hereby incorporated into PHA and LSP's engagement
agreement as if they had been set forth at length therein.

2\. During the pendency of the legal services engagement, LSP shall not,
without HUD approval, represent any officer or employee of PHA, in
her/his individual capacity, in connection with potential civil
liability or criminal conduct issues related to PHA operations.

3\. LSP has an obligation not to, and shall not, interfere with,
disrupt, or inappropriately delay or hinder any authorized monitoring,
review, audit, or investigative activity of HUD (including the Office of
Inspector General), the General Accounting Office (GAO), or the officers
and employees of HUD and GAO. Any and all representation by LSP cannot
be inconsistent with the foregoing obligation. Specifically, LSP shall
not deny access to HUD, GAO, or the officers and employees of HUD and
GAO, to PHA records in response to document demands by HUD, GAO, or the
officers and employees of HUD and GAO, notwithstanding possible
discovery privileges that

would otherwise be available to PHA. HUD requires public housing
agencies to provide HUD, GAO, or the officers and agents of HUD and GAO,
with "full and free" access to all their books, documents, papers and
records. [See]{.underline} 24 CFR. §85.42(e)(1); HUD Handbook 7460.7
REV-2, §1-2(B)(2).

4\. PHA and LSP shall make available for inspection and copying, by HUD
(including the Office of Inspector General), GAO, and the officers and
employees of HUD and GAO, all invoices, detailed billing statements, and
evidence of payment thereof relating to LSP's engagement. Such records
constitute "PHA records" and are subject to section 3, above.

5\. If HUD or PHA determines that LSP is violating any provision of this
Addendum to the Engagement Agreement, it shall timely notify LSP of such
violation. LSP will have 48 hours following its receipt of the notice of
violation to cease and desist from further violation of the addendum. If
LSP fails to adequately cure the noticed violation within 48 hours: (A)
HUD, in its discretion, may demand that PHA terminate the professional
legal services engagement for breach, or, henceforth, satisfy all costs
associated with the engagement with non-Federal funds; and/or (B) PHA,
in its discretion, may terminate the professional legal services
engagement for breach. Additionally, HUD may sanction LSP pursuant to 24
CFR. Part 24.

6\. Should any part, term, or provision of this Addendum to the
Engagement Agreement be declared or determined by any court of competent
jurisdiction to be illegal or invalid, the validity of the remaining
parts, terms, and provisions shall not be affected.

Date: \[Enter date\]

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\[Enter name of PHA Exec. Dir.\] \[Enter name of LSP key

partner\]