CHAPTER 3. CONTRACT MONITORING, ADMINISTRATION, AND

ENFORCEMENT

3-1. PROMPT MONITORING - of contract performance is essential

to ensure compliance with contract requirements and

performance/delivery schedules (FAR Part 42).

3-2. MONITORING TOOLS

A. Inspections. Inspections shall be performed as needed to

protect HUD\'s interests, ensure overall quality of

contract services, and as required by Handbooks 4310.5 and

4315.1.

1\. General. Inspections are needed to:

a\. Ensure that performance begins on the date

agreed;

b\. Ensure progress towards timely completion;

c\. Ensure compliance with contract requirements;

d\. Support contractor\'s request for partial and

final payments;

e\. Document labor enforcement requirements, as set

forth in Handbook 1344.1;

f\. Document correction of noted deficiencies;

g\. Document contractor delays or other performance

failures to preclude inadvertent waiver of

delivery or performance schedules; and,

h\. Ensure compliance with inspection deadlines

stated in the contract, as required by the

Prompt Payment Act.

2\. The person making an inspection must carry a copy of

the specifications against which to check the work

performed.

3\. Inspections of work/repairs performed on a property

must be documented on Form HUD-9519, Inspection

Report, with distribution as noted on the form.

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4\. Inspection services may be acquired under a HUD-

issued purchase order or formal contract. Inspection

reports complete by a contractor must be reviewed and

approved by the Government Technical Representative

(Realty Specialist, see paragraph 3-4) prior to

processing any payments due.

B. Performance Record Files. Maintain a file for each active

contractor on the Solicitation Mailing List for

procurements over the small purchase ceiling. Performance

record files are optional for contracts under the small

purchase ceiling; however, it is recommended that negative

comments on performance be included.

1\. A log of all contract awards shall be kept on the left

side of the Performance Record File. (See Appendix 4

for format).

2\. Performance Record File Contents:

a\. Solicitation mailing list application;

b\. Credit reports and credit rating response to

reference check;

c\. Correspondence having a bearing on performance,

bonding, labor complaints, equal opportunity,

delays, time extensions, adverse inspections,

terminations, etc; and,

d\. Amendments involving unanticipated work due to

theft or vandalism.

C. Multifamily Project Management System (PMS) - Provides

various reports on project expenditures and expenses which

can be used to monitor PM activity.

D. Single Family Management Information and Accounting System-

Reserved

3-3. PURCHASE ORDERS - Refer to FAR Part 13. Prompt follow-up

on completion dates is essential.

A. The back of the Form HUD-2542 includes a requirement for

the contractor to notify the Contracting Officer five days

before work is ready for inspection, and requires

inspection of services or repairs within five days of this

notice.

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B. Delays must be determined excusable or inexcusable based on

the Default clause on the back of Form HUD-2542. If delay

is excusable, the Contracting Officer must prepare a

modification to extend the completion date.

C. The clauses incorporated on the Form HUD-2542 provide for

inspection by the Government before acceptance and

payment.

D. Each Form HUD-2542 signed by the AMB/PM certifying

acceptance of the work must be accompanied by a completed

Form HUD-9519, Inspection Report.

E. Any modification required must be within the scope of the

work and the existing contractor capable of performance

without delay.

1\. Purchase orders must be modified by issuing a new

Form HUD-2542. Insert the original purchase order

number in block 8 of the Form HUD-2542 followed by the

modification number, e.g., 88-333-M1 (M1 means

modification number one). Each modification must be

numbered consecutively.

2\. Each modified Form HUD-2542 must show the original

total price, the adjustment (plus or minus) and the

new total price, and any change in the time for

completion. The file must be documented to show the

basis for determining the price change is fair and

reasonable.

3 Note the modification in the purchase order log.

4\. The original and the modified purchase orders must be

received prior to certifying and forwarding for

payment. The original purchase order must be retained

in the local office.

F. Cancellations - See FAR 13.504. Cancellations must be

issued in the same manner as a modification. Type across

the face of the Form HUD-2542; \"The above numbered purchase

order is cancelled in its entirety because (a brief

statement of reasons for the cancellation).\" This cancel-

led Form HUD-2542 must be retained in the property case

file and noted in the purchase order log accordingly.

3-4. GOVERNMENT TECHNICAL REPRESENTATIVE (GTR) - At the time of

award of a contract in excess of the small purchase ceiling the

Contracting Officer should designate a GTR based on the CPO\'s

request. Designation of the GTR is formally made by insertion

of the \"Conduct

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of Work\" clause (HUDAR 2452.237-73) into the contract. For

AMB/PM contracts, the GTR usually will be a Realty Specialist.

GTRs must be informed of their responsibilities for monitoring

and timely inspection of all phases of the contractor\'s

performance. The GTR must immediately schedule dates for

conducting inspections to assure that:

o Work begins timely;

o Work progresses sufficiently to assure timely

completion and compliance with contract requirements;

o Work is completed by the date stated in the contract;

and,

o Requests or payments are justified and appropriate.

Guidance on GTR duties and responsibilities is contained in the

Desk Guide for Government Technical Representatives on Property

Disposition Contracts. Copies are available from the

Management Branch, Multifamily Property Disposition Division.

3-5. PROPERTY MANAGEMENT CONTRACTS

A. Review of Payment Requests. In addition to the review

requirements set forth in Handbooks 4305.3 and 4310.5 and

the PMS Manual, AMB/PM requests for monthly management fees

and expenses must be reviewed to ensure:

1\. Valid expenditures;

2\. Compliance with AMB/PM purchasing authority limits;

3\. Compliance with AMB/PM contract payment terms;

4\. Correction from prior submissions; and,

4\. The absence of redundant payments.

B. On-Site Evaluations of AMB/PM operations must be conducted

as necessary to ensure performance meets the objectives of

the property disposition program. See Handbooks 4310.5 and

4315.1.

C. Promptly following award, conduct post-award orientation

with all new AMBs/PMs.

D. Consider holding \"progress management meetings\" covering

procedures, expenditures, problems, and needs of the

project as frequently as required/practicable to ensure

good performance.

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E. AMB/PM Purchases

1\. AMB/PM contracts authorize the contractor to enter

into purchase orders on HUD\'s behalf as necessary to

meet property management needs. Delegated purchasing

authority limits are established by Headquarters

Single Family and Multifamily Property Disposition

Divisions.

2\. Field Offices may establish AMB/PM purchase authority

limits less than the maximum established by

Headquarters to reflect changing needs, expertise of

the property manager, or to curb abuses noted. The

actual purchasing authority must be specified in the

AMB/PM contract.

3\. AMB/PMs must establish adequate sources for

repetitive purchases. Such purchases must be

equitably distributed among qualified suppliers to

ensure fairness of prices and avoid overreliance on

any particular source.

4\. Except for emergency situations described in

paragraph 4 below, AMBs/PMs must call the Field

Office for prior approval of purchases above the

limit set in their contract. The Field Office must

provide a purchase order number and authorizing

signature before issuance of the order, performance of

the work, and processing for payment.

5\. When emergency repairs are needed during hours HUD is

not open for business and the cost of such repairs is

estimated to exceed the AMB/PM\'s purchasing limit, the

AMB/PM must order the needed repairs and notify the

GTR the next business day. The GTR must take

appropriate action to retroactively authorize the

purchase(s). The GTR must consider whether the

contractor\'s actions were necessary and reasonable.

The AMB/PM must establish procedures to ensure that

such emergency, after-hour repairs are handled

promptly and cost-effectively. If valid emergencies

are a frequent occurrence, the Field Office should

establish indefinite delivery purchase orders and/or

contracts to meet these needs and minimize paperwork.

3-6. SERVICE/SUPPLY CONTRACTS

A. Considerations for Scheduling Inspections. Scheduling of

inspections can depend on a number of factors:

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1\. Type of work;

2\. Complexity of work;

3\. Type of contract;

4\. Dollar amount of contract;

5\. Time frame; and,

6\. Familiarity with the contractor.

B. Supply Contracts generally require inspection only

upon delivery of the required items.

C. Service Contracts require inspection at regular

intervals to ensure quality performance.

1\. Requests for payment (vouchers) must be supported

by inspection reports.

2\. Vouchers/invoices must be reviewed to ensure all

charges are in accordance with the contract

requirements.

3\. If multiple payments are required, a record of

payments must be fixed in the contract file

folder. See Appendix 5 for a format of a

payment record log. See paragraph 3-9 for

payment processing requirements.

D. Any required warranties must be submitted with the

request for final payment. Warranties must be filed

in the appropriate property file and the contract

file. (See FAR Subpart 46.7).

3-7. CONSTRUCTION CONTRACTS - are contracts for property repair

or rehabilitation. Administrative controls/considerations

include:

A. Preconstruction Conferences. While discretionary, they are

recommended if:

1\. Awarding a contract over \$25,000;

2\. Liquidated damages are included;

3\. Brand-name-or-equal provisions are included;

4\. Cost-reimbursement provisions are included; and,

5\. Contractor is new to the program.

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B. Conferences should include review of all significant

contract terms and conditions, including:

1\. Labor standards provisions;

2\. Weekly payrolls and payroll certifications;

3\. Subcontract agreements;

4\. Government rights and remedies if non-compliance

occurs;

5\. Bonding requirements;

6\. Delivery and completion requirements;

7\. Contractor\'s responsibility for supervising work;

8\. Notification requirement if delays occur;

9\. Modification procedures;

10\. Inspection and payment procedures; and,

11\. Warranties.

C. Labor Standards must be administered following Handbook

1344.1, REV 1, Federal Labor Standards in Housing and

Community Development programs.

D. Warranty of Construction - The clause prescribed by FAR

52.246.21 must be included in all PD construction contracts

awarded on a fixed-price basis.

1\. Before processing any post-closing complaint it must

be checked against the contract to see if the work is

covered by the warranty.

2\. If the contractor fails to correct the defect under

the warranty clause and the correction has to be

performed by another contractor, the Contracting

Officer will, in consultation with local office

counsel, take appropriate remedies against the

contractor. Such remedies may include: a reduction

in the contract price to cover the costs borne by HUD

to correct the defect; appropriate debt-collection

activities; and, any other remedies specified in the

contract.

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E. Mechanic/Materialmen Liens

1\. Small purchases are generally not supported by

performance or payment bonds. It is therefore

imperative to advise the contractor that:

a\. He/she has a duty to protect HUD against liens;

b\. He/she must obtain release of the lien;

c\. HUD will withhold payment to offset the amount of

the lien until such time as the lien is removed;

and,

d\. The placement of a lien may effect his/her

responsibility and therefore his/her eligibility

to receive future awards.

2\. Construction Contracts over \$25,000 must be

supported by a performance and payment bond. If a

lien should arise during performance:

a\. The claimant must be advised of the name and

address of the surety issuing the bond;

b\. The surety must be notified to take action under

the bond to remove the lien; and,

c\. The contractor must be advised of the same

conditions cited in paragraph 3-7 E. 1 above.

F. Construction Contract Payments - Requests for payment

under construction contracts exceeding \$500 must be

supported by an inspection report. Requests for payment

under construction contracts exceeding \$2,000 must be

supported by an inspection report and payroll data.

3-8 CONTRACT MODIFICATIONS (FAR Part 43)

A. General. During the life of a contract, it may become

necessary to alter the terms of the contract to

incorporate new requirements or handle problems that

develop after contract award. When that is the case, HUD

must prepare and issue a formal contract modification. In

most instances, there must be \"consideration\" for the

modification in the form of a price change, alteration of

the delivery date, or other adjustment to the contract.

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1\. Contract modifications are any written alterations in the

specifications, delivery point, date of delivery, contract

period, price, quantity, or other provisions of an existing

contract.

2\. Generally, modifications must be within the scope of work

of the existing contract. Modifications must not be used

to avoid the requirements to synopsize in the CBD nor the

requirement for full and open competition (FAR Parts 5 and

6).

3\. All contract modifications must be issued using Standard

Form 30 and be numbered sequentially starting with \"1.\"

4\. Only persons who have been delegated contracting authority

may modify a contract on HUD\'s behalf. Other personnel

shall not:

a\. Execute contract modifications;

b\. Act in such a manner as to cause the contractor to

believe that they have authority to bind the

Government; or,

c\. Direct or encourage the contractor to perform work

that should be the subject of a contract

modification.

5\. There are two general categories of modifications:

a\. Unilateral Modifications: Those issued and signed by

the Contracting Officer. Unilateral modifications are

binding on the contractor.

b\. Bilateral Modifications: Those established by mutual

agreement and signed by both the contractor and

Contracting Officer.

B. Types of Contract Modifications

1\. Unilateral Modifications

a\. Administrative Change. An administrative change

alters only administrative details which do not

affect the substantive requirements and provisions of

the contract - for example, the correction of a

typographical mistake. It is Government policy that

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all changes to a contract, whether or not the rights and

obligations of the parties are affected, be communicated

in writing to the contractor by the Cont acting Officer or

other duly authorized person.

b\. Change Order

\(1\) A change order is a written modification which

directs the contractor to make a change that is

permitted under the \"Changes\" clause of the contract.

(See FAR 52.243.1 Alternate I for the Changes clause

for fixed-price contracts for services.) Generally,

Government contracts contain such a clause, enabling

an agency unilaterally to make changes, within the

general scope of the contract, in any one of the

following:

o Drawings, designs, or specifications;

o Method of shipment or packing; and,

o Place of inspection, delivery, or

acceptance.

\(2\) When the change order is issued, the contractor is

obligated to proceed with the work as specified by the

change order. If there is an increase in the

price/cost of the work or the time for performance,

the contractor must submit a claim for an equitable

adjustment within 30 days from receipt of the change

order. If the cost of the work is decreased, HUD has

a right to an equitable downward adjustment in the

contract price. Equitable adjustments are reflected

in a subsequent bilateral modification. Disagreement

in the content of the change order and the equitable

adjustment are subject to settlement under the

\"Disputes\" cause (FAR 52.233-1).

\(3\) To the extent possible, changes authorized by the

Changes clause should be negotiated in advance,

include any price or other impact on the contract, and

be issued as a bilateral modification. (See 2.

below). This will minimize after-the-fact

negotiations and the potential for disputes.

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\(4\) Problems may arise because it is not always

clear as to what exactly is the \"general

scope of the contract\" or what actions are

within the coverage of a changes clause.

The Contracting Officer must make a

determination, in light of all the facts of

a given case, as to whether a proposed

alteration is new procurement, a

termination, or a change.

2\. Bilateral Modifications (supplemental agreements)

are contract modifications that are signed by both the

contractor and HUD. They are used to:

a\. Make negotiated equitable adjustments resulting

from the issuance of a change order;

b\. Extend the period of performance or delivery

schedule; and,

c\. Reflect other agreements of the parties

modifying the terms of contracts.

3-9. PAYMENT REQUIREMENTS

A. Policies - The Prompt Payment Act as further implemented in

OMB Circular No. A-125 (Prompt Payment) requires that:

1\. Bills be paid on time;

2\. When payments from the Government to the contractor

are late, interest penalties will be paid; and,

3\. Discounts be taken only when payments are made

within discount period offered by the

contractor.

B. AMB Bank Account Payments. The Prompt Payment Act does not

apply to payments made by an AMB from his/her bank account.

The Act applies to all other payments under purchase orders

or contracts.

C. Single Family Payment Processing Log - must be maintained

to assure that the time elements are noted for each step of

the process in order that delays can be identified and

corrected.

1\. Log Contents.

a\. Date of notification of completion/delivery;

b\. Date of receipt of proper invoice;

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c\. Contractor name;

d\. Contract, purchase order or voucher number;

e\. Dollar amount of payment;

f\. Payment due date;

g\. Date sent to OFA/paying agent; and,

h\. Payment number - nine digits as follows:

Region Office Projective Code Sequential Number

X XXX XXXXX

The Property Disposition Branch has been assigned

sequential control numbers between 10,000 and 29,999.

Numbering starts over at 10,000 at the beginning of

each fiscal year. This assignment of numbers permits

OFA to track payment penalties by office.

2\. A copy of each Form SF-1034 not supported by

a contract or purchase order must be maintained in a

monitoring file.

3\. The CPO must review the payment log and Form

SF-1034 monitoring file monthly to ensure:

a\. Procurement and payment procedures are consistent,

proper, and timely; and,

b\. Payments are not duplicated.

D. Vouchers

1\. Processing. All vouchers (Form SF-1034) submitted

to OFA/paying agent for payment must contain a payment

voucher number as explained in paragraph 3-8C above and the

following six items:

a\. Payment due date;

b\. Number of days until payment due date;

c\. Contact name (name of person preparing voucher);

d\. Telephone number of contact person;

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e\. Prompt payment applicability indicator. Use \"N\"

only when voucher is not subject to the rules

and regulations of the Prompt Payment Act. Leave

blank if Act is applicable; and,

f\. Invoice number and date.

2\. Payments under contracts

a\. General

\(1\) Review each voucher to ensure all charges

are in accordance with contract

requirements.

\(2\) If multipayments are required, a record of

payments must be filed in the contract file.

See Appendix 5 for suggested format.

b\. Construction Contracts

\(1\) Each payment request must be supported by a

HUD-9519, Acquired Property Inspection

Report.

\(2\) In addition to a final inspection report,

the request for final payment must be

accompanied by a release of claims (see

Appendix 6 for a suggested format) and any

warranties.

E. Authorized Certifying Officers (ACO) must approve and sign

all vouchers and HUD-2542 purchase orders before sending to

OFA for payment. Enough staff must be designated as ACOs

to provide for prompt and even workflow. Refer to Handbook

4045.1 for further details on ACOs.

3-10. CLOSEOUT PROCEDURES Reserved

3-11. DISPOSITION OF OFFICIAL CONTRACT FILES

Upon completion of all administrative requirements and final

payment, official contract files will be disposed of per the

instructions contained in Handbook 2225.6, Records Disposition

Management, and FAR 4.805.

Disposition must be coordinated with the Regional Records

Management Liaison Officer in the Office of Administration.

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