Report to Congressional Requesters

United States General Accounting Office

GAO

November 2002 HUD MANAGEMENT

Actions Needed to

Improve Acquisition

Management

GAO-03-157
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.

November 2002

HUD MANAGEMENT

Actions Needed to Improve Acquisition

Management

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.

Highlights of GAO-03-157, a report to the Senate Committee on Banking, Housing and Urban Affairs

and Subcommittee on Housing and Transportation

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.

United States General Accounting Office

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 riskbased 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.

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.

G A O

Accountability Integrity Reliability

Highlights
Page i GAO-03-157 HUD Management

Letter 1

Results in Brief 3

Background 6

HUD Has Increased Contracting Activities and Taken Steps to

Improve Acquisition Management 12

HUD Does Not Employ Certain Processes and Practices that

Would Facilitate Effective Contractor Monitoring 15

HUD Does Not Strategically Manage Its Acquisition Workforce 23

Weaknesses in Programmatic and Financial Management

Information Systems 26

Conclusions 31

Recommendations for Executive Action 32

Agency Comments 32

Appendix I Scope and Methodology 35

Appendix II Sampling Methodology for GAO Survey of HUD’s

Acquisition Management Reforms 39

Objectives 39

Scope and Methodology 39

Study Population 39

Sample Design 39

Estimates 40

Sampling Error 40

Nonsampling Error 41

Survey Development 41

Survey Administration 41

Appendix III Analysis of the HUD Procurement System (HPS)

Identified Discrepancies in HUD’s Contracting Data 43

Appendix IV HUD’s Financial Management Information Systems that

Contain Contracting Obligation and Expenditure

Information 45

Contents
Page ii GAO-03-157 HUD Management

Appendix V Comments from the Department of Housing and Urban

Development 46

GAO Comments 56

Appendix VI GAO Contacts and Staff Acknowledgments 59

GAO Contacts 59

Acknowledgments 59

Tables

Table 1: Contract Obligation Data from HUD’s Programmatic and

Financial Management Information Systems for Fiscal

Years 1999 and 2000 29

Table 2: Description of Sample 40

Figures

Figure 1: HUD Contracting Dollars by Category of Service for

Fiscal Year 2000 7

Figure 2: HUD Contracting Obligations for Fiscal Years 1995 to

2000 in 2001 Constant Dollars 12

Figure 3: Sidewalk Repairs at HUD Property 22
Page iii GAO-03-157 HUD Management

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
Page 1 GAO-03-157 HUD Management

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.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

 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).

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-03-157 HUD Management

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.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.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.

 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).
Page 3 GAO-03-157 HUD Management

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.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

 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).

Results in Brief
Page 4 GAO-03-157 HUD Management

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.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.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 organizationwide workforce planning effort,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.

 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.
Page 5 GAO-03-157 HUD Management

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
Page 6 GAO-03-157 HUD Management

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.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.

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

 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.

Background
Page 7 GAO-03-157 HUD Management

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

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
Page 8 GAO-03-157 HUD Management

$750 million as of September 30, 2001.9 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.10 Multifamily Housing has four fulltime GTRs located in Atlanta and Ft. Worth who are responsible for

monitoring most field multifamily contracts; two GTRs are assigned to the

 9

U.S. Department of Housing and Urban Development, FY 2001 Performance and

Accountability Report.

10FHA 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.
Page 9 GAO-03-157 HUD Management

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, governmentwide 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
Page 10 GAO-03-157 HUD Management

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.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.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

 11Contracting 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.

12To 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.
Page 11 GAO-03-157 HUD Management

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.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.14

 13National Academy of Public Administration, A Preliminary Review of Federal Housing

Administration Acquisition Activities (Washington, D.C.: May 1997).

14National Academy of Public Administration, HUD Procurement Reform: Substantial

Progress Underway (Washington, D.C.: April 1999).
Page 12 GAO-03-157 HUD 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.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

Notes: HUD reports that the contracting data are derived from various procurement and financial

reporting systems.

Source: HUD data.

 15HUD 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.

HUD Has Increased

Contracting Activities

and Taken Steps to

Improve Acquisition

Management
Page 13 GAO-03-157 HUD Management

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.
Page 14 GAO-03-157 HUD 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.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.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).

 16U.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).

17U.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).

HUD Has Taken Several

Steps to Improve

Acquisition Management
Page 15 GAO-03-157 HUD Management

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.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.

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.

 18GAO-02-45.

HUD Does Not

Employ Certain

Processes and

Practices that Would

Facilitate Effective

Contractor

Monitoring
Page 16 GAO-03-157 HUD Management

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.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.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

 19Department 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).

20We 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.

HUD’s Monitoring of

Contractors Is Not

Systematic
Page 17 GAO-03-157 HUD Management

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.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

 21GAO/RCED-00-117.
Page 18 GAO-03-157 HUD Management

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.

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.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

 22U.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).

HUD’s Monitoring of

Contractors Is Generally

Remote
Page 19 GAO-03-157 HUD Management

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

 23According 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.
Page 20 GAO-03-157 HUD Management

funds.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 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

 24The 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).

Weaknesses in Monitoring

Limit HUD’s Ability to

Prevent Contractor Fraud,

Waste, or Abuse
Page 21 GAO-03-157 HUD Management

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.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 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.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.

 25GAO/RCED-98-65.

26U.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).

27GAO-03-167T.
Page 22 GAO-03-157 HUD Management

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

Source: GAO photograph of HUD property.

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,
Page 23 GAO-03-157 HUD Management

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.

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.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.

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

 28We 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).

HUD Does Not

Strategically Manage

Its Acquisition

Workforce

Workload Issues Not Yet

Addressed and Skills and

Capabilities Not Yet

Assessed
Page 24 GAO-03-157 HUD Management

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.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.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

 29U.S. General Accounting Office, Human Capital: A Self-Assessment Checklist for Agency

Leaders, GAO/OCG-00-14G (Washington, D.C.: Sept. 2000).

30HUD 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.
Page 25 GAO-03-157 HUD Management

to make informed decisions, such as recruiting and hiring as well as

planning for training, is hampered.

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.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

 31At HUD, procurement analysts perform a variety of administrative functions for OCPO,

such as managing training.

Many of HUD’s Acquisition

Workforce Not Receiving

Required Training
Page 26 GAO-03-157 HUD Management

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.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.

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.

 32Office of Federal Procurement Policy Letter No. 97-01, Procurement System Education,

Training and Experience Requirements for Acquisition Personnel, September 12, 1997.

Weaknesses in

Programmatic and

Financial

Management

Information Systems
Page 27 GAO-03-157 HUD Management

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.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.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

 33HPS also tracks Purchase Orders, Interagency Agreements, and Grants; however, this

discussion is limited to contracts and purchase orders.

34Active 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.

HUD’s Centralized

Contracting Information

System Does Not Provide

Reliable Information on

Contract Activities
Page 28 GAO-03-157 HUD Management

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 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

HUD’s Financial

Management Information

Systems Do Not Readily

Provide Contracting

Obligation and

Expenditure Data
Page 29 GAO-03-157 HUD Management

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.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

HUD Procurement System

HUD’s financial

management information

systems

Fiscal year 1999 $1.1 billion $485 million

Fiscal year 2000 $1.2 billion $924 million

Total $2.3 billion $1.409 billion

Source: HUD data as shown.

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. 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

 35To 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.

36Of these 33 contracts, 29 were from the multifamily analysis and 4 were from the HUDwide analysis.
Page 30 GAO-03-157 HUD Management

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 37.37

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.

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

 37Of these 37, 31 were from the HUD-wide analysis and 6 were from the multifamily

analysis.

System Limitations Impede

Efforts of HUD’s

Acquisition Workforce and

HUD Management
Page 31 GAO-03-157 HUD Management

“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.

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

Conclusions
Page 32 GAO-03-157 HUD Management

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.

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.

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

Recommendations for

Executive Action

Agency Comments
Page 33 GAO-03-157 HUD Management

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 mulitfamily 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
Page 34 GAO-03-157 HUD Management

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 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.

Stanley J. Czerwinski

Director, Physical Infrastructure
Appendix I: Scope and Methodology

Page 35 GAO-03-157 HUD Management

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 2001.1

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

 1

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).

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 36 GAO-03-157 HUD Management

structured interviews with the 17 GTRs responsible for administering

these contracts.2

 These contracts included both headquarters and fieldadministered 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 contractingrelated 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

 2

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.
Appendix I: Scope and Methodology

Page 37 GAO-03-157 HUD Management

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.3

 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

 3

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.
Appendix I: Scope and Methodology

Page 38 GAO-03-157 HUD Management

reports detailed information on its contracting activity over $25,000 in

accordance with federal requirements.
Appendix II: Sampling Methodology for GAO

Survey of HUD’s Acquisition Management

Reforms

Page 39 GAO-03-157 HUD Management

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.

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.

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.

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

Appendix II: Sampling Methodology for GAO

Survey of HUD’s Acquisition Management

Reforms

Objectives

Scope and

Methodology

Study Population

Sample Design
Appendix II: Sampling Methodology for GAO

Survey of HUD’s Acquisition Management

Reforms

Page 40 GAO-03-157 HUD Management

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

Population

sizea

Sample

size Respondentsb

In scope

respondentsc

Response

rate (%)d

(1) Contracting Officers 33 25 20 19 80

(2) Contract Specialists 50 34 30 29 88

(3) Government Technical Monitors

(GTM) 500 82 67 55 82

(4) Government Technical

Representatives (GTR) 187 65 57 47 88

(5) Both GTR and GTM 69 42 37 34 88

(6) Purchasing Agents 2 2 2 1 100

Total 841 250 213 185 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.

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.

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

Estimates

Sampling Error
Appendix II: Sampling Methodology for GAO

Survey of HUD’s Acquisition Management

Reforms

Page 41 GAO-03-157 HUD Management

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.

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.

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.

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.

Nonsampling Error

Survey Development

Survey Administration
Appendix II: Sampling Methodology for GAO

Survey of HUD’s Acquisition Management

Reforms

Page 42 GAO-03-157 HUD Management

We performed our work between February and June 2002 in accordance

with generally accepted government auditing standards.
Appendix III: Analysis of the HUD

Procurement System (HPS) Identified

Discrepancies in HUD’s Contracting Data

Page 43 GAO-03-157 HUD Management

Reliability problems identified with

HPS data elements Examples

Obligated amount is greater than the

overall value of the contract

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.

Overall value of the contract and

obligated amount is greater than the

Indefinite delivery Indefinite quantity

(IDIQ) Maximum

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.

Status of contract not consistent with

date information and significant number

of data fields blank

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.

Appendix III: Analysis of the HUD

Procurement System (HPS) Identified

Discrepancies in HUD’s Contracting Data
Appendix III: Analysis of the HUD

Procurement System (HPS) Identified

Discrepancies in HUD’s Contracting Data

Page 44 GAO-03-157 HUD Management

Reliability problems identified with

HPS data elements Examples

• 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.

Service Type data fields not Complete or

not Consistent

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.
Appendix IV: HUD’s Financial Management

Information Systems that Contain

Contracting Obligation and Expenditure

Information

Page 45 GAO-03-157 HUD Management

Financial system Description

HUD’s Central Accounting and Program

System (HUDCAPS)

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.

Program Accounting System & Line of Control

and Credit System

(PAS & LOCCS)

PAS & LOCCS are two financial systems that are integrated. PAS is the projectlevel 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.

Single Family Acquired Asset Management

System

(SAMS)

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.

Cash Control Accounting Report System

(CCARS)

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.

Comprehensive Servicing and Monitoring

System/Property Management System

(CSMS/PMS)

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.

Macola 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.

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

Page 46 GAO-03-157 HUD Management

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.
Appendix V: Comments from the Department

of Housing and Urban Development

Page 47 GAO-03-157 HUD Management
Appendix V: Comments from the Department

of Housing and Urban Development

Page 48 GAO-03-157 HUD Management

See comment 2.

See comment 1.
Appendix V: Comments from the Department

of Housing and Urban Development

Page 49 GAO-03-157 HUD Management

See comment 4.

See comment 3.
Appendix V: Comments from the Department

of Housing and Urban Development

Page 50 GAO-03-157 HUD Management

See comment 5.
Appendix V: Comments from the Department

of Housing and Urban Development

Page 51 GAO-03-157 HUD Management
Appendix V: Comments from the Department

of Housing and Urban Development

Page 52 GAO-03-157 HUD Management

See comment 6.
Appendix V: Comments from the Department

of Housing and Urban Development

Page 53 GAO-03-157 HUD Management
Appendix V: Comments from the Department

of Housing and Urban Development

Page 54 GAO-03-157 HUD Management

See comment 8.

See comment 7.
Appendix V: Comments from the Department

of Housing and Urban Development

Page 55 GAO-03-157 HUD Management

See comment 8.

See comment 8.

See comment 8.
Appendix V: Comments from the

Department of Housing and

Urban Development

Page 56 GAO-03-157 HUD Management

The following are GAO’s comments to HUD’s letter dated October 23,

2002.

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 ClingerCohen 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.

GAO Comments
Appendix V: Comments from the

Department of Housing and

Urban Development

Page 57 GAO-03-157 HUD Management

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
Appendix V: Comments from the

Department of Housing and

Urban Development

Page 58 GAO-03-157 HUD Management

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.
Appendix VI: GAO Contacts and

Staff Acknowledgments

Page 59 GAO-03-157 HUD Management

Stanley J Czerwinski, (202) 512-5535

Steve Cohen, (202) 512-2834

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.

Appendix VI: GAO Contacts and Staff

Acknowledgments

GAO Contacts

Acknowledgments

(541009)
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