[Federal Register Volume 65, Number 230 (Wednesday, November 29, 2000)]
[Rules and Regulations]
[Pages 71204-71210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-30332]



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Part II





Department of Housing and Urban Development





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24 CFR Part 943



Consortia of Public Housing Agencies and Joint Ventures; Final Rule

Federal Register / Vol. 65, No. 230 / Wednesday, November 29, 2000 / 
Rules and Regulations

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 943

[Docket No. FR-4474-F-02]
RIN 2577-AC00


Consortia of Public Housing Agencies and Joint Ventures

AGENCY: Office of Public and Indian Housing, HUD.

ACTION: Final rule.

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SUMMARY: This final rule implements a 1998 law that authorizes public 
housing agencies (PHAs) to administer any or all of their housing 
programs through a consortium of PHAs. The law also authorizes PHAs to 
use subsidiaries, joint ventures, partnerships or other business 
arrangements to administer their housing programs or to provide 
supportive or social services. This final rule specifies minimum 
requirements relating to formation and operation of consortia and 
minimum contents of consortium agreements, as required by the statute 
and reflects consideration of public comments received on the proposed 
rule.

EFFECTIVE DATE: December 29, 2000.

FOR FURTHER INFORMATION CONTACT: Rod Solomon, Deputy Assistant 
Secretary for Policy, Program and Legislative Initiatives, Department 
of Housing and Urban Development, Office of Public and Indian Housing, 
451 Seventh Street, SW, Room 4116, Washington, DC 20410; telephone 
(202) 708-0713 (this is not a toll-free telephone number). Persons with 
hearing or speech disabilities may access this number via TTY by 
calling the toll-free Federal Information Relay Service at 1-800-877-
8339.

SUPPLEMENTARY INFORMATION:

I. The September 14, 1999 Proposed Rule

    On September 14, 1999 (64 FR 49940), HUD published for public 
comment a proposed rule implementing section 13 of the United States 
Housing Act of 1937 (42 U.S.C. 1437 et seq.) (referred to as the ``1937 
Act''), as amended by section 515 of the Quality Housing and Work 
Responsibility Act of 1998 (title V of the fiscal year 1999 HUD 
Appropriations Act; Pub. L. 105-276, approved October 21, 1998; 112 
Stat. 2461) (referred to as the ``Public Housing Reform Act'').
    In addition to authorizing public housing agencies (PHAs) to 
administer any or all of their housing programs through a consortium of 
PHAs, section 13 of the 1937 Act also authorizes PHAs to use 
subsidiaries, joint ventures, partnerships or other business 
arrangements to administer their housing programs or to provide 
supportive or social services. The proposed rule specified minimum 
requirements relating to formation and operation of consortia and 
minimum contents of consortium agreements, as required by the statute.
    Before enactment of the Public Housing Reform Act, some PHAs had 
established cooperative arrangements for carrying out some of their 
responsibilities. A principal difference is that under a section 13 
consortium, a joint PHA Plan is submitted on behalf of participating 
PHAs. Enactment of the revised section 13, however, does not restrict 
the ability of PHAs to continue to establish cooperative arrangements 
under which they receive funding separately and submit separate PHA 
Plans. Another major difference between such arrangements and consortia 
as authorized under section 13, is that under section 13 funding must 
be paid to the consortium. HUD is implementing this requirement by 
providing that funds shall be directed to the lead agency, as a 
representative of the consortium, on behalf of the participating PHAs, 
instead of being paid to the PHAs separately (although funding 
allocations are still calculated separately for each PHA).
    The preamble to the September 14, 1999 proposed rule provides 
additional information regarding the proposed implementation of section 
13 of the 1937 Act, as revised.

II. Changes Made at the Final Rule Stages

    The following describes the more significant changes made to this 
rule at the final rule stage. In addition to the changes discussed 
below, certain technical and clarifying changes were made at the final 
rule stage. Some of the nonsubstantive changes, but not necessarily 
all, may be noted below. The more significant changes are as follows:
    <bullet> In Sec. 943.118 (What is a consortium?), HUD adds language 
at the end of this section to require that PHAs participating in a 
consortium adopt the same fiscal year in order that the applicable 
periods for submission and review of the joint PHA Plan are the same 
and to indicate that notwithstanding any other regulation, PHAs may 
request and HUD may approve changes in PHA fiscal years to make this 
possible.
    <bullet> In Sec. 943.120 (What programs of a PHA are included in a 
consortium's functions), HUD revises paragraph (a)(1) to clarify that a 
PHA's public housing program may include either the operating fund or 
the capital fund, or both). In paragraph (a)(4) of this same section, 
HUD removes reference to the exception made for ``Moderate 
Rehabilitation and Certificates and Vouchers.
    <bullet> In Sec. 943.122 (How is a consortium organized?), HUD 
revises paragraph to clarify that any necessary payment agreements 
entered into between HUD and the lead agency and other participating 
agencies must provide that HUD funding to the participating PHAs for 
program categories covered by the consortium will be paid to the lead 
agency. This payment arrangement is consistent with the requirements of 
the Public Housing Reform Act. HUD revises paragraph (b) to provide 
that to be the lead agency in a consortium, not only must a PHA not be 
designated as troubled, or determined by HUD to fail the civil rights 
compliance threshold for new funding, the PHA must not have had its 
PHAS designation withheld for civil rights or other reasons.
    <bullet> In Sec. 943.124 (What elements must a consortium agreement 
contain?), HUD revises paragraph (a)(5) to provide that the consortium 
agreement must not only specify the period of existence of the 
consortium and the terms under which a PHA may withdraw from the 
consortium before the end of the period of existence, but must specify 
when a PHA may join the consortium. This paragraph also was revised to 
provide that, for orderly transition, the addition or withdrawal of a 
PHA and termination of the consortium must take effect on the 
anniversary of the consortium's fiscal year.
    <bullet> In Sec. 943.126 (What is the relationship between HUD and 
a consortium?), HUD removes paragraph (b) which provided that HUD's 
payment to the consortium of funding for the covered program categories 
covered will be paid to the lead agency. This paragraph was duplicative 
of Sec. 943.122, which addresses consortium organization. HUD revises 
paragraph (a) by removing the ``(a)'' as the designation for this 
paragraph and by clarifying that HUD's relationship with the consortium 
is through the PHA Plan process, in addition to the payment agreements 
entered into. HUD also revises this paragraph to clarify that HUD funds 
provided to the consortium must be used in accordance with the 
consortium agreement and the joint PHA Plan, in addition to HUD's 
regulations and requirements.
    <bullet> In Sec. 943.128 (How does a consortium carry out planning 
and reporting functions?), HUD revises paragraph (b) to clarify that 
the consortium must maintain records, in

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addition to submitting certain reports to HUD. HUD revises paragraph 
(c) to require that the consortium agreement must be made available to 
the public as a supporting document to the joint PHA Plan.
    <bullet> In Sec. 943.130 (What are the responsibilities of 
participating PHAs?), HUD adds a new paragraph (b) to address the 
applicability of independent audit and performance assessment system 
requirements to consortia and to note that the manner of applicability 
depends upon the composition and funding of the PHA. The new paragraph 
provides that where the lead agency will manage substantially all 
program and activities of the consortium, HUD interprets financial 
accountability to rest with the consortium and therefore apply 
independent and performance assessment requirements on a consortium-
wide basis. Where the lead agency will not manage substantially all 
programs and activities of a consortium, the consortium must identify 
in its PHA Plan submission which PHAs have financial accountability for 
the programs. The determination of financial accountability shall be 
made in accordance with generally accepted accounting principles, as 
determined in consultation with an independent public accountant. This 
paragraph also provides, however, that with respect to any consortium, 
HUD may determine (based on a request from the consortium or other 
circumstances) to apply independent audit and performance requirements 
on a different basis (than that provided in the rule) where a different 
basis would promote sound management.
    <bullet> In Sec. 943.140 (What programs and activities are covered 
by this subpart?), HUD revises paragraph (a) to clarify that subpart C 
applies to a PHA's management functions as well as the PHA's 
administrative functions.
    <bullet> In Sec. 943.146 (What impact does the use of a subsidiary 
affiliate, or joint venture have on financial accountability to HUD and 
the Federal government?), HUD replaces the term ``General Accounting 
Office'' with ``Comptroller General,'' which is consistent with 
statutory terminology.
    <bullet> In Sec. 943.148 (What procurement standards apply to PHAs 
selecting partners for a joint venture?), HUD revises paragraph (a) to 
clarify that the requirements of 24 CFR part 85 (Administrative 
Requirements for Grants and Cooperative Agreements to State, Local and 
Federally Recognized Indian Tribal Governments) are applicable to the 
regulations in part 943, subject to the provisions in paragraph (b) of 
this section. HUD revises paragraph (b)(2) of this same section, to 
reference the applicability of the requirements of 24 CFR part 84 
(Grants and Agreements with Institutions of Higher Education, 
Hospitals, and Other Non-Profit Agencies).
    In Sec. 943.150 (What procurement standards apply to a PHA's joint 
venture partner?), HUD revises paragraph (a) to include reference to 
the applicability of part 84.

III. Discussion of Public Comments Received on the Proposed Rule

    This final rule takes into consideration the public comments 
received on the September 14, 1999 proposed rule. The public comment 
period on the proposed rule closed on November 15, 1999. By close of 
business on that date, HUD had received 6 public comments. Comments 
were submitted by two PHAs; two of the three main organizations 
representing PHAs; a State PHA association; and a private individual. 
This section of the preamble presents a summary of the significant 
issues raised by the public commenters on the September 14, 1999 
proposed rule and HUD's responses to these comments, and provides the 
basis why certain changes, as highlighted in Section II of this 
preamble, were made at the final rule stage. The changes benefit both 
from the comments received during the public comment period and from 
comments and questions that have arisen since the comment period closed 
from PHAs and others interested in forming consortia or joint ventures, 
as provided by this rule.

A. General Comments Not Regarding a Particular Regulatory Section

    Comment: Rule is unclear regarding the relationship between PHA 
consortia and formula funding under PHDEP. One commenter posed several 
questions regarding the relationship between PHA consortia and formula 
funding under the Public Housing Drug Elimination Program (PHDEP). The 
commenter referred to HUD's September 14, 1999 final rule (64 FR 49900) 
providing for PHDEP formula allocations. The commenter wrote that the 
September 14, 1999 final rule provides that certain grantees who 
received past funding will automatically receive PHDEP funding for 
Fiscal Year (FY) 1999, provided that the grantee's grant application 
demonstrates positive program outcomes. The commenter was concerned 
about those PHAs that are not eligible for automatic FY 1999 PHDEP 
funding.
    The commenter asked the following questions:
    1. Will such a PHA be able to join a consortium of other PHAs that 
continuously receive PHDEP assistance?
    2. Will the PHA be required to become a PHDEP grantee before 
joining such a consortium?
    3. May a PHA that was not awarded PHDEP assistance conduct drug-
elimination activities subsidized by other PHAs who have received PHDEP 
funding?
    HUD Response. Yes, a PHA not eligible for automatic PHDEP funding 
may join a consortium with other PHAs that do receive PHDEP assistance, 
without becoming a PHDEP grantee itself first. A PHA that was not 
awarded PHDEP assistance and is part of a consortium with PHAs that 
were awarded PHDEP assistance may conduct drug elimination activities 
using that assistance.
    Comment: Rule is unclear regarding real estate transactions and 
development/acquisition and redevelopment. One commenter wrote that it 
had hoped ``that these types of development activities would be 
highlighted in the proposed rule and encouraged by HUD.''
    HUD Response. HUD encourages PHAs to use the consortium and joint 
venture options as broadly as possible to advance their mission, 
including using them for capital planning and development. However, HUD 
also believes that any public housing development activities involving 
joint ventures are more appropriately addressed in HUD's Mixed-Finance 
Development rule or Capital Fund rule, to be issued later this year.
    Comment: Further HUD guidance is required. One commenter wrote that 
the ``statute and the proposed rule assume a level of experience or 
sophistication which may not be universal among the PHAs.'' The 
commenter wrote that ``it would be most useful [for HUD] to prepare 
some form of policy guide or `how to' that would direct the energies of 
potential members in a productive way.'' The commenter recommended that 
HUD provide guidance in the question and answer format, with ``examples 
with different sizes of PHAs and different sets of consortia objectives 
that have successfully used the strategy.''
    Comment: Rule provides sufficient guidance. In contrast to the 
preceding comment, one commenter wrote that ``sufficient regulatory 
guidance has been provided and that remaining planning and operational 
issues should be left for [P]HAs to develop through their agency 
planning process and partnership agreements.'' The commenter believes 
that the provisions of the proposed rule

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``effectively outline the basic framework and submission process for 
[P]HAs that opt to form a consortium or joint venture.''
    HUD Response. The rule provides the basic regulatory framework. HUD 
will explore issuing additional guidance to supplement the rule.

B. Comment regarding proposed Sec. 943.115--What programs are covered 
under this subpart?

    Comment: Final rule should cover all categories of Section 8 
projects. Section 943.115 of the proposed rule provided that two types 
of Section 8 projects are not covered by the regulatory provisions 
governing consortia:
    1. PHA-administered project-based Section 8 under the Request for 
Proposals published on May 19, 1999 (64 FR 27358); and
    2. Section 8 projects that are the subject of financial 
restructuring under the ``Mark to Market'' program, where Participating 
Administrative Entities are designated to administer the program (see 
42 U.S.C. 1437f note).
    One commenter objected to these exclusions, writing that ``[a]ny 
consortium made up of public agencies should be treated corporately as 
a public agency itself.''
    HUD Response. Neither of these categories is covered by the PHA 
Plan, which is why they were excluded in the September 14, 1999 
proposed rule. The PHA Plan is the vehicle for PHAs to combine their 
planning and reporting, and this rule addresses only those entities and 
activities covered by a PHA Plan. HUD, therefore, makes no change in 
response to this comment.

C. Comment regarding proposed Sec. 943.120--What programs of a PHA are 
included in a consortium's functions?

    Comment: Final rule should authorize a PHA to enter more than one 
consortium for a program category. Section 943.120(b) of the proposed 
rule provided that ``[i]f a PHA elects to enter a consortium with 
respect to a program category * * * the consortium must cover the PHA's 
whole program under the [Annual Contributions Contract (ACC)] with HUD 
for that program category.'' One commenter--the PHA for the State of 
Hawaii--objected to this provision. The commenter wrote that in 
addition to the administration of its state-wide program, it 
administers a relatively large Section 8 tenant-based program for the 
City and County of Honolulu. The PHA also administers separate, and 
smaller, Section 8 programs for neighboring counties. According to the 
commenter, each county also administers separate Section 8 certificate 
and voucher programs. The PHA wrote that it would like to continue to 
administer the Section 8 program for Honolulu, while forming a separate 
consortium to administer the smaller programs on each of the neighbor 
island counties. However, under proposed Sec. 943.120(b), the PHA 
stated it would be prevented from taking this course of action.
    HUD Response. A joint PHA Plan covering an entire program category 
is an essential element of a consortium. If HUD were to allow a PHA to 
participate in more than one consortium for the same program category, 
there would be overlapping PHA Plans for the same program, and as many 
or more PHA Plans rather than fewer. Program administration would not 
be simplified. Consequently, the final rule continues to provide that a 
PHA may not be a member of two different consortia for the same 
program. However, the proposed rule and this final rule still leave 
room for a PHA or a consortium to contract with another PHA to 
administer some or all aspects of a Section 8 program. The PHA 
performing these functions under contract need not be a member of a 
consortium with the PHA whose program it is administering. In addition, 
HUD will work with agencies that encounter problems in determining how 
to combine functions where a consortium under this rule does not seem 
to be the proper mechanism.

D. Comment regarding proposed Sec. 943.124--What elements must a 
consortium agreement contain?

    Comment: Consortium agreement should provide for PHAs joining 
consortium after establishment. One commenter wrote that the final rule 
should require the inclusion of a provision in the consortium agreement 
providing for (or prohibiting) a new PHA joining the consortium after 
its establishment.
    HUD Response. Section 943.124 was revised in the final rule to 
include the requested provision.

E. Comment regarding proposed Sec. 943.128--How does a consortium carry 
out planning and reporting functions?

    Comment: Final rule should provide flexibility regarding the 
reporting requirements. Section 943.128 of the proposed rule provided 
for reporting to HUD, in accordance with HUD regulations and 
requirements, for all of the participating PHAs. The preamble to the 
proposed rule solicited public comment on whether all reports should be 
combined reports (see 64 FR 49940, third column). One commenter wrote 
that, absent an explanation of what is meant by ``all reports'', the 
question is difficult to answer. However, the commenter recommended 
that ``reporting requirements should be met in whatever way seems best 
for the consortium and its individual members, so long as [HUD] gets 
the data it needs.''
    HUD Response. The scope of planning and reporting by the consortium 
must reflect the scope of consortium activities. PHAs should be aware 
that funding allocations for the Operating Fund and Capital Fund will 
continue to be calculated separately for each PHA in a consortium. In 
addition, as noted in Section II of this preamble, how independent 
audit and performance assessment requirements apply to PHAs in a 
consortium depends upon the composition and funding of participating 
PHAs. HUD's intention, with respect to applicability of independent 
audit and performance assessment of PHAs in a consortium, is that a 
consortium composed entirely of PHAs that are not designated as 
troubled and for which the lead agency has assumed all public housing 
administration and management functions would be treated as one entity 
for purposes of independent and audit performance assessment 
requirements of the participating PHAs. However, the rule also provides 
HUD with the flexibility to select or approve alternative approaches to 
applying independent audit and performance assessment requirements 
where such alternative approaches would promote sound management.

F. Comment regarding proposed Sec. 943.148--What procurement standards 
apply to PHAs selecting partners for a joint venture?

    Comment: Final rule should not apply procurement requirements to 
selection of an affiliate as a joint venture partner. Section 
943.148(a) of the proposed rule provided that the procurement 
requirements of 24 CFR part 85 are generally applicable to a PHA's 
procurement of goods and services. Section 943.148(b) of the proposed 
rule permitted qualifications based on sole source procurement for PHA 
selection of a joint venture partner without making a distinction 
between selection of an affiliated or non-affiliated entity. Section 
943.148(b) permitted such a selection of a joint venture partner if one 
of two conditions is met:
    1. The joint venture partner will make available to the PHA 
substantial, unique and tangible resources or other benefits that would 
not otherwise be available to the PHA on the open market (e.g.,

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planning expertise, program experience, or financial or other 
resources); or
    2. A resident group or a PHA subsidiary is willing and able to act 
as the PHA's partner in performing administrative functions or to 
provide supportive or social services.
    One commenter wrote that, by treating a PHA's decision to operate 
through an affiliate as a procurement action, the proposed rule 
``detracts from the benefit to the PHA of utilizing the associated 
entity.'' The commenter wrote that new section 13 of the 1937 Act 
``appears to evidence Congress' opinion that PHAs need the ability to 
operate through whatever organizational structure is most suitable in 
light of the specific objectives sought to be accomplished, without 
fear that such operation will be clouded by intimations that such 
relationships are somehow improper or inappropriate vehicles.''
    The commenter stated that it does not believe that the ``sole 
source exception'' provided in proposed Sec. 943.148(b) adequately 
addresses this problem. According to the commenter, the first standard 
``provides little help in the PHA/affiliate context'' because the ``PHA 
affiliate will usually offer to the PHA only another form with which to 
accomplish its objectives, with perhaps the same staff and resources 
the PHA already has.'' The commenter also objected to the second 
standard because ``there are many functions'' (such as real estate 
acquisition) that cannot be categorized as administrative functions or 
supportive/social services.
    HUD Response. The commenter interprets the rule to require a PHA to 
follow part 85 in its transactions with a subsidiary or affiliate, 
while that is not its intent. Rather, the rule creates an exception to 
part 85 procurement procedures in selection of its joint venture 
partner. The rule creates an ability to make this selection under 
streamlined procedures--either through a Request for Qualifications or 
a sole source procurement.
    With respect to the functions that are covered by subpart C, the 
rule has been revised at this final rule stage to clarify that the 
functions covered include management functions. It does not apply to 
activities of a PHA that are subject to the requirements of subpart F 
of Part 941. This section also has been revised at the final rule stage 
to clarify that the requirements of 24 CFR part 84 also may be 
applicable.

IV. Findings and Certifications

Public Reporting Burden

    The information collection requirements contained in Secs. 943.124, 
943.126, and 943.128 have been approved by the Office of Management and 
Budget (OMB) under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520) and assigned OMB Control Number 2577-0235. In accordance with the 
Paperwork Reduction Act, HUD may not conduct or sponsor, and a person 
is not required to respond to, a collection of information unless the 
collection displays a currently valid OMB control number.

Impact on Small Entities

    The Secretary has reviewed this final rule before publication and 
by approving it certifies, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), that this final rule will not have a 
significant economic impact on a substantial number of small entities. 
Based on HUD's experience and contacts with representatives of PHAs and 
HUD field offices, HUD expects a relatively small number of PHAs to 
form consortia--certainly fewer than 100. While there would be savings 
and efficiencies in the long run for small PHAs, forming a consortium 
also would require some work for these PHAs--to enter consortium 
agreements--and would require them to overcome resistance to giving up 
local control of their programs. Consequently, HUD concludes that this 
final rule will not have a significant impact on a substantial number 
of small entities.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made at the proposed rule stage, in accordance with HUD regulations 
at 24 CFR part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4223). Since the changes to 
the proposed rule are minor, that Finding remains applicable to this 
final rule and is available for public inspection between the hours of 
7:30 a.m. and 5:30 p.m. weekdays in the Regulations Division, Office of 
General Counsel, Room 10276, U.S. Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410.

Federalism Impact

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on State and local governments or preempt State law 
within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This rule does not impose a Federal 
mandate that will result in the expenditure by State, local, and tribal 
governments, in the aggregate, or by the private sector, of $100 
million or more in any one year.

Regulatory Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, entitled ``Regulatory Planning and Review.'' OMB 
determined that this rule is a ``significant regulatory action'' as 
defined in section 3(f) of the Order (although not an economically 
significant regulatory action under the Order). Any changes made to 
this rule as a result of that review are clearly identified in the 
docket file, which is available for public inspection in the 
Regulations Division of the Office of General Counsel, Room 10276, 451 
Seventh Street, SW, Washington, DC 20410-0500.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers for the 
program affected by this rule are 14.850, 14.855, and 14.857.

List of Subjects in 24 CFR Part 943

    Low and moderate income housing, Reporting and recordkeeping 
requirements.


    Accordingly, HUD adds a new part 943 to title 24 of the Code of 
Federal Regulations to read as follows:

PART 943--PUBLIC HOUSING AGENCY CONSORTIA AND JOINT VENTURES

Subpart A--General
Sec.
943.100   What is the purpose of this part?
Subpart B--Consortia
943.115   What programs are covered under this subpart?
943.118   What is a consortium?

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943.120   What programs of a PHA are included in a consortium's 
functions?
943.122   How is a consortium organized?
943.124   What elements must a consortium agreement contain?
943.126   What is the relationship between HUD and a consortium?
943.128   How does a consortium carry out planning and reporting 
functions?
943.130   What are the responsibilities of participating PHAs?
Subpart C--Subsidiaries, Affiliates, Joint Ventures in Public Housing
943.140   What programs and activities are covered by this subpart?
943.142   In what types of operating organizations may a PHA 
participate?
943.144   What financial impact do operations of a subsidiary, 
affiliate, or joint venture have on a PHA?
943.146   What impact does the use of a subsidiary, affiliate, or 
joint venture have on financial accountability to HUD and the 
Federal government?
943.148   What procurement standards apply to PHAs selecting 
partners for a joint venture?
943.150   What procurement standards apply to a PHA's joint venture 
partner?
943.151   What procurement standards apply to a joint venture 
itself?

    Authority: 42 U.S.C. 1437k and 3535(d).

Subpart A--General


Sec. 943.100  What is the purpose of this part?

    This part authorizes public housing agencies (PHAs) to form 
consortia, joint ventures, affiliates, subsidiaries, partnerships, and 
other business arrangements under section 13 of the United States 
Housing Act of 1937 (42 U.S.C. 1437k). Under this authority, PHAs 
participating in a consortium enter into a consortium agreement, submit 
joint PHA Plans to HUD, and may combine all or part of their funding 
and program administration. This part does not preclude a PHA from 
entering cooperative arrangements to operate its programs under other 
authority, as long as they are consistent with other program 
regulations and requirements.

Subpart B--Consortia


Sec. 943.115  What programs are covered under this subpart?

    (a) Except as provided in paragraph (b) of this section, this 
subpart applies to the following:
    (1) PHA administration of public housing or Section 8 programs 
under an Annual Contributions Contract (ACC) with HUD; and
    (2) PHA administration of grants to the PHA in connection with its 
public housing or Section 8 programs.
    (b) This subpart does not apply to the following:
    (1) PHA administration of Section 8 projects assigned to a PHA for 
contract administration pursuant to an ACC entered under the Request 
for Proposals (RFP) published May 19, 1999 (64 FR 27358);
    (2) Section 8 contract administration of a restructured subsidized 
multifamily project by a Participating Administrative Entity in 
accordance with part 401 of this title; or
    (3) A PHA in its capacity as owner of a Section 8 project.


Sec. 943.118  What is a consortium?

    A consortium consists of two or more PHAs that join together to 
perform planning, reporting, and other administrative or management 
functions for participating PHAs, as specified in a consortium 
agreement. A consortium also submits a joint PHA Plan. The lead agency 
collects the assistance funds from HUD that would be paid to the 
participating PHAs for the elements of their operations that are 
administered by the consortium and allocates them according to the 
consortium agreement. The participating PHAs must adopt the same fiscal 
year so that the applicable periods for submission and review of the 
joint PHA Plan are the same. Notwithstanding any other regulation, PHAs 
proposing to form consortia may request and HUD may approve changes in 
PHA fiscal years to make this possible.


Sec. 943.120  What programs of a PHA are included in a consortium's 
functions?

    (a) A PHA may enter a consortium under this subpart for 
administration of any of the following program categories:
    (1) The PHA's public housing program (which may include either the 
operating fund or the capital fund, or both);
    (2) The PHA's Section 8 voucher and certificate program (including 
the project-based certificate and voucher programs and special housing 
types);
    (3) The PHA's Section 8 Moderate Rehabilitation program, including 
Single Room Occupancy program;
    (4) All other project-based Section 8 programs administered by the 
PHA under an ACC with HUD; and
    (5) Any grant programs of the PHA in connection with its Section 8 
or public housing programs, such as the Drug Elimination program or the 
Resident Opportunities and Self-Sufficiency program, to the extent not 
inconsistent with the terms of the governing documents for the grant 
program's funding source.
    (b) If a PHA elects to enter a consortium with respect to a 
category specified in paragraph (a) of this section, the consortium 
must cover the PHA's whole program under the ACC with HUD for that 
category, including all dwelling units and all funding for that program 
under the ACC with HUD.


Sec. 943.122  How is a consortium organized?

    (a) PHAs that elect to form a consortium enter into a consortium 
agreement among the participating PHAs, specifying a lead agency (see 
Sec. 943.124), and submit a joint PHA Plan (Sec. 943.118). HUD enters 
into any necessary payment agreements with the lead agency and the 
other participating PHAs (see Sec. 943.126) to provide that HUD funding 
to the participating PHAs for program categories covered by the 
consortium will be paid to the lead agency.
    (b) The lead agency must not be a PHA that is designated as a 
``troubled PHA'' by HUD, that has been determined by HUD to fail the 
civil rights compliance threshold for new funding, or that has had a 
PHAS designation withheld for civil rights or other reasons. The lead 
agency is designated to receive HUD program payments on behalf of 
participating PHAs, to administer HUD requirements for administration 
of the funds, and to apply the funds in accordance with the consortium 
agreement and HUD regulations and requirements.


Sec. 943.124  What elements must a consortium agreement contain?

    (a) The consortium agreement among the participating PHAs governs 
the formation and operation of the consortium. The consortium agreement 
must be consistent with any payment agreements between the 
participating PHAs and HUD and must specify the following:
    (1) The names of the participating PHAs and the program categories 
each PHA is including under the consortium agreement;
    (2) The name of the lead agency;
    (3) The functions to be performed by the lead agency and the other 
participating PHAs during the term of the consortium;
    (4) The allocation of funds among participating PHAs and 
responsibility for administration of funds paid to the consortium; and
    (5) The period of existence of the consortium and the terms under 
which a PHA may join or withdraw from the consortium before the end of 
that period. To provide for orderly transition, addition or withdrawal 
of a PHA and termination of the consortium must take effect on the 
anniversary of the consortium's fiscal year.
    (b) The agreement must acknowledge that the participating PHAs are 
subject to the joint PHA Plan submitted by the lead agency.

[[Page 71209]]

    (c) The agreement must be signed by an authorized representative of 
each participating PHA.


Sec. 943.126  What is the relationship between HUD and a consortium?

    HUD has a direct relationship with the consortium through the PHA 
Plan process and through one or more payment agreements, executed in a 
form prescribed by HUD, under which HUD and the participating PHAs 
agree that program funds will be paid to the lead agency on behalf of 
the participating PHAs. Such funds must be used in accordance with the 
consortium agreement, the joint PHA Plan and HUD regulations and 
requirements.


Sec. 943.128  How does a consortium carry out planning and reporting 
functions?

    (a) During the term of the consortium agreement, the consortium 
must submit joint five-year Plans and joint Annual Plans for all 
participating PHAs, in accordance with part 903 of this chapter. HUD 
may prescribe methods of submission for consortia generally and where 
the consortium does not cover all program categories.
    (b) The consortium must maintain records and submit reports to HUD, 
in accordance with HUD regulations and requirements, for all of the 
participating PHAs. All PHAs will be bound by Plans and reports 
submitted to HUD by the consortium for programs covered by the 
consortium.
    (c) Each PHA must keep a copy of the consortium agreement on file 
for inspection. The consortium agreement must also be a supporting 
document to the joint PHA Plan.


Sec. 943.130  What are the responsibilities of participating PHAs?

    (a) Responsibilities, generally. Despite participation in a 
consortium, each participating PHA remains responsible for its own 
obligations under its ACC with HUD. This means that the PHA has an 
obligation to assure that all program funds, including funds paid to 
the lead agency for administration by the consortium, are used in 
accordance with HUD regulations and requirements, and that the PHA 
program is administered in accordance with HUD regulations and 
requirements. Any breach of program requirements with respect to a 
program covered by the consortium agreement is a breach of the ACC with 
each of the participating PHAs, so each PHA is responsible for the 
performance of the consortium.
    (b) Applicability of independent audit and performance assessment 
system requirements to consortia. Where the lead agency will manage 
substantially all program and activities of the consortium, HUD 
interprets financial accountability to rest with the consortium and 
thus HUD will apply independent audit and performance assessment 
requirements on a consortium-wide basis. Where the lead agency will not 
manage substantially all programs and activities of a consortium, the 
consortium shall indicate in its PHA Plan submission which PHAs have 
financial accountability for the programs. The determination of 
financial accountability shall be made in accordance with generally 
accepted accounting principles, as determined in consultation with an 
independent public accountant. In such situations, HUD will apply 
independent audit and performance assessment requirements consistent 
with that determination. With respect to any consortium, however, HUD 
may determine (based on a request from the consortium or other 
circumstances) to apply independent audit and performance requirements 
on a different basis where this would promote sound management.

Subpart C--Subsidiaries, Affiliates, Joint Ventures in Public 
Housing


Sec. 943.140  What programs and activities are covered by this subpart?

    (a) This subpart applies to the provision of a PHA's public housing 
administrative and management functions, and to the provision (or 
arranging for the provision) of supportive and social services in 
connection with public housing. This subpart does not apply to 
activities of a PHA that are subject to the requirements of part 941, 
subpart F, of this title.
    (b) For purposes of this subpart, the term ``joint venture 
partner'' means a participant (other than a PHA) in a joint venture, 
partnership, or other business arrangement or contract for services 
with a PHA.
    (c) This part does not affect a PHA's authority to use joint 
ventures, as may be permitted under State law, when using non-1937 Act 
funds.


Sec. 943.142  In what types of operating organizations may a PHA 
participate?

    (a) A PHA may create and operate a wholly owned or controlled 
subsidiary or other affiliate; may enter into joint ventures, 
partnerships, or other business arrangements with individuals, 
organizations, entities, or governmental units. A subsidiary or 
affiliate may be a nonprofit corporation. A subsidiary or affiliate may 
be an organization controlled by the same persons who serve on the 
governing board of the PHA or who are employees of the PHA.
    (b) The purpose of any of these operating organizations would be to 
administer programs of the PHA.


Sec. 943.144  What financial impact do operations of a subsidiary, 
affiliate, or joint venture have on a PHA?

    Income generated by subsidiaries, affiliates, or joint ventures 
formed under the authority of this subpart is to be used for low-income 
housing or to benefit the residents assisted by the PHA. This income 
will not cause a decrease in funding provided under the public housing 
program, except as otherwise provided under the Operating Fund and 
Capital Fund formulas.


Sec. 943.146  What impact does the use of a subsidiary, affiliate, or 
joint venture have on financial accountability to HUD and the Federal 
government?

    None; the subsidiary, affiliate, or joint venture is subject to the 
same authority of HUD, HUD's Inspector General, and the Comptroller 
General to audit its conduct.


Sec. 943.148  What procurement standards apply to PHAs selecting 
partners for a joint venture?

    (a) The requirements of part 85 of this title are applicable to 
this part, subject to paragraph (b) of this section, in connection with 
the PHA's public housing program.
    (b) A PHA may use competitive proposal procedures for 
qualifications-based procurement (request for qualifications or 
``RFQ''), or may solicit a proposal from only one source (``sole 
source'') to select a joint venture partner to perform an 
administrative or management function of its public housing program or 
to provide or arrange to provide supportive or social services covered 
under this part, under the following circumstances:
    (1) The proposed joint venture partner has under its control and 
will make available to the partnership substantial, unique and tangible 
resources or other benefits that would not otherwise be available to 
the PHA on the open market (e.g., planning expertise, program 
experience, or financial or other resources). In this case, the PHA 
must maintain documentation to substantiate both the cost 
reasonableness of its selection of the proposed partner and the unique 
qualifications of the partner: or
    (2) A resident group or a PHA subsidiary is willing and able to act 
as the PHA's partner in performing administrative and management 
functions or to provide supportive or social services. This entity must 
comply with the requirements of part 84 of this title (if the entity is 
a nonprofit) or part

[[Page 71210]]

85 of this title (if the entity is a State or local government) with 
respect to its selection of the members of the team and the members 
must be paid on a cost-reimbursement basis only. The PHA must maintain 
documentation that indicates both the cost reasonableness of its 
selection of a resident group or PHA subsidiary and the ability of that 
group or subsidiary to act as the PHA's partner under this provision.


Sec. 943.150  What procurement standards apply to a PHA's joint venture 
partner?

    (a) General. A joint venture partner is not a grantee or subgrantee 
and, accordingly, is not required to comply with part 84 or part 85 of 
this title in its procurement of goods and services under this part. 
The partner must comply with all applicable State and local procurement 
and conflict of interest requirements with respect to its selection of 
entities to assist in PHA program administration.
    (b) Exception. If the joint venture partner is a subsidiary, 
affiliate, or identity of interest party of the PHA, it is subject to 
the requirements of part 85 of this title. HUD may, on a case-by-case 
basis, exempt such a joint venture partner from the need to comply with 
requirements under part 85 of this title if HUD determines that the 
joint venture has developed an acceptable alternative procurement plan.
    (c) Contracting with identity-of-interest parties. A joint venture 
partner may contract with an identity-of-interest party for goods or 
services, or a party specified in the selected bidder's response to a 
RFP or RFQ (as applicable), without the need for further procurement 
if:
    (1) The PHA can demonstrate that its original competitive selection 
of the partner clearly anticipated the later provision of such goods or 
services;
    (2) Compensation of all identity-of-interest parties is structured 
to ensure there is no duplication of profit or expenses; and
    (3) The PHA can demonstrate that its selection is reasonable based 
upon prevailing market costs and standards, and that the quality and 
timeliness of the goods or services is comparable to that available in 
the open market. For purposes of this paragraph (c), an ``identity-of-
interest party'' means a party that is wholly owned or controlled by, 
or that is otherwise affiliated with, the partner or the PHA. The PHA 
may use an independent organization experienced in cost valuation to 
determine the cost reasonableness of the proposed contracts.


Sec. 943.151  What procurement standards apply to a joint venture 
itself?

    (a) When the joint venture as a whole is controlled by the PHA or 
an identity of interest party of the PHA, the joint venture is subject 
to the requirements of part 85 of this title.
    (b) If a joint venture is not controlled by the PHA or an identity 
of interest party of the PHA, then the rules that apply to the other 
partners apply. See Sec. 943.150.

    Dated: November 8, 2000.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 00-30332 Filed 11-28-00; 8:45 am]
BILLING CODE 4210-33-P