HUD’s procurement offices annually award and administer millions of dollars worth of contracts on behalf of HUD’s program offices. This process entails receiving descriptions of need, soliciting and receiving offers, awarding contracts, making necessary contract modifications, resolving disputes, and closing out completed contracts. The Office of Procurement and Contracts performs these functions for headquarters offices, and the three Administrative Service Centers (located in New York, N.Y.; Atlanta, Ga.; and Denver, Colo.) perform them for HUD’s field offices. The major types of goods and services procured by headquarters include information technology hardware and software, mortgage-accounting and claims-processing services, advertising for the sale of HUD’s properties, and various professional, technical, and administrative management support services. The typical goods and services purchased by the field offices include real estate management services and mortgage insurance-related activities, such as mortgage credit analyses, appraisals, and mortgage insurance endorsement processing. HUD’s staffing levels decreased from 12,823 in 1993 to 9,200 in 1998. While HUD has been downsizing, its annual obligations for headquarters contracts have steadily increased. According to HUD’s data systems, the annual contract obligations at HUD’s headquarters grew from $213 million in fiscal year 1991 to $376 million in fiscal year 1996 (in constant 1996 dollars). No historical data are available for field office contracting activities. HUD’s 2020 Management Reform Plan and supporting documents indicate that the Department’s reliance on contractors to help carry out its responsibilities will remain significant. For instance, the plan calls for HUD to contract with private firms for a number of functions, including physical building inspections of public housing and multifamily insured projects; legal, investigative, audit, and engineering services; and activities to clean up the backlog of troubled assisted multifamily properties. Previously, physical inspections of multifamily projects were carried out by HUD personnel, mortgagees, and regional contractors. The plan also encompasses the potential use of contractors to manage construction under the HOPE VI program. Finally, the 2020 reforms call for transferring the Office of Housing’s contract administration activities for its rental assistance programs to contract administrators. The new arrangement would be similar to the process under the Office of Public and Indian Housing’s rental assistance programs. Currently, approximately 1.1 million assisted rental units are administered by the Office of Housing under contracts with project owners. The Office of Housing performs the role of contract administrator and makes monthly rent payments to owners on behalf of eligible families. Under HUD’s proposal, these activities would be carried out directly by contractors (often, housing finance agencies or housing authorities) instead of HUD employees. We, HUD’s Inspector General, and the National Academy of Public Administration have identified weaknesses in HUD’s contracting practices. For example, our review of HUD’s oversight of real estate asset management (REAM) contractors, who are responsible for safeguarding foreclosed HUD properties, found that HUD did not have an adequate system in place to assess its field offices’ oversight of these contractors. Our audit work found that HUD does not have a system in place for monitoring its field offices’ administration of REAM contracts. To safeguard and maintain the approximately 30,000 properties that HUD has in its inventory at any given time, HUD obtains the services of REAM contractors. These contractors are to secure and inspect the properties, report their condition to HUD, notify interested parties of HUD’s ownership, perform exterior maintenance, and ensure that the properties are free of debris and hazardous conditions. REAM contractors are therefore essential to HUD’s achieving its goal of returning these properties to private ownership as soon as possible, while obtaining a maximum sale price for HUD. HUD’s guidance makes headquarters staff responsible for overseeing the administration of REAM contracts. Specifically, the guidance requires regional offices to ensure that field offices are monitoring REAM contractors and requires headquarters staff to review regional offices’ oversight actions through regional reviews. We found, however, that headquarters staff have not been reviewing the field offices since HUD reorganized its field office structure in 1995 and eliminated the regional offices. According to HUD Single-Family Property Disposition officials, the regional offices’ oversight function was never absorbed into headquarters after the regional offices were eliminated. Also, after the reorganization, HUD’s guidance was not updated to ensure that the administration of REAM contracts was monitored by headquarters. In addition, HUD’s field office staff are not consistently providing adequate oversight of REAM contractors. We believe this lack of oversight contributed to some of the poor property conditions—ranging from graffiti and debris to imminent safety hazards—that we saw when we visited 66 HUD properties. Such conditions can decrease the marketability of HUD’s properties, decrease the value of surrounding homes, increase HUD’s holding costs and, in some cases, threaten the health and safety of neighbors and potential buyers. Our report made recommendations to HUD for improving its oversight of REAM contractors. HUD’s field office staff are directly responsible for overseeing REAM contractors. We found, however, that some key oversight responsibilities were not always performed by staff at the three HUD field offices we visited. For example, HUD’s field staff did not always evaluate REAM contractors as required. Field office staff are supposed to evaluate the REAM contractor’s performance every year in the month prior to the contract’s anniversary date. This annual evaluation is used to make decisions on contract extensions and, if necessary, to act on inadequate performance. However, at all three field offices we visited, these evaluations were not always conducted or were not always completed in time to provide useful information for contract renewal decisions. For example, one of the field offices we visited has evaluated the REAM contractor’s performance only once since the REAM contract was awarded in June 1995, and that evaluation was conducted several weeks after the contract had already been extended beyond the base year. Officials in that field office told us that performance evaluations were not performed because they did not have the staff resources or travel funds to visit the contractor’s office. However, it should be noted that the REAM contractor’s office is only 37 miles from HUD’s field office. Furthermore, in the one evaluation conducted, field office staff did not convey the results of the evaluation to the REAM contractor, as required. In this evaluation, HUD cited the contractor for failing to remove debris from some properties. Our inspection of properties in this field location revealed that the debris removal problem still existed at the time of our review, more than 1 year later. One property had been shown by realtors eight times while it contained debris. In fact, a realtor noted that the only accessible entrance to the property was blocked with furniture and debris, which was the case when we visited the property. During our August 1997 inspection of 24 properties in this location, we found that most of the properties contained either interior or exterior debris. Consequently, prospective buyers were sometimes viewing properties littered with household trash, personal belongings, and other debris. In addition, HUD’s field office staff did not always inspect the properties managed by REAM contractors, as suggested by HUD’s guidance. Because HUD recognizes that physical inspections are the best method for monitoring the contractors’ work, HUD’s guidance suggests that field office staff conduct monthly physical inspections of a minimum number of properties assigned to each contractor. To help meet this target, the guidance allows the field offices to contract out for property inspection services. Without adequate on-site inspections, HUD cannot be assured that it is receiving the services for which it has paid. In two of the field offices we visited, property files contained evidence that some properties were being inspected. However, of the 42 property files we reviewed in the third field office, HUD’s field office staff had not inspected any of those properties. Field office staff told us they did not get out to inspect properties because they did not have the travel funds or staff resources to do so. Subsequent to our visit, in December 1997, this field office started using contractors to make property inspections. Moreover, HUD’s field office staff did not always ensure that the REAM contractors conducted property inspections and submitted appropriate reports for HUD’s review. HUD’s guidance requires REAM contractors to submit initial inspection reports within 5 working days of being notified that a property has been assigned, but it offers no specific guidance on the submission of routine inspection reports. The REAM contractor’s submission of initial and routine inspection reports is essential for HUD to determine its marketing strategy for the properties and to mitigate potential losses to the properties. For example, the initial inspection reports, along with appraisals, are the primary tools for determining the repairs that must be made and whether the property meets certain standards that would allow it to be sold with HUD-insured financing. At the three offices we reviewed, the requirements placed on REAM contractors for submitting inspection reports and the extent to which the reports were actually submitted to the field offices varied considerably. For example, at one location, all of the property files we reviewed contained initial inspections, while in another location, 43 percent of the files contained no initial inspections. Without inspection reports, HUD is unable to readily determine whether the contractors are conducting inspections as required. At all three locations that we visited, we found instances where properties were not maintained as required by the REAM contracts. During our inspection of approximately 20 properties in each location, we identified properties that (1) were not properly secured, (2) had physical conditions that did not match those that the REAM contractor had reported to HUD, or (3) had imminent hazards. For instance, of the 66 properties we visited in all three locations, we found that approximately 39 percent were not sufficiently secured to prevent access to the property.