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). 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. 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. If contractors do not accurately report on the condition of properties, HUD may lack vital information on which to make disposition decisions and to address safety hazards. We recognize, however, that the condition of the properties is not totally attributable to HUD’s oversight of the contractors. Other Weaknesses Exist in HUD’s Contracting

We, the Inspector General, and the National Academy of Public Administration have identified other weaknesses in HUD’s contracting with respect to the Department’s procurement systems, needs assessment and planning functions, and oversight of contractors’ performance. HUD Has Taken Steps to Improve Its Contracting Operations

HUD has recognized the need to improve its contracting processes and has begun taking actions to address weaknesses that we and the Inspector General have identified. HUD is also establishing a contract review board, composed of the chief procurement officer and other senior HUD officials, that will be responsible for reviewing and approving each HUD program office’s strategic procurement plan and reviewing the offices’ progress in implementing the plans.
Why GAO Did This Study

GAO discussed issues related to contracting activities at the Department of Housing and Urban Development (HUD), focusing on the: (1) extent of HUD's reliance on contractors to carry out the Department's responsibilities; (2) weaknesses in HUD's current contracting practices, particularly with respect to the oversight of property management contractors; and (3) HUD's actions to address its contracting weaknesses.

What GAO Found

GAO noted that: (1) HUD's annual obligations for headquarters contracts have steadily increased in recent years, growing from $213 million in fiscal year (FY) 1991 to $376 million in FY 1996, according to HUD's data systems; (2) furthermore, the Department will continue to rely heavily on contractors to help carry out its responsibilities under its 2020 Management Reform Plan; (3) 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 multi-family insured projects; legal, investigative, audit, and engineering services; and activities to clean up the backlog of troubled assisted multi-family properties; (4) GAO, HUD's Inspector General, and the National Academy of Public Administration have identified weaknesses in HUD's contract administration and monitoring of contractors' performance; (5) the three HUD field offices GAO visited varied greatly in their efforts to monitor real estate asset management contractors' performance, and none of the offices adequately performed all of the functions needed to ensure that the contractors meet their contractual obligations to maintain and protect HUD-owned properties; (6) GAO's physical inspection of the properties for which the contractors in each location were responsible identified problems at the properties, including vandalism, maintenance problems, and safety hazards, which may 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; (7) HUD has recognized the need to improve its contracting processes and has begun taking actions to address the weaknesses that GAO and the Inspector General have identified; (8) HUD has recently appointed a chief procurement officer and is also establishing a contract review board; and (9) HUD is taking steps to revise its property disposition activities which could reduce its reliance on asset management contractors.