24CFR2014 85.36, Office of the Secretary, HUD

2755-0161 _24CFR-2014-85-36(h).pdf

Public Housing, Contracting with Resident-Owned Businesses

24CFR2014 85.36, Office of the Secretary, HUD

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Office of the Secretary, HUD

§ 85.36

(f) Federal equipment. In the event a
grantee or subgrantee is provided federally-owned equipment:
(1) Title will remain vested in the
Federal Government.
(2) Grantees or subgrantees will manage the equipment in accordance with
Federal agency rules and procedures,
and submit an annual inventory listing.
(3) When the equipment is no longer
needed, the grantee or subgrantee will
request disposition instructions from
the Federal agency.
(g) Right to transfer title. The Federal
awarding agency may reserve the right
to transfer title to the Federal Government or a third part named by the
awarding agency when such a third
party is otherwise eligible under existing statutes. Such transfers shall be
subject to the following standards:
(1) The property shall be identified in
the grant or otherwise made known to
the grantee in writing.
(2) The Federal awarding agency
shall issue disposition instruction
within 120 calendar days after the end
of the Federal support of the project
for which it was acquired. If the Federal awarding agency fails to issue disposition instructions within the 120
calendar-day period the grantee shall
follow § 85.32(e).
(3) When title to equipment is transferred, the grantee shall be paid an
amount calculated by applying the percentage of participation in the purchase to the current fair market value
of the property.
§ 85.33

Supplies.

(a) Title. Title to supplies acquired
under a grant or subgrant will vest,
upon acquisition, in the grantee or subgrantee respectively.
(b) Disposition. If there is a residual
inventory of unused supplies exceeding
$5,000 in total aggregate fair market
value upon termination or completion
of the award, and if the supplies are
not needed for any other federally
sponsored programs or projects, the
grantee or subgrantee shall compensate the awarding agency for its
share.

§ 85.34 Copyrights.
The Federal awarding agency reserves a royalty-free, nonexclusive, and
irrevocable license to reproduce, publish or otherwise use, and to authorize
others to use, for Federal Government
purposes:
(a) The copyright in any work developed under a grant, subgrant, or contract under a grant or subgrant; and
(b) Any rights of copyright to which
a grantee, subgrantee or a contractor
purchases ownership with grant support.
§ 85.35 Subawards to debarred and
suspended parties.
Grantees and subgrantees must not
make any award or permit any award
(subgrant or contract) at any tier to
any party that is debarred or suspended or is otherwise excluded from or
ineligible for participation in federal
assistance programs subject to 2 CFR
part 2424.
[72 FR 73493, Dec. 27, 2007]

§ 85.36 Procurement.
(a) States. When procuring property
and services under a grant, a State will
follow the same policies and procedures
it uses for procurements from its nonFederal funds. The State will ensure
that every purchase order or other contract includes any clauses required by
Federal statutes and executive orders
and their implementing regulations.
Other grantees and subgrantees will
follow paragraphs (b) through (i) in
this section.
(b) Procurement standards. (1) Grantees and subgrantees will use their own
procurement procedures which reflect
applicable State and local laws and
regulations, provided that the procurements conform to applicable Federal
law and the standards identified in this
section.
(2) Grantees and subgrantees will
maintain a contract administration
system which ensures that contractors
perform in accordance with the terms,
conditions, and specifications of their
contracts or purchase orders.
(3) Grantees and subgrantees will
maintain a written code of standards of
conduct governing the performance of
their employees engaged in the award

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§ 85.36

24 CFR Subtitle A (4–1–14 Edition)

and administration of contracts. No
employee, officer or agent of the grantee or subgrantee shall participate in selection, or in the award or administration of a contract supported by Federal
funds if a conflict of interest, real or
apparent, would be involved. Such a
conflict would arise when:
(i) The employee, officer or agent,
(ii) Any member of his immediate
family,
(iii) His or her partner, or
(iv) An organization which employs,
or is about to employ, any of the
above, has a financial or other interest
in the firm selected for award. The
grantee’s or subgrantee’s officers, employees or agents will neither solicit
nor accept gratuities, favors or anything of monetary value from contractors, potential contractors, or parties
to subagreements. Grantee and subgrantees may set minimum rules where
the financial interest is not substantial
or the gift is an unsolicited item of
nominal intrinsic value. To the extent
permitted by State or local law or regulations, such standards or conduct
will provide for penalties, sanctions, or
other disciplinary actions for violations of such standards by the grantee’s and subgrantee’s officers, employees, or agents, or by contractors or
their agents. The awarding agency may
in regulation provide additional prohibitions relative to real, apparent, or
potential conflicts of interest.
(4) Grantee and subgrantee procedures will provide for a review of proposed procurements to avoid purchase
of unnecessary or duplicative items.
Consideration should be given to consolidating or breaking out procurements to obtain a more economical
purchase. Where appropriate, an analysis will be made of lease versus purchase alternatives, and any other appropriate analysis to determine the
most economical approach.
(5) To foster greater economy and efficiency, grantees and subgrantees are
encouraged to enter into State and
local intergovernmental agreements
for procurement or use of common
goods and services.
(6) Grantees and subgrantees are encouraged to use Federal excess and surplus property in lieu of purchasing new
equipment and property whenever such

use is feasible and reduces project
costs.
(7) Grantees and subgrantees are encouraged to use value engineering
clauses in contracts for construction
projects of sufficient size to offer reasonable opportunities for cost reductions. Value engineering is a systematic and creative analysis of each contract item or task to ensure that its essential function is provided at the
overall lower cost.
(8) Grantees and subgrantees will
make awards only to responsible contractors possessing the ability to perform successfully under the terms and
conditions of a proposed procurement.
Consideration will be given to such
matters as contractor integrity, compliance with public policy, record of
past performance, and financial and
technical resources.
(9) Grantees and subgrantees will
maintain records sufficient to detail
the significant history of a procurement. These records will include, but
are not necessarily limited to the following: rationale for the method of
procurement, selection of contract
type, contractor selection or rejection,
and the basis for the contract price.
(10) Grantees and subgrantees will
use time and material type contracts
only—
(i) After a determination that no
other contract is suitable, and
(ii) If the contract includes a ceiling
price that the contractor exceeds at its
own risk.
(11) Grantees and subgrantees alone
will be responsible, in accordance with
good administrative practice and sound
business judgment, for the settlement
of all contractual and administrative
issues arising out of procurements.
These issues include, but are not limited to source evaluation, protests, disputes, and claims. These standards do
not relieve the grantee or subgrantee
of any contractual responsibilities
under its contracts. Federal agencies
will not substitute their judgment for
that of the grantee or subgrantee unless the matter is primarily a Federal
concern. Violations of law will be referred to the local, State, or Federal
authority having proper jurisdiction.
(12) Grantees and subgrantees will
have protest procedures to handle and

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Office of the Secretary, HUD

§ 85.36

resolve disputes relating to their procurements and shall in all instances
disclose information regarding the protest to the awarding agency. A
protestor must exhaust all administrative remedies with the grantee and subgrantee before pursuing a protest with
the Federal agency. Reviews of protests by the Federal agency will be limited to:
(i) Violations of Federal law or regulations and the standards of this section (violations of State or local law
will be under the jurisdiction of State
or local authorities) and
(ii) Violations of the grantee’s or subgrantee’s protest procedures for failure
to review a complaint or protest. Protests received by the Federal agency
other than those specified above will be
referred to the grantee or subgrantee.
(c) Competition. (1) All procurement
transactions will be conducted in a
manner providing full and open competition consistent with the standards
of § 85.36. Some of the situations considered to be restrictive of competition
include but are not limited to:
(i) Placing unreasonable requirements on firms in order for them to
qualify to do business,
(ii) Requiring unnecessary experience
and excessive bonding,
(iii) Noncompetitive pricing practices
between firms or between affiliated
companies,
(iv) Noncompetitive awards to consultants that are on retainer contracts,
(v) Organizational conflicts of interest,
(vi) Specifying only a brand name
product instead of allowing an equal
product to be offered and describing
the performance of other relevant requirements of the procurement, and
(vii) Any arbitrary action in the procurement process.
(2) Grantees and subgrantees will
conduct procurements in a manner
that prohibits the use of statutorily or
administratively imposed in-State or
local geographical preferences in the
evaluation of bids or proposals, except
in those cases where applicable Federal
statutes expressly mandate or encourage geographic preference. Nothing in
this section preempts State licensing
laws. When contracting for architectural and engineering (A/E) services,

geographic location may be a selection
criteria provided its application leaves
an appropriate number of qualified
firms, given the nature and size of the
project, to compete for the contract.
(3) Grantees will have written selection procedures for procurement transactions. These procedures will ensure
that all solicitations:
(i) Incorporate a clear and accurate
description of the technical requirements for the material, product, or
service to be procured. Such description shall not, in competitive procurements, contain features which unduly
restrict competition. The description
may include a statement of the qualitative nature of the material, product
or service to be procured, and when
necessary, shall set forth those minimum essential characteristics and
standards to which it must conform if
it is to satisfy its intended use. Detailed product specifications should be
avoided if at all possible. When it is
impractical or uneconomical to make a
clear and accurate description of the
technical requirements, a brand name
or equal description may be used as a
means to define the performance or
other salient requirements of a procurement. The specific features of the
named brand which must be met by
offerors shall be clearly stated; and
(ii) Identify all requirements which
the offerors must fulfill and all other
factors to be used in evaluating bids or
proposals.
(4) Grantees and subgrantees will ensure that all prequalified lists of persons, firms, or products which are used
in acquiring goods and services are current and include enough qualified
sources to ensure maximum open and
free competition. Also, grantees and
subgrantees will not preclude potential
bidders from qualifying during the solicitation period.
(d) Methods of procurement to be followed. (1) Procurement by small purchase procedures. Small purchase procedures are those relatively simple and
informal procurement methods for securing services, supplies, or other property that do not cost more than the
simplified acquisition threshold fixed
at 41 U.S.C. 403(11) (currently set at
$100,000). If small purchase procedures
are used, price or rate quotations shall

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§ 85.36

24 CFR Subtitle A (4–1–14 Edition)

be obtained from an adequate number
of qualified sources.
(2) Procurement by sealed bids (formal advertising). Bids are publicly solicited and a firm-fixed-price contract
(lump sum or unit price) is awarded to
the responsible bidder whose bid, conforming with all the material terms
and conditions of the invitation for
bids, is the lowest in price. The sealed
bid method is the preferred method for
procuring construction, if the conditions in § 85.36(d)(2)(i) apply.
(i) In order for sealed bidding to be
feasible, the following conditions
should be present:
(A) A complete, adequate, and realistic specification or purchase description is available;
(B) Two or more responsible bidders
are willing and able to compete effectively and for the business; and
(C) The procurement lends itself to a
firm fixed price contract and the selection of the successful bidder can be
made principally on the basis of price.
(ii) If sealed bids are used, the following requirements apply:
(A) The invitation for bids will be
publicly advertised and bids shall be
solicited from an adequate number of
known suppliers, providing them sufficient time prior to the date set for
opening the bids;
(B) The invitation for bids, which
will include any specifications and pertinent attachments, shall define the
items or services in order for the bidder
to properly respond;
(C) All bids will be publicly opened at
the time and place prescribed in the invitation for bids;
(D) A firm fixed-price contract award
will be made in writing to the lowest
responsive and responsible bidder.
Where specified in bidding documents,
factors such as discounts, transportation cost, and life cycle costs shall be
considered in determining which bid is
lowest. Payment discounts will only be
used to determine the low bid when
prior experience indicates that such
discounts are usually taken advantage
of; and
(E) Any or all bids may be rejected if
there is a sound documented reason.
(3) Procurement by competitive proposals. The technique of competitive
proposals is normally conducted with

more than one source submitting an
offer, and either a fixed-price or costreimbursement type contract is awarded. It is generally used when conditions
are not appropriate for the use of
sealed bids. If this method is used, the
following requirements apply:
(i) Requests for proposals will be publicized and identify all evaluation factors and their relative importance. Any
response to publicized requests for proposals shall be honored to the maximum extent practical;
(ii) Proposals will be solicited from
an adequate number of qualified
sources;
(iii) Grantees and subgrantees will
have a method for conducting technical evaluations of the proposals received and for selecting awardees;
(iv) Awards will be made to the responsible firm whose proposal is most
advantageous to the program, with
price and other factors considered; and
(v) Grantees and subgrantees may
use competitive proposal procedures
for qualifications-based procurement of
architectural/engineering (A/E) professional services whereby competitors’
qualifications are evaluated and the
most qualified competitor is selected,
subject to negotiation of fair and reasonable compensation. The method,
where price is not used as a selection
factor, can only be used in procurement of A/E professional services. It
cannot be used to purchase other types
of services though A/E firms are a potential source to perform the proposed
effort.
(4) Procurement by noncompetitive
proposals is procurement through solicitation of a proposal from only one
source, or after solicitation of a number of sources, competition is determined inadequate.
(i) Procurement by noncompetitive
proposals may be used only when the
award of a contract is infeasible under
small purchase procedures, sealed bids
or competitive proposals and one of the
following circumstances applies:
(A) The item is available only from a
single source;
(B) The public exigency or emergency
for the requirement will not permit a
delay resulting from competitive solicitation;

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Office of the Secretary, HUD

§ 85.36

(C) The awarding agency authorizes
noncompetitive proposals; or
(D) After solicitation of a number of
sources, competition is determined inadequate.
(ii) Cost analysis, i.e., verifying the
proposed cost data, the projections of
the data, and the evaluation of the specific elements of costs and profits, is
required.
(iii) Grantees and subgrantees may
be required to submit the proposed procurement to the awarding agency for
pre-award review in accordance with
paragraph (g) of this section.
(e) Contracting with small and minority
firms, women’s business enterprise and
labor surplus area firms. (1) The grantee
and subgrantee will take all necessary
affirmative steps to assure that minority firms, women’s business enterprises, and labor surplus area firms are
used when possible.
(2) Affirmative steps shall include:
(i) Placing qualified small and minority businesses and women’s business
enterprises on solicitation lists;
(ii) Assuring that small and minority
businesses, and women’s business enterprises are solicited whenever they
are potential sources;
(iii) Dividing total requirements,
when economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority business, and women’s business
enterprises;
(iv) Establishing delivery schedules,
where the requirement permits, which
encourage participation by small and
minority business, and women’s business enterprises;
(v) Using the services and assistance
of the Small Business Administration,
and the Minority Business Development Agency of the Department of
Commerce; and
(vi) Requiring the prime contractor,
if subcontracts are to be let, to take
the affirmative steps listed in paragraphs (e)(2) (i) through (v) of this section.
(f) Contract cost and price. (1) Grantees and subgrantees must perform a
cost or price analysis in connection
with every procurement action including contract modifications. The method and degree of analysis is dependent
on the facts surrounding the particular

procurement situation, but as a starting point, grantees must make independent estimates before receiving bids
or proposals. A cost analysis must be
performed when the offeror is required
to submit the elements of his estimated cost, e.g., under professional,
consulting, and architectural engineering services contracts. A cost analysis
will be necessary when adequate price
competition is lacking, and for sole
source procurements, including contract modifications or change orders,
unless price reasonableness can be established on the basis of a catalog or
market price of a commercial product
sold in substantial quantities to the
general public or based on prices set by
law or regulation. A price analysis will
be used in all other instances to determine the reasonableness of the proposed contract price.
(2) Grantees and subgrantees will negotiate profit as a separate element of
the price for each contract in which
there is no price competition and in all
cases where cost analysis is performed.
To establish a fair and reasonable profit, consideration will be given to the
complexity of the work to be performed, the risk borne by the contractor, the contractor’s investment,
the amount of subcontracting, the
quality of its record of past performance, and industry profit rates in the
surrounding geographical area for
similar work.
(3) Costs or prices based on estimated
costs for contracts under grants will be
allowable only to the extent that costs
incurred or cost estimates included in
negotiated prices are consistent with
Federal cost principles (see § 85.22).
Grantees may reference their own cost
principles that comply with the applicable Federal cost principles.
(4) The cost plus a percentage of cost
and percentage of construction cost
methods of contracting shall not be
used.
(g) Awarding agency review. (1) Grantees and subgrantees must make available, upon request of the awarding
agency, technical specifications on proposed procurements where the awarding agency believes such review is
needed to ensure that the item and/or

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§ 85.36

24 CFR Subtitle A (4–1–14 Edition)

service specified is the one being proposed for purchase. This review generally will take place prior to the time
the specification is incorporated into a
solicitation document. However, if the
grantee or subgrantee desires to have
the review accomplished after a solicitation has been developed, the awarding agency may still review the specifications, with such review usually limited to the technical aspects of the proposed purchase.
(2) Grantees and subgrantees must on
request make available for awarding
agency pre-award review procurement
documents, such as requests for proposals or invitations for bids, independent cost estimates, etc. when:
(i) A grantee’s or subgrantee’s procurement procedures or operation fails
to comply with the procurement standards in this section; or
(ii) The procurement is expected to
exceed
the
simplified
acquisition
threshold and is to be awarded without
competition or only one bid or offer is
received in response to a solicitation;
or
(iii) The procurement, which is expected to exceed the simplified acquisition threshold, specifies a ‘‘brand
name’’ product; or
(iv) The proposed award is more than
the simplified acquisition threshold
and is to be awarded to other than the
apparent low bidder under a sealed bid
procurement; or
(v) A proposed contract modification
changes the scope of a contract or increases the contract amount by more
than the simplified acquisition threshold.
(3) A grantee or subgrantee will be
exempt from the pre-award review in
paragraph (g)(2) of this section if the
awarding agency determines that its
procurement systems comply with the
standards of this section.
(i) A grantee or subgrantee may request that its procurement system be
reviewed by the awarding agency to determine whether its system meets
these standards in order for its system
to be certified. Generally, these reviews shall occur where there is a continuous high-dollar funding, and thirdparty contracts are awarded on a regular basis.

(ii) A grantee or subgrantee may selfcertify its procurement system. Such
self-certification shall not limit the
awarding agency’s right to survey the
system. Under a self-certification procedure, awarding agencies may wish to
rely on written assurances from the
grantee or subgrantee that it is complying with these standards. A grantee
or subgrantee will cite specific procedures, regulations, standards, etc., as
being in compliance with these requirements and have its system available
for review.
(h) Bonding requirements. For construction or facility improvement contracts or subcontracts exceeding the
simplified acquisition threshold, the
awarding agency may accept the bonding policy and requirements of the
grantee or subgrantee provided the
awarding agency has made a determination that the awarding agency’s
interest is adequately protected. If
such a determination has not been
made, the minimum requirements shall
be as follows:
(1) A bid guarantee from each bidder
equivalent to five percent of the bid price.
The ‘‘bid guarantee’’ shall consist of a
firm commitment such as a bid bond,
certified check, or other negotiable instrument accompanying a bid as assurance that the bidder will, upon acceptance of his bid, execute such contractual documents as may be required
within the time specified.
(2) A performance bond on the part of
the contractor for 100 percent of the contract price. A ‘‘performance bond’’ is
one executed in connection with a contract to secure fulfillment of all the
contractor’s obligations under such
contract.
(3) A payment bond on the part of the
contractor for 100 percent of the contract
price. A ‘‘payment bond’’ is one executed in connection with a contract to
assure payment as required by law of
all persons supplying labor and material in the execution of the work provided for in the contract.
(i) Contract provisions. A grantee’s
and subgrantee’s contracts must contain provisions in paragraph (i) of this
section. Federal agencies are permitted
to require changes, remedies, changed
conditions, access and records retention, suspension of work, and other

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Office of the Secretary, HUD

§ 85.37

clauses approved by the Office of Federal Procurement Policy.
(1) Administrative, contractual, or
legal remedies in instances where contractors violate or breach contract
terms, and provide for such sanctions
and penalties as may be appropriate.
(Contracts more than the simplified acquisition threshold)
(2) Termination for cause and for
convenience by the grantee or subgrantee including the manner by which
it will be effected and the basis for settlement. (All contracts in excess of
$10,000)
(3) Compliance with Executive Order
11246 of September 24, 1965, entitled
‘‘Equal Employment Opportunity,’’ as
amended by Executive Order 11375 of
October 13, 1967, and as supplemented
in Department of Labor regulations (41
CFR chapter 60). (All construction contracts awarded in excess of $10,000 by
grantees and their contractors or subgrantees)
(4) Compliance with the Copeland
‘‘Anti-Kickback’’ Act (18 U.S.C. 874) as
supplemented in Department of Labor
regulations (29 CFR part 3). (All contracts and subgrants for construction
or repair)
(5) Compliance with the Davis-Bacon
Act (40 U.S.C. 276a to 276a–7) as supplemented by Department of Labor regulations (29 CFR part 5). (Construction
contracts in excess of $2000 awarded by
grantees and subgrantees when required by Federal grant program legislation)
(6) Compliance with Sections 103 and
107 of the Contract Work Hours and
Safety Standards Act (40 U.S.C. 327–330)
as supplemented by Department of
Labor regulations (29 CFR part 5).
(Construction contracts awarded by
grantees and subgrantees in excess of
$2000, and in excess of $2500 for other
contracts which involve the employment of mechanics or laborers)
(7) Notice of awarding agency requirements and regulations pertaining
to reporting.
(8) Notice of awarding agency requirements and regulations pertaining
to patent rights with respect to any
discovery or invention which arises or
is developed in the course of or under
such contract.

(9) Awarding agency requirements
and regulations pertaining to copyrights and rights in data.
(10) Access by the grantee, the subgrantee, the Federal grantor agency,
the Comptroller General of the United
States, or any of their duly authorized
representatives to any books, documents, papers, and records of the contractor which are directly pertinent to
that specific contract for the purpose
of making audit, examination, excerpts, and transcriptions.
(11) Retention of all required records
for three years after grantees or subgrantees make final payments and all
other pending matters are closed.
(12) Compliance with all applicable
standards, orders, or requirements
issued under section 306 of the Clean
Air Act (42 U.S.C. 1857(h)), section 508
of the Clean Water Act (33 U.S.C. 1368),
Executive Order 11738, and Environmental Protection Agency regulations
(40 CFR part 15). (Contracts, subcontracts, and subgrants of amounts in
excess of $100,000).
(13) Mandatory standards and policies
relating to energy efficiency which are
contained in the state energy conservation plan issued in compliance with the
Energy Policy and Conservation Act
(Pub. L. 94–163, 89 Stat. 871).
[53 FR 8068, 8087, Mar. 11, 1988, as amended at
60 FR 19639, 19642, Apr. 19, 1995]

§ 85.37

Subgrants.

(a) States. States shall follow state
law and procedures when awarding and
administering subgrants (whether on a
cost reimbursement or fixed amount
basis) of financial assistance to local
and Indian tribal governments. States
shall:
(1) Ensure that every subgrant includes any clauses required by Federal
statute and executive orders and their
implementing regulations;
(2) Ensure that subgrantees are
aware of requirements imposed upon
them by Federal statute and regulation;
(3) Ensure that a provision for compliance with § 85.42 is placed in every
cost reimbursement subgrant; and
(4) Conform any advances of grant
funds to subgrantees substantially to
the same standards of timing and

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