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States Fight U.S. Awards Giving Akron NYC’s Housing

(Corrects spelling of executive’s name in 12th paragraph of story published July 22.)

July 22 (Bloomberg) -- The U.S. government has decided that the housing authority of Akron, Ohio, should administer New York’s federal rental-assistance program.

Idaho will manage programs in Arizona, Hawaii and Utah, according to the U.S. Department of Housing and Development, which stands to save $100 million a year in the shakeup, officials said.

More than a dozen state and local agencies will lose lucrative HUD contracts valued at $220 million a year to run low-income housing programs after the first full competition since 2000.

The new contracts, awarded July 1, may be held up as agencies challenge them at the Government Accountability Office, which adjudicates such disputes. So far, 12 losing agencies including New York have filed protests against 22 of the 53 awards.

The losing agencies may lose revenue, lay off employees or cut other low-income programs as a result of HUD’s decision, officials said.

Oregon Housing and Community Services, which lost its contract to a unit of the Bremerton, Washington housing authority, may need to lay off as many as 24 employees if its protest doesn’t succeed.

“The loss of this contract is going to significantly change the agency,” Lisa Joyce, a spokeswoman for Oregon Housing and Community Services, said July 20. “We’re going to have to restructure the way we’re organized because of the loss of revenue” if Oregon’s protest isn’t successful, she said.

$20 Million in Fees

The agencies selected by HUD, called performance-based contract administrators, or PBCAs, process housing assistance payments and conduct management and occupancy reviews of public housing in their own and other states’ project-based rental assistance under Section 8, the primary federal low-income housing program.

Only public housing agencies or state and local government organizations focused on low-income housing can compete to be PBCAs, which can hire companies as subcontractors to help perform the work.

Each contractor is paid a percentage of the fair market rent of all the units it administers. Under the previous contracts, awarded in 2000 and 2004, agencies could receive 3 percent of the rent of the units. Those fees can vary from several hundred thousand dollars to as much as $20 million, according to HUD.

Private Subcontractor

New York’s Housing Trust Fund Corp. received $40.2 million in the 12-month period that ended Nov. 2010, Christopher Browne, a spokesman for the agency, said in an e-mail. About $13.7 million of that went to a private sector subcontractor, a unit of CGI Group Inc., and the agency used the rest to cover the program’s costs and underwrite other affordable housing programs, he said.

Some state agencies used the revenue to fund other programs. Southwest Housing Compliance Corp., a non-profit associated with the Housing Authority of the City of Austin, lost the contract for Texas, which it had held since 2000. Its other five contracts won’t make up for that loss of revenue, and the agency may need to cut programs it runs, such as scholarships for low-income students, said Michael Cummings, a vice president for the non-profit, in an interview yesterday.

CGI, which said in January it had $40.3 million this year in management services subcontracts with five states, stands to lose because not all of its partners won new contracts.

$100 Million Savings

By holding a new competition, the agency will save more than $100 million a year, or about 30 percent of the costs, Carol Galante, the acting assistant secretary for HUD’s Office of Housing, said in a July 14 interview.

“This is the first time HUD took a serious look at how to do this more cost efficiently while maintaining quality of service,” Galante said. “Certainly, the budget environment gave added impetus,” she said, though changes already were in the works.

Under the new contracts, the maximum fee was 2.5 percent. Successful bidders averaged 1.7 percent, Galante said.

To determine the winners, HUD scored agencies’ proposals and then divided by the percentage fee the agency had bid, according to several people briefed by HUD on the competition. The Oregon agency bid 2.45 percent and the Bremerton unit bid about 1.88 percent, Oregon Housing’s acting director Rick Crager said at a public meeting on July 15.

Summit Multi-Family Housing Corp., a unit of the Akron Housing Authority, beat out New York for the new contract, and won the contracts for New Jersey and Maryland.

New York’s application scored a higher technical rating than the winner, Darryl C. Towns, the agency’s commissioner, said in a July 11 letter to HUD Secretary Shaun Donovan.

“HUD failed to disclose the relative importance that it would give to the price,” Towns wrote. New York’s application “was materially prejudiced by HUD’s failure” to reveal how much importance it placed on price.

State agencies in Arizona, Delaware, Kansas, Maryland, Massachusetts, New Jersey, and Rhode Island, as well as New York and Oregon, filed protests at GAO.

Other organizations associated with local housing authorities also protested: Columbus, Ohio; Oakland, California; and National Housing Compliance, an association of several authorities in Georgia. GAO has to decide on the protests by mid-October.

Largest Provider

In 2009, the CGI unit was one of the largest providers of PBCA services, working with agencies in California, Florida, New York, Ohio, and Washington, D.C., to administer about 25 percent of the projects involved. In January, the company signed contract renewals valued at $40.3 million to continue performing the services through Sept. 30.

All five agencies that CGI partnered with failed to win contracts in their home state, though the Florida agency won awards in Georgia and the Virgin Islands. Linda Odorisio, a spokeswoman for CGI, declined to comment.

Quadel Consulting Corp., a closely held company in Washington, D.C., was the biggest private sector winner, partnering with successful bidders in eight jurisdictions including Indiana, North Carolina, Ohio, Washington, D.C., Illinois, Virginia, Texas, and Washington state. Six of those contracts are under protest at GAO. Al Hardy, a spokesman for Quadel, didn’t respond to a request for comment.

Southwest of Austin and Jefferson County Assisted Housing Corp., a non-profit associated with the Jefferson County Housing Authority in Birmingham, Alabama, won the most contracts at five each. Three of the Jefferson County contracts and one of Southwest’s are facing protests.

The Idaho Housing and Finance Association won three new contracts and will provide services to more than 18,000 units in Arizona, Hawaii, Idaho and Utah, said Sheryl Putnam, housing compliance and program support manager for the association, in a July 20 phone interview. One of Idaho’s awards is under protest.

Spokespersons for agencies in Massachusetts, Kansas, Rhode Island, and Georgia declined to comment, citing the protests.

Agencies in New Jersey, Akron, Ohio, Birmingham, Alabama and Oakland, California didn’t respond to requests for comment.

To contact the reporter on this story: Leah Nylen in Washington at

To contact the editor responsible for this story: Anne Laurent at

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