This article was previously published in the Pennsylvania Association of Housing & Redevelopment Agencies (PAHRA) Monitor (Spring 2014-15). It is reprinted here with permission.
The “common rule,” 24 CFR §85.36, has been removed from the Code of Federal Regulations. If the “disappearance” of the familiar procurement regulation is taking you by surprise, it is likely because during the December holiday season and rush of year-end activity, you may not have taken note of the Federal Register as published on December 19, 2014. A joint interim final rule was published on that date implementing the final guidance Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 CFR Chapter I, Chapter II, Part 200 (Uniform Guidance). This interim final rule became effective on December 26, 2014.
The Uniform Guidance impacts non-Federal entities1 like public housing agencies (PHAs), which are considered to be local government2 for purposes of the Uniform Guidance, and includes procurement standards in 2 CFR §§200.317-200.326.
As you might suspect given the removal of 24 CFR §85.36, PHAs need to update their procurement policies and procedures. The U.S. Department of Housing and Urban Development intends to issue guidance on this transition. It is important to note that Federal awards3 will be governed by the regulations in effect and codified in:
A. unless B(i) below applies, 24 CFR part 85 (2013 edition) or as provided by the terms of the Federal award if the Federal awards were made prior to December 26, 2014.
-and-
B. 2 CFR part 200 if:
(i) the terms of a Federal award made prior to December 26, 2014 state that the award will be subject to regulations as may be amended;
-or-
(ii) the Federal awards were made on or after December 26, 2014 (e.g., FY 2015 Capital Fund Program Formula Grants).
When updating your PHA’s procurement policies and procedures to address the Uniform Guidance, PHAs should note what differs from the familiar 24 CFR §85.36, including the following:
Tangible Personal Benefit and Conflict of Interest - 2 CFR §200.318(c)(1): The language with respect to conflict of interest has been expanded from just “financial or other interest in” to also include “or a tangible personal benefit from” a firm considered for a contract. Thus, a PHA’s written standards of conduct must exclude an employee, officer, or agent from participating in the selection, award, or administration of a contract supported by a Federal award when the employee, officer, or agent, any member of his or her immediate family, his or her partner, or an organization which employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from a firm considered for a contract.
Organizational Conflicts of Interest - 2 CFR §200.318(c)(2): While the former 24 CFR §85.36(c)(v) noted that organizational conflicts of interest presented a situation considered to be restrictive of competition (rather than full and open competition), the former “common rule” did not require written standards of conduct covering organizational conflicts of interest. “Organizational conflicts of interest means that because of relationships with a parent company, affiliate, or subsidiary organization, the non-Federal entity is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization.” 2 CFR §200.318(c)(2). This will require any PHA with an affiliate or instrumentality to adopt written standards of conduct covering organizational conflicts of interest.
Recall that in the context of mixed-finance development, HUD has the following definitions:
An affiliate is an entity, other than an instrumentality, formed by a PHA and in which a PHA has a financial or ownership interest or participates in its governance. The PHA has some measure of control over the assets, operations, or management of the affiliate, but such control does not rise to the level of control to qualify the entity as an instrumentality.
24 CFR §905.604(b)(4)
An instrumentality is an entity related to the PHA whose assets, operations, and management are legally and effectively controlled by the PHA, and through which PHA functions or policies are implemented, and which utilizes public housing funds or public housing assets for the purpose of carrying out public housing development functions of the PHA. An instrumentality assumes the role of the PHA, and is the PHA under the Public Housing Requirements, for purposes of implementing public housing development activities and programs, and must abide by the Public Housing Requirements. Instrumentalities must be authorized to act for and to assume such responsibilities.
24 CFR §905.604(b)(3)
as well as a notice, Notice PIH-2007-15, as extended by Notice PIH 2011-47.
Micro-purchase - 2 CFR 200.67; 2 CFR §200.320(a): There is a new subset of a non-Federal entity’s small purchase procedures, micro-purchase, in the CFR; it was previously included in HUD Handbook No. 7460.8 REV 2. The micro-purchase threshold is currently $3,000 except as otherwise discussed in the Federal Acquisition Regulation at 48 CFR Subpart 2.1 (Definitions).
Procurement by Small Purchase Procedures; Simplified Acquisition Threshold - 2 CFR 200.88; 2 CFR §200.320(b): The small purchase procurement method is for securing services, supplies, or other property that do not cost more than $150,000 (as periodically adjusted for inflation). The simplified acquisition threshold was fixed at $100,000 under 24 CFR §85.36(d)(1).
Contract Provisions for Non-Federal Entity Contracts Under Federal Awards - 2 CFR §200.326; Appendix II to Part 200: The contract provisions that must be included in a contract made by a PHA under the Federal award differ between 24 CFR §85.36(i) and 2 CFR Part 200. While the provisions of the former 24 CFR §85.36(i)(1- 3, 5-6, 12) are fairly similar (but note such things as citation changes or revised dollar amounts) to Appendix II, A-E and G, and the provisions of the former 24 CFR §85.36(i) (8) are relatable to Appendix II, F, there are deviations. Reporting, copyrights and rights in data, access, record retention and mandatory standards and policies relating to energy efficiency of the former 24 CFR §85.36(i)(7, 9-11, 13) are no longer included under this heading. Appendix II to Part 200 adds H-J, Debarment and Suspension, Byrd Anti-Lobbying Amendment and a cross reference to 2 CFR §200.322 (regarding procurement of recovered materials).
Thus, PHAs need to bring their procurement policies and procedures into alignment with the Uniform Guidance. The applicability of the familiar 24 CFR §85.36 is limited.
Endnotes
1 Non-Federal entity is defined at 2 CFR §200.69.
2 Local government is defined at 2 CFR §200.64.
3 Federal award is defined at 2 CFR §200.38.
