Consortia of Public Housing Agencies and Joint Ventures

[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Proposed Rules]
[Pages 49940-49944]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23701]



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Part VIII





Department of Housing and Urban Development





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24 CFR Part 943



Consortia of Public Housing Agencies and Joint Ventures; Proposed Rule

Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / 
Proposed Rules

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 943

[Docket No. FR-4474-P-01]
RIN 2577-AC00


Consortia of Public Housing Agencies and Joint Ventures

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement a new statutory provision 
specifically authorizing public housing agencies (PHAs) to administer 
any or all of their housing programs through a consortium of PHAs. It 
also authorizes PHAs to use subsidiaries, joint ventures, partnerships 
or other business arrangements to administer its housing programs or to 
provide supportive or social services. The proposed rule specifies 
minimum requirements relating to formation and operation of consortia 
and minimum contents of consortium agreements, as required by the 
statute.

DATES: Comments Due Date: November 15, 1999.

ADDRESSES: Submit comments regarding this proposed rule to the 
Regulations Division, Office of General Counsel, Room 10276, Department 
of Housing and Urban Development, 451 Seventh Street, SW, Washington, 
DC 20410-0500.
    Communications should refer to the above docket number and title. 
Facsimile (FAX) comments are not acceptable. A copy of each 
communication submitted will be available for public inspection and 
copying between 7:30 a.m. and 5:30 p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT: Rod Solomon, Deputy Assistant 
Secretary for Policy, Program, and Legislative Initiatives, Office of 
Public and Indian Housing, U.S. Department of Housing and Urban 
Development, at (202) 708-0713 or e-mail him at the following address: 
RodSolomon@hud.gov. The preceding telephone number is not toll-free. 
Persons with hearing or speech impairments may access the above 
telephone number via TTY by calling the Federal Information Relay 
Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Statutory Basis

    Section 515 of the Quality Housing and Work Responsibility Act of 
1998 (Pub. L. 105-276, 112 Stat. 2549, approved October 21, 1998) 
(Public Housing Reform Act) repealed the existing section 13 of the 
United States Housing Act of 1937 (42 U.S.C. 1437k) dealing with energy 
conservation, replacing it with a new section 13 authorizing PHAs to 
operate in consortia and joint ventures. The statute requires that HUD 
specify minimum requirements relating to the formation and operation of 
consortia and minimum contents of consortium agreements.
    New section 13 provides authority for PHAs to form consortia, joint 
ventures, affiliates, and subsidiaries for the purposes set out in the 
statute. Before enactment of section 13, some PHAs had established 
cooperative arrangements for carrying out some of their 
responsibilities. A principal difference between such arrangements and 
consortia as authorized under section 13, is that under section 13 
funding may be directed to a representative of the consortium on behalf 
of several PHAs instead of being paid to the PHAs separately. Another 
major difference is that under a section 13 consortium, a joint PHA 
plan is submitted on behalf of participating PHAs. Enactment of section 
13, however, does not restrict the ability of PHAs to continue to 
establish cooperative arrangements under which they receive funding 
separately and submit separate PHA plans.

II. Regulatory Interpretations

A. Consortia

1. HUD Programs Covered
    Generally, this rule covers the public housing program, PHA-
administered Section 8 housing assistance programs, and related 
programs. Programs not covered are other housing owned by the PHA and 
two categories of project-based Section 8 projects:
    •  PHA-administered project-based section 8 under the Request 
for Proposals published on May 19, 1999, 64 FR 27358 (HUD invited 
response by specially created consortia that could qualify as PHAs.); 
and
    •  Section 8 projects that are the subject of financing 
restructuring under the finance restructuring ``Mark to Market'' 
program, where Participating Administrative Entities are designated to 
administer the program (see 42 U.S.C. 1437f note).
2. General
    HUD encourages PHAs to take advantage of the new authority to 
create consortia to operate their programs. This type of coordination 
may be particularly helpful for PHAs with small programs or ones whose 
location is not convenient to access planning resources. Acting 
together, PHAs should be able to access expertise not otherwise readily 
available and obtain significant cost savings. In addition, joint 
planning by PHAs in adjacent geographic areas will permit a 
metropolitan or regional perspective to be set out in a single PHA 
Annual Plan. This may facilitate reaching deconcentration and mobility 
goals for very low income families. Consequently, HUD has placed very 
few limits on the exercise of PHA discretion in implementing this 
statutory provision. Nothing in this rule, however, precludes PHAs from 
making other contractual arrangements for administration of their 
programs, consistent with program regulations and provisions of their 
Annual Contributions Contracts (ACCs) with HUD.
    This rule provides for reporting by the consortium to HUD on behalf 
of participating PHAs (see Sec. 943.124). HUD invites comments on 
whether all reports should be combined reports.
    Under the Section 8 Voucher program, program regulations (24 CFR 
982.4) already provide for using a consortium of PHAs and having a 
separate ACC with an entity authorized to act as legal representative 
of the consortium.
3. PHA Inclusion of Programs in a Consortium
    The statute specifies that ``any or all of the housing programs of 
[the PHAs]'' may be administered by a consortium. HUD interprets the 
coverage to include a PHA's public housing and Section 8 programs, and 
related programs, such as the drug elimination program. When a PHA 
participates, it must decide which categories of its programs to 
include. For this purpose, the categories are as follows:
    •  Public housing;
    •  Section 8 voucher;
    •  Section 8 Moderate Rehabilitation, including Single Room 
Occupancy;
    •  All project-based Section 8 programs administered by a PHA 
under an ACC with HUD, except for Moderate Rehabilitation and 
Certificates and Vouchers;
    •  Grant programs associated with public housing and Section 
8 housing programs (such as drug elimination)--unless use of a 
consortium would be inconsistent with the terms of the grant program.
    The participating PHAs will designate a lead agency in the 
consortium agreement. The consortium agreement will specify the 
responsibilities of the

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lead PHA and other participating PHAs for administration of the 
consortium and for administration of the covered programs. To assure 
competency in the operation of the consortium, the rule requires that 
the lead agency for the consortium may not be one designated as 
troubled by HUD or one that fails the funding threshold on satisfaction 
of civil rights requirements.
4. Relationship of PHAs in Consortium
    The period of existence of a consortium and the terms under which a 
PHA may withdraw from it before the end of that period must be 
specified in the consortium agreement. To provide for orderly 
transition, a PHA's withdrawal from a consortium or its natural 
termination date must take effect at the end of the consortium's fiscal 
year. Nothing in this rule affects HUD's authority to intervene, as 
necessary, to enforce its rights under the Annual Contributions 
Contract, if the actions of a consortium result in a default by a PHA.
5. HUD's Relationship to Consortium
    The relationship between HUD and the consortium is to be specified 
in a payment agreement with the lead agency and the other participating 
PHAs. This agreement will specify the agreement for direct payment of 
program funds to the lead agency on behalf of the consortium and 
requirements for use of the funds in accordance with HUD regulations 
and requirements, and remedies for any breach of the obligation of the 
lead agency and participating PHAs to administer the combined program 
in accordance with HUD requirements.

B. Joint Ventures, Partnerships, Affiliates, and Subsidiaries

1. HUD Programs Covered
    Although section 13 authorizes joint ventures, partnerships, 
affiliates, subsidiaries, and other business arrangements for all of a 
PHA's programs, this rule covers only the public housing program. PHAs 
engaged in Section 8 program administration are free to engage in such 
arrangements without any new regulatory restrictions. (In the Section 8 
programs, the PHA is paid a fixed fee for administration of assistance 
to owners and is responsible for delivering the contract administration 
services, without either increase or reduction of the fixed fee). In 
the public housing program, special protections are imposed where 
physical assets are at risk, as in Part 941, Subpart F, for mixed 
finance development. This rule does not override those protections.
    Section 13 authorizes the use of joint ventures, partnerships, or 
other business arrangements with persons or entities ``with respect to 
administration of the programs of the [PHA].'' In this proposed rule, 
HUD has chosen to limit the applicability of the joint venture subpart 
(Subpart C) and its associated special procurement flexibility to the 
public housing program. PHAs do not need the flexibility granted by 
this subpart for their Section 8 operations because they already have 
it. For example, Section 8 operations are not subject to the 
procurement provisions of 24 CFR part 85.
2. Procurement Provisions
    To encourage PHAs to select the most qualified partners for joint 
ventures in administration of public housing, the rule clarifies the 
applicability of public housing procurement requirements (found in 24 
CFR part 85) to these partners. For procurement of (a) supportive and 
social services, and (b) administrative functions, this rule provides 
that the standard requirements are applicable to the procurement of 
goods and services, but a PHA may consider factors other than price in 
selecting a partner under the conditions that would warrant sole source 
selection. (See Sec. 943.150(b)). The rule also clarifies that a joint 
venture partner is not subject to standard procurement requirements in 
its activities unless the partner is a subsidiary, affiliate, or 
identity of interest party of the PHA. In that case, HUD may exempt the 
joint venture partner from compliance with the standard procurement 
requirements if the joint venture partner has an acceptable alternative 
procurement plan. A wholly owned subsidiary or affiliate of a PHA is 
not exempt in any way.
3. Impact on Existing Joint Venture Authority
    This statute does not attempt to regulate a PHA's use of joint 
ventures, as may be permitted under State law, when using non-1937 Act 
funds. The rule (Sec. 943.140(c)) makes that clear.

Findings and Certifications

Public Reporting Burden

    The proposed information collection requirements contained in 
Secs. 943.124, 943.126, and 943.128 have been submitted to the Office 
of Management and Budget (OMB) under the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3520). In accordance with the Paperwork Reduction 
Act, HUD may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless the collection displays 
a currently valid OMB control number.
    Submit comments on the information collections by November 15, 
1999, referring to the title and docket number of the rule. Comments 
should be addressed to Mildred Hamman, Reports Liaison Officer, Office 
of Public and Indian Housing, Department of Housing and Urban 
Development, 451 Seventh Street, S.W., Washington, D.C. 20410.
    Comments are solicited from members of the public and affected 
entities concerning the proposed collection of information specifically 
to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond, including through the use of appropriate automated 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    The burden of information is estimated as follows:

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                                     Number of     Responses per   Total annual      Hours per     Total annual
         Section of CFR             respondents     respondent       responses       response          hours
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943.124  Consortium Agreement...              40               1              40               8             320
943.126  Payment Agreement......              40               1              40               4             160
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943.128(a)  Consolid. Plan;.....         Already included in burden estimates for PHA Plan under Part 903
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943.128(b)  Consortium Reporting              40               1              40               8             320
                                 -------------------------------------------------------------------------------
    Total.......................  ..............  ..............  ..............  ..............             800
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Impact on Small Entities

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires that an 
agency analyze the impact of a rule on small entities whenever it 
determines that the rule is likely to have a significant impact on a 
substantial number of small entities. Based on HUD's experience and 
contacts with representatives of PHAs and HUD field offices, we expect 
a relatively small number of PHAs to form consortia--certainly fewer 
than 100. While there would be savings and efficiencies in the long run 
for small PHAs, forming a consortium also would require some work for 
these PHAs--to enter consortium agreements--and would required them to 
overcome resistance to giving up local control of their programs. 
Consequently, we conclude that the rule will not have a significant 
impact on a substantial number of small entities. We encourage small 
entities to submit comments, however, on ways that the impact of the 
rule on them could be made more advantageous.

Environmental Finding

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969. The Finding of No Significant Impact is available for 
public inspection between the hours of 7:30 a.m. and 5:30 p.m. weekdays 
in the Regulations Division at the above address.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this rule will not have substantial direct effects on 
states or their political subdivisions, or the relationship between the 
federal government and the states, or on the distribution of power and 
responsibilities among the various levels of government. As a result, 
the rule is not subject to review under the order.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532) 
establishes requirements for Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and 
the private sector. This proposed rule does not impose a Federal 
mandate that will result in the expenditure by State, local, or tribal 
governments in the aggregate, or by the private sector, of $100 million 
or more in any one year. On the contrary, it adds new options for PHA 
operations.

Regulatory Review

    The Office of Management and Budget (OMB) has reviewed this 
proposed rule under Executive Order 12866, Regulatory Planning and 
Review, issued by the President on September 30, 1993. OMB determined 
that this rule is a ``significant regulatory action'' as defined in 
section 3(f) of the Order (although not an economically significant 
regulatory action under the Order). Any changes made in this proposed 
rule after its submission to OMB are identified in the docket file, 
which is available for public inspection during regular business hours 
in the Regulations Division, Office of General Counsel, Room 10276, 
U.S. Department of Housing and Urban Development, 451 Seventh Street, 
SW, Washington, DC 20410.

Catalog

    The Catalog of Federal Domestic Assistance number for the programs 
covered by this rule are 14.850, 14.855, and 14.857.

List of Subjects in 24 CFR 943

    Low and moderate income housing, Reporting and recordkeeping 
requirements.

    Accordingly, HUD proposes to add a new part 943 to title 24 of the 
Code of Federal Regulations as follows:

PART 943-- PUBLIC HOUSING AGENCY CONSORTIA AND JOINT VENTURES

Sec.

Subpart A--General

943.100  What is the purpose of this part?

Subpart B--Consortia

943.115  What programs are covered under this subpart?
943.118  What is a consortium?
943.120  What programs of a PHA are included in a consortium's 
functions:
943.122  How is a consortium organized?
943.124  What elements must a consortium agreement contain?
943.126  What is the relationship between HUD and a consortium?
943.128  How does a consortium carry out planning and reporting 
functions?
943.130  What are the responsibilities of participating PHAs?

Subpart C--Subsidiaries, Affiliates, Joint Ventures in Public Housing

943.140  What programs and activities are covered by this subpart?
943.142  In what types of operating organizations may a PHA 
participate?
943.144  What financial impact do operations of a subsidiary, 
affiliate, or joint venture operations have on a PHA?
943.146  What impact does the use of a subsidiary, affiliate, or 
joint venture have on financial accountability to HUD and the 
Federal government?
943.148  What procurement standards apply to PHAs selecting partners 
for a joint venture?
943.150  What procurement standards apply to a PHA's joint venture 
partner?
943.151  What procurement standards apply to a joint venture itself?

    Authority: 42 U.S.C. 1437k and 3535(d).

Subpart A--General


Sec. 943.100  What is the purpose of this part?

    This part authorizes public housing agencies (PHAs) to form 
consortia, joint ventures, affiliates, subsidiaries, partnerships, and 
other business arrangements under section 13 of the United States 
Housing Act of 1937 (42 U.S.C. 1437k). Under this authority, 
participating PHAs submit joint PHA plans to HUD and combine their 
funding and program administration. This part does not preclude a PHA 
from entering cooperative arrangements to operate its programs under 
other authority, as long as they are consistent with other program 
regulations and requirements.

Subpart B--Consortia


Sec. 943.115  What programs are covered under this subpart?

    (a) Except as provided in paragraph (b) of this section, this 
subpart applies to the following:
    (1) PHA administration of public housing or Section 8 programs 
under an ACC with HUD; and

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    (2) PHA administration of grants to the PHA in connection with its 
public housing or Section 8 programs.
    (b) This subpart does not apply to the following:
    (1) PHA administration of Section 8 projects assigned to a PHA for 
contract administration pursuant to an ACC entered under the Request 
for Proposals published May 19, 1999 (64 FR 27358);
    (2) Section 8 contract administration of a restructured subsidized 
multifamily project by a Participating Administrative Entity in 
accordance with part 401 of this title; or
    (3) A PHA in its capacity as owner of a Section 8 project.


Sec. 943.118  What is a consortium?

    A consortium consists of two or more PHAs that join together to 
perform planning, reporting, and other administrative functions for 
participating PHAs, as specified in a consortium agreement. The lead 
agency collects the assistance funds from HUD that would be paid to the 
participating PHAs for the elements of their operations that are 
administered by the consortium and allocates them according to the 
consortium agreement. A consortium also submits a joint PHA plan.


Sec. 943.120  What programs of a PHA are included in a consortium's 
functions?

    (a) A PHA may enter a consortium under this subpart for 
administration of any of the following program categories:
    (1) The PHA's public housing program;
    (2) The PHA's Section 8 voucher and certificate program (including 
the project-based certificate and voucher programs);
    (3) The PHA's Section 8 Moderate Rehabilitation program, including 
Single Room Occupancy program;
    (4) All other project-based Section 8 programs administered by the 
PHA under an Annual Contributions Contract (ACC) with HUD, except for 
Moderate Rehabilitation and Certificates and Vouchers; and
    (5) Any grants to the PHA in connection with its Section 8 or 
public housing programs, to the extent not inconsistent with the terms 
of the governing documents for the grant's funding source.
    (b) If a PHA elects to enter a consortium with respect to a program 
category specified in paragraph (a)(1), (a)(2), (a)(3), or (a)(4) of 
this section, the consortium must cover the PHA's whole program under 
the ACC with HUD for that program category, including all dwelling 
units and all funding for that program under the ACC with HUD.


Sec. 943.122  How is a consortium organized?

    (a) PHAs that elect to form a consortium enter into a consortium 
agreement among the participating PHAs, specifying a lead agency (see 
Sec. 943.124). HUD enters into a payment agreement with the lead agency 
and the other participating PHAs (see Sec. 943.126).
    (b) The lead agency must not be a PHA that is designated as a 
``troubled PHA'' by HUD or that has been determined by HUD to fail the 
civil rights compliance threshold for new funding. The lead agency is 
designated to receive HUD program payments on behalf of participating 
PHAs, to administer HUD requirements for administration of the funds, 
and to apply the funds in accordance with the consortium agreement and 
HUD regulations and requirements.


Sec. 943.124  What elements must a consortium agreement contain?

    (a) The consortium agreement among the participating PHAs governs 
the formation and operation of the consortium. It must be consistent 
with the consortium's payment agreement with HUD and must specify the 
following:
    (1) The names of the participating PHAs and the program categories 
each PHA is including under the consortium agreement;
    (2) The name of the lead agency;
    (3) The functions to be performed by the lead agency and the other 
participating PHAs during the term of the payment agreement;
    (4) The allocation of funds among participating PHAs and 
responsibility for administration of funds paid to the consortium under 
the payment agreement; and
    (5) The period of existence of the consortium and the terms under 
which a PHA may withdraw from it before the end of that period. To 
provide for orderly transition, the consortium's termination date or a 
PHA's withdrawal from the consortium must take effect at the end of the 
consortium's fiscal year.
    (b) The agreement must acknowledge that the participating PHAs are 
subject to the requirements of the joint PHA Plan.
    (c) The agreement must be signed by an authorized representative of 
each participating PHA.


Sec. 943.126  What is the relationship between HUD and a consortium?

    (a) HUD has a direct relationship with the consortium through a 
payment agreement, executed in the form prescribed by HUD. The payment 
agreement specifies the conditions under which HUD agrees to pay 
program funds to the lead agency on behalf of the participating PHAs. 
It specifies the requirements for use of the funds in accordance with 
HUD regulations and requirements.
    (b) Under the payment agreement, the participating PHAs agree that 
HUD will pay the consortium all assistance payments otherwise payable 
to the PHAs for the program categories they have included under the 
consortium agreement. The combined amount is paid to the lead agency on 
behalf of the consortium.


Sec. 943.128  How does a consortium carry out planning and reporting 
functions?

    (a) During the term of the payment agreement, the consortium must 
complete a joint five-year Plan and a joint Annual Plan for all 
participating PHAs, in accordance with part 903 of this chapter.
    (b) The consortium must submit reports to HUD, in accordance with 
HUD regulations and requirements, for all of the participating PHAs. 
All PHAs will be bound by plans and reports submitted to HUD by the 
consortium for programs covered by the consortium.
    (c) Each PHA must keep a copy of the consortium agreement on file 
for inspection.


Sec. 943.130  What are the responsibilities of participating PHAs?

    Despite participation in a consortium, each participating PHA 
remains responsible for its own obligations under its ACC with HUD. 
This means that it has an obligation to assure that all program funds, 
including funds paid to the lead agency for administration by the 
consortium, are used in accordance with HUD regulations and 
requirements, and that the PHA program is administered in accordance 
with HUD regulations and requirements. Any breach of program 
requirements with respect to a program covered by the consortium 
agreement is a breach of the ACC with each of the participating PHAs, 
so each PHA is responsible for the performance of the consortium.

Subpart C--Subsidiaries, Affiliates, Joint Ventures in Public 
Housing


Sec. 943.140  What programs and activities are covered by this subpart?

    (a) This subpart applies to the provision of a PHA's public housing 
administrative functions, and to the provision (or arranging for the 
provision) of supportive and social services in connection with public 
housing. It does not apply to activities of a PHA that are subject to 
the

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requirements of part 941, subpart F, of this title.
    (b) For purposes of this subpart, the term ``joint venture 
partner'' means a participant (other than a PHA) in a joint venture, 
partnership, or other business arrangement or contract for services 
with a PHA.
    (c) This part does not affect a PHA's authority to use joint 
ventures, as may be permitted under State law, when using non-1937 Act 
funds.


Sec. 943.142  In what types of operating organizations may a PHA 
participate?

    (a) A PHA may create and operate a wholly owned or controlled 
subsidiary or other affiliate; may enter into joint ventures, 
partnerships, or other business arrangements with individuals, 
organizations, entities, or governmental units. A subsidiary or 
affiliate may be a nonprofit corporation. It may be an organization 
controlled by the same persons who serve on the governing board of the 
PHA or who are employees of the PHA.
    (b) The purpose of any of these operating organizations would be to 
administer programs of the PHA.


Sec. 943.144  What financial impact do operations of a subsidiary, 
affiliate, or joint venture have on a PHA?

    Income generated by subsidiaries, affiliates, or joint ventures 
formed under the authority of this subpart is to be used for low-income 
housing or to benefit the residents assisted by the PHA. This income 
will not cause a decrease in funding provided under the public housing 
program except as otherwise provided under the Operating Fund and 
Capital Fund formulas.


Sec. 943.146  What impact does the use of a subsidiary, affiliate, or 
joint venture have on financial accountability to HUD and the Federal 
government?

    None. The subsidiary, affiliate, or joint venture is subject to the 
same authority of HUD, HUD's Inspector General, and the General 
Accounting Office to audit its conduct.


Sec. 943.148  What procurement standards apply to PHAs selecting 
partners for a joint venture?

    (a) The requirements of part 85 of this title (generally requiring 
a request for proposals or ``RFP'') are applicable to a PHA's 
procurement of goods and services under this subpart in connection with 
the PHA's public housing program.
    (b) A PHA may use competitive proposal procedures for 
qualifications-based procurement (request for qualifications or 
``RFQ'') or may solicit a proposal from only one source (``sole 
source'') to select a joint venture partner to perform an 
administrative function of its public housing program or to provide or 
arrange to provide supportive or social services covered under this 
part under the following circumstances:
    (1) The proposed joint venture partner has under its control and 
will make available to the partnership substantial, unique and tangible 
resources or other benefits that would not otherwise be available to 
the PHA on the open market (e.g., planning expertise, program 
experience, or financial or other resources). In this case, the PHA 
must maintain documentation to substantiate both the cost 
reasonableness of its selection of the proposed partner and the unique 
qualifications of the partner: or
    (2) A resident group or a PHA subsidiary is willing and able to act 
as the PHA's partner in performing administrative functions or to 
provide supportive or social services. This entity must comply with the 
requirements of part 85 of this title with respect to its selection of 
the members of the team and the members must be paid on a cost-
reimbursement basis only.


Sec. 943.150  What procurement standards apply to a PHA's joint venture 
partner?

    (a) General. A joint venture partner is not a grantee or subgrantee 
and, accordingly, is not required to comply with part 85 of this title 
in its procurement of goods and services under this part. The partner 
must comply with all applicable State and local procurement and 
conflict of interest requirements with respect to its selection of 
entities to assist in PHA program administration.
    (b) Exception. If the joint venture partner is a subsidiary, 
affiliate, or identity of interest party of the PHA, it is subject to 
the requirements of part 85 of this title. HUD may, on a case-by-case 
basis, exempt such a joint venture partner from the need to comply with 
requirements under part 85 of this title if it determines that the 
joint venture has developed an acceptable alternative procurement plan.
    (c) Contracting with identity-of-interest parties. A joint venture 
partner may contract with an identity-of-interest party for goods or 
services, or a party specified in the selected bidder's response to a 
RFP or RFQ (as applicable), without the need for further procurement 
if:
    (1) The PHA can demonstrate that its original competitive selection 
of the partner clearly anticipated the later provision of such goods or 
services;
    (2) Compensation of all identity-of-interest parties is structured 
to ensure there is no duplication of profit or expenses; and
    (3) The PHA can demonstrate that its selection is reasonable based 
upon prevailing market costs and standards, and that the quality and 
timeliness of the goods or services is comparable to that available in 
the open market. For purposes of this paragraph (c), an ``identity-of-
interest party'' means a party that is wholly owned or controlled by, 
or that is otherwise affiliated with, the partner or the PHA. The PHA 
may use an independent organization experienced in cost valuation to 
determine the cost reasonableness of the proposed contracts.


Sec. 943.151  What procurement standards apply to a joint venture 
itself?

    (a) When the joint venture as a whole is controlled by the PHA or 
an identity of interest party of the PHA, the joint venture is subject 
to the requirements of part 85 of this title.
    (b) If a joint venture is not controlled by the PHA or an identity 
of interest party of the PHA, then the rules that apply to the other 
partners apply. See Sec. 943.150.

    Dated: August 27, 1999.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-23701 Filed 9-13-99; 8:45 am]
BILLING CODE 4210-33-P