HUD Didn't Use Best Practices in the Procurement, Administration of Multifamily Servicing Contract

HUD’s Office of Inspector General (OIG) audited HUD’s procurement and administration of its multifamily mortgage loan and property management servicing and accounting contract. The Federal Housing Commissioner and HUD housing officials had communicated concerns to OIG.

HUD’s Office of the Chief Procurement Officer (OCPO) is responsible for obtaining all contracted goods and services required by HUD. OCPO regularly executes a contract to provide multifamily mortgage loan servicing and accounting, property management servicing and accounting, and Sections 202 and 811 direct loan Uniform Commercial Code setup and maintenance.

HUD officials stated that this service contract had been awarded to the same contractor for more than 20 years, resulting in approximately $357 million in contract payments. The objectives of the audit were to determine whether HUD officials ensured that the contract scope of services was appropriate and necessary, maximized competition, provided sufficient oversight and monitoring, and provided adequate communication and coordination among the departments involved.

What Auditors Found

HUD officials ensured that the scope of services was appropriate and necessary but didn’t always follow applicable requirements or use best practices in the procurement and administration of HUD’s contract for multifamily mortgage loan and property management servicing and accounting.

Specifically, HUD officials didn’t sufficiently track contract payments, identify and de-obligate (or adjust downward the obligations recorded in a contract) excess funds at contract closeout, or ensure adequate communication and coordination with the departments involved with this contract. Also, HUD officials didn’t obtain a sufficient number of bidders, ineffectively selected the procurement method used, and didn’t maximize vendor awareness of and visibility for this contract. OIG attributed these deficiencies to HUD’s high rate of turnover and lack of central and consistent accountability and communication in the offices responsible for this contract.

OIG also found that OCPO officials didn’t do enough to ensure that there was adequate competition when they didn’t select the most effective procurement method or maximize vendor awareness for this contract. In 20 years, there were few competing bids. Based on the unique scope of this contract, using U.S. General Services Administration’s e-Buy online tool may not have been the most effective method of procurement for this solicitation as it unintentionally limited competition.

Auditor’s Recommendations

OIG recommended that HUD officials de-obligate the almost $10 million in excess obligations on HUD’s most recent award of the contract for these services and ensure that these funds are put to better use. In addition, OIG recommended HUD officials implement procedures to ensure that: (1) obligated amounts are tracked and are consistent with funding needs; (2) consistent oversight, accountability, and communication are promoted; (3) best practices are followed to provide maximum competition; and (4) decisions are made with the input of all parties involved.

• Office of the Chief Procurement Officer: Audit Report Number 2015-NY-0001, December 2014