Justifications for such no-bid contracts are numerous, but include urgency or the fact that a contractor is uniquely qualified.
For sole-source procurements other than to Sec. 8(a) certified firms, federal regulations require written justifications to be kept and made publicly available. HUD did not respond to AHF’s request to furnish such justifications for sole-source contracts in 2006.
Promoting minority businesses
Jackson is passionate about promoting SDB contracting, and proud of helping minority business owners increase their income.
In his 2006 Dallas speech, Jackson made sure his audience, which was largely minority, knew that he had the power to make them wealthy, according to the Dallas Business Journal. Jackson told the group that HUD provides “business opportunities for many in this room to get rich.” The article went on to quote Jackson as saying, “Whether it’s HUD or another agency, the opportunities are there. The most amazing thing I’ve ever seen is the amount of contracts we give out every day. One contract can make you wealthy.”
It wasn’t the first time Jackson bragged about the lucrative potential of HUD contracts.
One longtime HUD headquarters employee attended a luncheon with Jackson sponsored by an organization called Blacks in Government. In his remarks to the group, this employee said, Jackson “bragged about how he was creating black millionaires” as secretary of HUD.
Jackson’s desire to help minority business owners make money through contracting preferences is consistent with federal policy. In fact, the SBA sets goals for such participation. HUD exceeds its SBA goals by very substantial margins in regard to minority-owned firms, and only slightly exceeds the goal for woman-owned firms.
In fiscal 2006, HUD’s Web site reports that the department awarded 70.6 percent of its contracts to small business, compared to a goal of 45 percent set by the SBA. It gave SDBs 43.3 percent of its contracts, four times the 10 percent goal set by SBA and a substantial increase from fiscal 2002, when the ratio was 19 percent.
HUD gave 16.6 percent of contracts to so-called “Sec. 8(a)” firms, compared to the SBA goal of 10 percent. (It’s unclear if the Sec. 8(a) contracts are counted in the overall 43.3 percent that went to SDBs.)
HUD also tracks contracts that go to woman-owned small businesses, where it slightly exceeded its 20 percent goal, as well as veteran-owned small businesses and businesses in targeted geographic areas. All of these groups get certain advantages in competing for contracts.
These goals are for prime contracts only. HUD also sets ambitious goals for the number of subcontracts that prime contractors must provide to SDBs.
To create such dramatic increases in contracting to SDBs, HUD directed program offices that need contractors to use SDBs as much as possible.
Several senior HUD housing officials said the emphasis on SDB contracts may be great for minority businesses but that it can pose problems for effective program operations.
One former senior HUD executive said that despite being understaffed and needing contractors’ help, he was told to “stay away from procurement.” People who had nothing to do with the programs involved wrote the descriptions of work. He said program staffers are responsible for the work of the contract but have little to say about choosing the contractor or evaluating their work. If a program person does give a contractor a negative evaluation, they are likely to be overruled, he said.
One assistant secretary who is still at HUD told the IG that he is concerned about the pressure to use SDB contractors because they often have limited capacity.
Because of their small size, he and others said such firms often get a prime contract with HUD and then subcontract most or even all of the work to bigger companies.
Program users and HUD staff told AHF they believe certain contractors are being selected to receive contracts over and over again despite having little experience or poor credentials or even high costs. Several said the targeted firms had their contracts renewed even when program staff found their work unsatisfactory.
Jackson has defended his efforts to increase SDB contracts as part of Bush administration policy, and told the IG that he felt criticism of one of the minority-owned firms that HUD used was motivated by racism.
Even as new, small contractors are given opportunities, current and former HUD staff say there is not enough manpower to monitor them and review their work.
In 2002, the GAO confirmed that view, saying “Weaknesses in HUD’s monitoring processes limit the department’s ability to identify and correct contractor performance problems, hold contractors accountable, and assure itself that it is receiving services.” In a follow-up, GAO said it could not verify HUD’s claim that it had addressed this and other problems cited by GAO. (For details, see Congress Targets Contracting.)
Who’s getting contracts? Who’s not?
The competition for large and lucrative HUD contracts is fierce, especially in the one area where the biggest firms still seem to prevail: IT.
IT was once the single biggest contracting line item at HUD. The title of biggest contractor for HUD since 2000 goes to Lockheed Martin Corp., which has landed contracts totaling $636 million in that time.