Contracting for housing program operations had overtaken IT by 2004. Contracts for the Office of Housing rose from $178 million in 2003 to $399 million in 2005, according to HUD.

Several well-established firms in the housing industry told AHF that getting a HUD contract under Jackson is very difficult for a firm that is not in one of the preference categories. Several former HUD contractors said they have stopped seeking contracts under the Bush administration for that reason.

Among the Sec. 8(a) certified businesses which are getting contracts, one of the most successful is Harrington Moran Barksdale of Fort Worth, Texas. In fiscal 2006, the firm was awarded HUD contracts worth $78.6 million, according to FedSpending.org.

The firm’s Web site says it is a property management and marketing company specializing in asset management and disposition of single-family real estate homes. It is owned by Maurice L. Barksdale, who was assistant secretary for housing at HUD under the Reagan administration.

The firm received $96 million in HUD contracts in 2004 and 2005 primarily to manage and market single-family HUD-owned properties in Texas.

(For more information on other firms that have seen their business grow thanks to preferences and in many cases, sole-source procurement, see Building a 'Baby Haliiburton'.)

The preferences given to small and minority-owned contractors open up the possibility for manipulation of the process for reasons other than getting the best work at the best price, according to IG testimony by Joseph Neurauter, who was the department’s chief procurement officer in 2006.

He explained to investigators how the contracting process could be subject to “gaming” for political purposes. If a company has a friend in the agency, that friend could use disadvantaged business preferences like those provided by the 8(a) program, or for women-owned businesses, to steer the business to their company. “They could pick out this company, maybe it’s a small, maybe it’s an 8(a) ... Small Business Office says, okay, it’s a small, it helps to meet our goal and requirements. It comes to [the Office of the Chief Procurement Officer], we look at it,” said Neurauter. “And so all the rules could fit, all of the stars could align, and we would say, sure, this seems appropriate, we’ll make the award, when all along you could argue that the original motivation behind this was improper, because this company happens to be a big contributor to whatever party.”

Jackson told the IG repeatedly that he does not control the contracting process, and that all he does is advocate in general for small and disadvantaged businesses to get a healthy share of the work. HUD public affairs staff and several witnesses in the IG investigation flatly stated that Jackson is “not involved” in the contracting process.

However, interviews of employees conducted by AHF and employees quoted in the IG report said that they believe Jackson is very involved in the process, and in some cases, tries to dictate specifically who should and who should not get contracts or contract renewals.

The vast majority of HUD senior staff and offices report to Deputy Secretary Roy Bernardi. Besides Bernardi, very few people report to Jackson directly. One of that handful is the head of the Office of Small and Disadvantaged Business Utilization (OSDBU).

Jackson insisted that OSDBU take a key role in almost every proposed contract that could possibly be broken down into parts that a small business could handle, a step that met with resistance from HUD program staff, according to an IG witness.

HUD employees stated that this unbundling of contracts, which Jackson consistently advocates, helps increase small business participation, but makes it harder for staff to effectively manage the multiple contracts that take the place of the single one that otherwise would have been awarded.

Kathleen Koch, who served as acting general counsel for HUD in 2006, told the IG OSDBU was “very aggressive” in increasing SDB contracts and that Jackson “worked directly with the office director on these matters.”

According to testimony from Koch, Jackson met regularly with contractors or people who wanted to get contracts. “We warned him against it,” said Koch, adding that she and her staff used to review the schedule for the previous secretary, Mel Martinez, to advise if there were potential problems, but that practice “just petered out” after Jackson became secretary. (Koch and several other senior executives in the Office of General Counsel resigned in 2006, at least partly because of concerns about Jackson’s activities in contracting, according to a knowledgeable source.)