We performed a review of HUD's recent invitation to submit applications (invitation) for performance-based contract administrator services for Southern California to be effective June 1, 2009, and its related annual contributions contract (contract) due to a complaint and concerns that this activity may have been inconsistent with agreed-upon management decisions on Audit Report 2007-SE-0001. The purpose of this review was to determine whether the invitation and the related proposed contract were consistent with the management decisions on our audit report and to advise the Acting Deputy Assistant Secretary for Multifamily Housing of any inconsistency.

Our review found that HUD did not implement the two recommendations from Audit Report 2007-SE-0001 calling for changes to the contract. As a result, the deficiencies reported in that report were not corrected. Consequently, HUD could pay as much as $1.9 million or 19 percent of the contract's basic fee each year for work not required and not performed on this contract and will not achieve its objective of obtaining the best value for dollars spent for contract administrator services.

We recommend that HUD’s Assistant Secretary for Housing, immediately rescind the invitation until such time as it and its related contract are revised so they do not include tasks that are not required, include a mechanism to adjust workload and commensurate fees as program needs change, and include a provision for making adjustments to the contracts in the future if requirements change.