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HUD’s Approval of the City of High Point’s Use of a 15 Percent Margin for Procurement Bids

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We reviewed the U.S. Department of Housing and Urban Development’s (HUD) Greensboro, NC, Office of Community Planning and Development’s approval of the City of High Point’s use of a 15 percent cost estimate margin.  The objective of this review was to determine whether HUD knowingly allowed the City to use the 15 percent margin. 

HUD’s Greensboro, NC, Office of Community Planning and Development allowed the City to use the 15 percent cost estimate margin, although it violated 24 CFR 85.36.  This practice allowed the City to misspend $824,734 of $902,997 (91 percent) for inadequate contracts for 5 of the 14 (35.7 percent) projects for which the City did not select the lowest bidder for its lead-based paint hazard control grants.  

We recommend that the Director of the Office of Field Management, Office of the Deputy Assistant Secretary for Operations, require the Director of the Greensboro, NC, Office of Community Planning and Development to issue a notice to inform all North Carolina grantees that they must use the lowest bidder in a sealed bid process unless they are able to provide sufficient support in compliance with 24 CFR 85.36 to remove the bidder from the procurement process