HUD Emails Raise Questions About Bureaucrats Skewing Bidding Process 

Emails discussed 'limiting the competition' after department received an unfavorable action from the Supreme Court

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January 29, 2018

A contractor that managed a sizable portion of Housing and Urban Development's Section 8 program claims that numerous HUD officials illegally threw away a competitive bidding process for contracting that work, claiming internal emails show repeated instances of high-ranking HUD officials skirting court rulings while operating with a bias against their company and others like them in the years that followed.

Navigate Affordable Housing Partners is a nonprofit based in Alabama that originally won a contract to administer somewhere between five to ten percent of HUD's Section 8 housing program in 2000. For low-income citizens who qualify, Section 8 housing provides housing assistance by subsidizing a portion of the fair-market rent to the landlord of the property.

HUD began contracting the management of Section 8 work at that time as a response to numerous scandals from the previous decades and in an effort to modernize HUD’s mission and operations.

HUD relied on a competitive bid process for the contracting and by most standards, the efforts led to success: Better administration of the program for fewer dollars.

Navigate and its colleagues point to a report by the HUD inspector general that noted HUD, "has made substantial progress in reducing erroneous payments, from and estimated $3.2 billion in fiscal year 2000 to $1.32 billion in fiscal year 2011." That study was agency-wide, meaning those totals include the Section 8 program as well as others.

However, the Obama administration altered the process in 2012, relabeling the contracts as "cooperative agreements" so the funds could be distributed in a system that resembeld a state-based grant structure rather than a competitive bidding process.

The GAO ruled the move was improper in August of that year. However, when HUD showed it had no intention of adhering to the GAO's guidance, Navigate and other contractors sued. The plaintiffs lost in district court before winning on appeal, and the Supreme Court refused to hear the case.

Emails obtained in a Freedom of Information Act request by Navigate and its colleagues and reviewed by the Washington Free Beacon unearthed an exchange between two HUD officials right after the Supreme Court refused to hear the case.

"The Supreme Court denied certiorari yesterday, leaving in place the Federal Circuit’s holding that the contracts used to administer the program are procurement contracts," wrote Doris Finnerman, an attorney in HUD's Assisted Housing division, meaning the contracts had to be competitively bid, not "awarded" through a grant structure.

"Still to be resolved is the legal/policy question whether the procurement must be a full and open competition of limited to Public Housing Agencies because of the language in the U.S. Housing Act, 42 U.S.C. 1437f. If anyone asks for my opinion -- ☺ -- I would advise a full and open competition," Finnerman added.

"It'll be up to the lawyers to figure out [if] the competition can be limited," wrote Keith Surber, HUD's acting chief procurement officer.

Doris Finnerman replied, "I'm for any competition that disadvantages the plaintiffs!!"

Navigate CEO Eric Strong said reading those emails undermined the sense of partnership he and his fellow plaintiffs had felt with HUD.

"When HUD first decided to contract this out (in 1999), it took a while to figure out how to do it, the best way to do it, and we all worked together as partners figuring that out," Strong told the Washington Free Beacon. "[The contracting has] been successful, it's saved them money, it was good for the tenants, it was good for the owners and managers, and so to read those emails and to see this crazy bias, it was shocking. And a little bit of disbelief at first."

A spokesperson from HUD said the agency would not comment on the emails.

Winning the emails was its own challenge: After Navigate filed the Freedom of Information Act request, HUD did not respond for two years. Navigate had to go to court to win release of the emails.

As HUD was preparing to petition the Supreme Court in 2014, a Department of Justice lawyer who was representing HUD told Finnerman that the department could do a competitive bid process, but, "still could limit it to properly licensed entities. I don't see how they win here."

Emails from earlier in the thread established that the "they" referred to the group of plaintiffs that included Navigate.

"If we have any say in this, and we do, they won't win no matter what happens. But what do you mean by 'properly licensed entities?'" Finnerman asked in reply.

"State approved," the DOJ lawyer responded. "The states will be the controlling outside player imo [in my opinion]."

Strong said Navigate received evaluations from HUD over the years. HUD did not respond to a request on their evaluation of the nonprofit.

Currently, the newest round of Section 8 administration contracts is in draft form, and the department is accepting comments on the drafts. But the proposal is still not a complete return to the competitive structure previously in place.

Strong sees the entire episode as a case of trying to fix something that wasn't broken.

"What we wanted all along was an equal playing field," Strong said. "And we're like so many other businesses and many of our colleagues. We compete. We win. We lose. But we want a level playing field and a fair shot at keeping or getting more contracts."

"We're still hopeful to get past all this and get back to a fair and equitable rebid."

Published under: Supreme Court