Issue link: https://read.dmtmag.com/i/133786
MHARR VIEWPOINT A New Contractor for the Federal Program? BY DANNY GHORBANI MHARR has often highlighted the unique aspects of the federal manufactured housing program that together guarantee the safety, quality and unmatched affordability of HUD Code manufactured homes for American consumers. These include its three main pillars of: (1) uniform, performance-based federal standards; (2) federal preemption; and (3) uniform federal enforcement. Unfortunately, though, there's another "unique" feature of the HUD program that's not so positive for either consumers or the industry – the lack of genuine, open and fair competition for the principal program enforcement contract – that has led to innovation-stifling stagnation under the same entrenched contractor, using the same timeworn, needlessly costly system for nearly forty years. And now, with that contract due for rebidding in the near future, the question for the HUD program, its stakeholders, Congress and the Government Accountability Office (GAO) – in the context of its current investigation -is whether HUD will comply with applicable law and ensure full and open competition for the monitoring contract, or simply continue to cover for what amounts to a sole-source contracting process. As things stand, the HUD program has effectively had the same "monitoring" contractor -- i.e., the same continuing entity, with the same operational philosophy and the same key personnel, albeit under different names -- since the federal program went into effect in 1976. The program has thus had one – and only one – monitoring contractor in its history, and that contractor has been around, as the de facto regulator and "face" of in-plant program enforcement since President Jimmy Carter took office. If there is any other federal regulatory JUNE 2013 18 THE JOURNAL program in Washington, D.C. that has had the same principal contractor for nearly four decades, it must be a closely guarded secret, because no one has ever been able to point to one. Before anyone writes this off, though, as some sort of meaningless quirk, it's important to understand that this entrenched contractual relationship has realworld negative consequences for both consumers and the industry, and needs to be changed. To begin with, the role and power of the "monitoring" contractor have exploded over the course of nearly four decades, with virtually no corresponding checks and balances to protect regulated manufacturers (due, in part to the absence of an appointed non-career program administrator). While the program contractor is officially empowered only to "monitor" the performance of the third-party Primary Inspection Agencies (PIAs) that exercise direct oversight of manufacturers' compliance with the federal standards, the reality is much different. As HUD's surrogate in each manufacturing plant and a principal source of technical expertise within the program, the monitoring contractor wields disproportionate influence. Indeed, as the current system has evolved, the monitoring contractor effectively acts as prosecutor, judge and jury on a myriad of compliance issues that do not otherwise see the light of day. This virtually unchecked power is part of a system that provides the contractor with a financial incentive, not only to find fault with manufacturers, their homes and various production systems, but to expand the cost and personnel burdens imposed on manufacturers through multiple layers of reports, checklists, spreadsheets, paperwork, intrusive multi-day "test" audits based on non-regulatory criteria, and other red tape that do nothing to help consumers but have been used, particularly in recent years, to prop-up bloated contract spending despite historically low production levels. Worse yet, this ever-expanding, revenuedriven inspection regime, over the course of decades, has worked to suffocate the type of experimentation and innovation that would produce even greater cost savings for consumers, together with a more technologically advanced product. Thus, much of the benefit that consumers could – and are supposed to --derive from performance-based federal standards, has been wasted by an overly-rigid, fossilized inspection system that is more focused on generating billing than protecting consumers in a cost-effective manner. For years, HUD attempted to justify this inflexible and wasteful system by pointing to "consumer complaints." Manufacturers knew, though, as the National Commission on Manufactured Housing later confirmed, that the vast majority of these complaints were a result of a deficiency in the original 1974 federal law that did not include installation standards and enforcement as part of that law. The 2000 reform law, however, corrected this deficiency (while simultaneously strengthening consumer satisfaction mechanisms) and, as a result, the number of consumer complaints involving manufactured home performance has fallen to extremely low levels.