Issue link: https://read.dmtmag.com/i/576094
OCTOBER 2015 14 THE JOURNAL 'Monitoring' Contractor's Domination of Federal Program Must End MHARR VIEWPOINT BY MARK WEISS Attending the HUD-IPIA-SAA conference in April 2015, one had to wonder just who runs the federal manufactured housing program on a pol- icy and implementation level – HUD or its en- trenched "monitoring" contractor. Employees of the revenue-driven "monitoring" contractor (the only entity to hold that contract since the incep- tion of federal regulation in 1976, albeit under different corporate names) participated in panel presentations, offered interpretations of the stan- dards and enforcement regulations, and made broad pronouncements on program policies (for example, IPIA concurrences for non-confor- mance determinations). All of this led MHARR to emphasize, in its April 16, 2015 meeting re- port, the unprecedented (and dangerous) degree to which the revenue-driven "program contrac- tor – and its allies – and their interests are now driving the federal program," instead of publicly accountable officials at HUD. And, indeed, no other governmental agency has such a depend- ent, distorted and intertwined relationship with a contractor that, like HUD, it would actually seek – repeatedly -- to prevent full and fair com- petition for that contract. With this situation now reaching a critical stage, however, it is im- portant to have a clear understanding of all its various aspects. The federal program, obviously, did not reach this point overnight. For decades MHARR has been a lone voice opposing the slow but steady accretion of more and more program functions in that one and only "monitoring" contractor which – nominally, at least – is supposed to be keeping tabs on the program's third-party Primary In- spection Agencies. Along with these extended functions have come a steady increase in power, authority and influence within the program, as reflected by a slew of contractor-initiated and/or contractor-developed pseudo-regulations (e.g. , "Acceptable Quality Level," "Computer Coded Items" and others), de facto standards and ex- panded in-plant regulation, as well as multiple layers of costly, time-consuming policies, proce- dures, practices, criteria, "checklists" and de facto "interpretations" of virtually every aspect of the HUD regulatory program, none of which have ever gone through notice and comment rulemak- ing, as required by law, or been proven to pro- duce corresponding benefits for homeowners. HUD program officials, for their part, spent years denying (and still do) that the monitoring contractor exercises substantial discretionary power within the program – the very hallmark of inherently governmental authority – just as they have denied the continually-expanding role and pervasive influence of the monitoring contractor, even as both have clearly evolved and grown (with the exception of just a few short periods) over the past 40 years. Those same officials – also for decades – routinely dismissed (or ignored) complaints of system atic abuses by the "monitor- ing" contractor ranging from arbitrary, subjective and baseless regulatory demands, to excessive paperwork and red tape that needlessly inflate regulatory compliance costs to the ultimate ben- efit of exactly no one (except the contractor and its bottom line). Worse yet, in a disturbing number of cases, regulated parties that ap- proached HUD were targeted for reprisals and retribution. And now, with the domination of the program by a paid contractor reaching a crit- ical stage, others in the industry – and consumers – can no longer afford to be bystanders. To be sure, and as with so many other mat- ters, the law is squarely on the side of industry members and consumers. Based on aggressive MHARR documentation and education efforts in Congress during the 19080s and 1990s, as well as MHARR's participation in and exposure of these issues at the National Commission on Man- u factured Housing, in numerous industry forums and at multiple congressional hearings, Congress took significant steps in the Manufactured Hous- ing Improvement Act of 2000 to curb the power of all contractors within the HUD program – but especially the entrenched "monitoring" contrac- tor -- to prevent any one contractor, in the fu- ture, from amassing so many program functions that it effectively controls the policy and direc- tion of the program based on its own self-inter- est. These limiting provisions include, among oth- ers: (1) the "separate and independent contrac- tors" requirement of section 623, which was the basis for the recent termination of the "monitor- ing" contractor's dispute resolution subcontract; (2) the definition of "monitoring" inserted in section 603, which specifically restricts the "monitoring" function to the "periodic review of … primary inspection agencies … for the purpose of ensuring that the primary inspection agencies are discharging their duties" under the law; (3) section 604(b)(6), which requires that all changes to program policies, procedures and practices be brought to the MHCC and subjected to notice and comment rulemaking, regardless of what they are called or how they are characterized by HUD and/or the "monitoring" contractor; and (4) the provision for an appointed, non-career pro- gram Administrator, in order to assure strong, transparent and responsive program accountabil- ity in all matters, including contracting and the proper (limited) role of program contractors. The 2000 reform law, therefore, if fully and properly implemented, has the necessary safe- guards to break the accumulated power of the en- trenched "monitoring" contractor and move the program back to a healthy, lawful and effec tive contracting structure, where a genuine "moni- toring" contractor would perform the limited ministerial function of "periodically review[ing]" the PIAs and accountable HUD officials – subject to federal government ethics law and regulations -- would be in firm control of program policy and direction, rather than a self-interested revenue- driven private actor. But, as has been the case with far too much of the 2000 law, its key con- tracting reforms have been honored more in the breach than in actuality. Not surprisingly, then, the Government Accountability Office (GAO) in its July 2014 report on HUD's implementation of the 2000 reform law, pointed out significant "questions and uncertainties about HUD's over- sight of the monitoring contract…." In order to expose and document the true and full extent of the de facto domination of the HUD program by the "monitoring" contractor, MHARR in its comprehensive September 2012 Freedom of Information Act (FOIA) request to HUD, sought multiple categories of documents