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MSHDA HUD Section 3 Training. To increase the capacity of nonprofit organizations and local units of government to fulfill the HUD Section 3 compliance obligations. Welcome!. Guy Stockard MSHDA Statewide Section 3 Coordinator 517-373-6725 [email protected] Morning Agenda.

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Mshda hud section 3 training

MSHDA HUD Section 3 Training

To increase the capacity of nonprofit organizations and local units of government to fulfill the HUD Section 3 compliance obligations.


Welcome
Welcome!

Guy Stockard

MSHDA Statewide Section 3 Coordinator

517-373-6725

[email protected]


Morning agenda
Morning Agenda

  • Historical Background

  • What is Section 3?

  • Recipient Responsibilities

  • Recommendations Practical Tips and Best Practices

  • Implementing Section 3 for Successful Compliance

  • Reporting Results



Section 3 history
Section 3 History

  • Civil Unrest 1960’s

  • Kerner Commission Report

  • Los Angeles Riots

  • Hurricane Katrina

  • Current Economic Crisis

  • Economic Stimulus Act


A changing discussion
A Changing Discussion

  • Renewed emphasis on enforcement of Section 3.

  • Previous discussions largely involved “how to avoid the intent of the law.

  • New discussion “how to implement creatively the spirit of the law to get results.”


What is section 3
What is Section 3?

  • Section 3 of the Housing and Urban Development Act of 1968

  • Implementing regulations at:

    24 CFR Part 135

  • Statute: 12 U.S.C. 1701u

  • Purpose/Intent


Section 3
Section 3

To ensure that economic opportunities generated by certain HUD funded projects shall, to the greatest extent feasible, and consistent with existing Federal and State laws, be directed to low- and very low-income persons (particularly those receiving assistance for housing), and to the businesses that provide economic opportunities to these persons.


To the greatest extent feasible
To the Greatest Extent Feasible

…what does this mean???


Simply stated
Simply Stated….

  • HUD funds are one of the largest sources of federal dollars

  • Typically result in new contracts, employment or training opportunities

  • If economic opportunities are created…Section 3 residents and businesses receive preference


Failure to comply with section 3
Failure to Comply with Section 3

HUD holds direct recipients of covered funding accountable for their own compliance, and the compliance of their sub-recipients and contractors


Penalties for noncompliance
Penalties for Noncompliance

  • Debarment

  • Suspension

  • Limited Denial of Participation in HUD Programs


Applicability
Applicability

  • Public Housing

    • Development

    • Operation

    • Modernization

  • Housing and Community Development

    • Housing rehabilitation

    • Housing construction

    • Other public construction


Covered recipient agencies
Covered Recipient Agencies

  • PHAs

  • Entitlement Communities

  • HOME Participating Jurisdictions

  • State, County, or Local Units of Government

  • Non-Profit Organizations

  • Developers

  • Property Managers

  • CHDOs

  • Private Agency or Institution


Covered funding examples
Covered Funding Examples

  • HOME

  • CDBG

  • NSP/Economic Stimulus Funds

  • HOPE VI Funding

  • PHA Operating Funds

  • PHA Development Funds

  • PHA Modernization/Rehab Funds


Funding thresholds
Funding Thresholds

  • The requirements for Section 3 apply to recipients of HUD Housing Community Development funding exceeding $200,000.

  • Contractors or subcontractors that receive contracts in excess of $100,000 are required to comply with Section 3 in the same manner as the recipients.


Funding thresholds1
Funding Thresholds

  • There are no thresholds for Public Housing Funds. Section 3 applies to all activities regardless of the dollar amount

  • The requirements also apply to all contractors regardless of the dollar amount of the contract


Applicability to entire project
Applicability to Entire Project

Section 3 requirements apply to the entire project or activity regardless if the project is fully or partially funded with covered financial assistance.


What section 3 is not
What Section 3 is NOT…

  • A Racial Quota Program

  • An Entitlement for Eligible Individuals and Businesses

  • Only applicable to Direct Recipients

  • Optional—It’s the law!


Section 3 economic opportunities
Section 3 Economic Opportunities

Section 3 regulations do not require hiring/contracting unless it is necessary to complete the project.

** Only triggered when covered projects require “new” hires or contracting opportunities


Section 3 economic opportunities1
Section 3 Economic Opportunities

  • Not limited to low-wage construction jobs

  • Prospective Section 3 eligible employees or businesses must demonstrate that they are qualified


Section 3 residents
Section 3 Residents

  • Residents of Public Housing; or

  • Low- and very low-income persons residing in the metropolitan area or non-metropolitan county


Section 3 minorities
Section 3 & Minorities

  • Section 3 of the HUD Act is race-neutral.

  • The preferences provided by this federal act are based on income and location.


Additional potential section 3 residents
Additional Potential Section 3 Residents

  • Persons receiving unemployment benefits or other government subsidies

  • Returning Veterans

  • Recent College or Vocational School Graduates

  • Women in non-traditional careers

  • YouthBuild participants


Section 3 business concerns
Section 3 Business Concerns

  • Owned (51%) by Section 3 residents;

  • Substantially employs Section 3 residents (30% or more); or

  • Can provide evidence of commitment to subcontract 25% of work to another Section 3 Business



Responsibility 1
Responsibility #1

Implementing procedures designed to comply with the requirements of

Section 3


Practical tips
Practical Tips:

  • Develop and Publish official policies—Section 3 Plan

  • Strategic Planning

  • Internal/External Meetings


Practical tips1
Practical Tips:

  • Identify long and short term projects/activities

  • Consider applicable State, Federal and local laws


Section 3 plans
Section 3 Plans

  • Strategies to target Section 3 residents and businesses

  • Certification/Selection criteria

  • Process for informing contractor’s about responsibilities and assessing hiring/subcontracting needs


Section 3 plans1
Section 3 Plans

  • Penalties for noncompliance

  • Incentives for good performers

  • Reporting Requirements

  • Recordkeeping

  • Section 3 Coordinator


Responsibility 2
Responsibility #2

Notify Section 3 residents about training and employment opportunities and Section 3 businesses about contracting opportunities


Practical tips2
Practical Tips:

  • Establish certification procedures

  • Maintain lists of certified Section 3 residents & businesses

  • Personally notify certified residents and businesses

  • Post Notices Door-to-Door


Practical tips3
Practical Tips:

  • Community Job Fairs

  • Online Job Search Vehicles

  • Community Partnerships

  • Section 3 Coordinator


Responsibility 3
Responsibility #3

Notify covered contractors about the requirements of

Section 3


Practical tips4
Practical Tips:

  • Mandatory Pre-Bid Hearings/ Meetings

  • Section 3 Workshops

  • Provide copies of your agency’s Section 3 Plan and have contractors certify receipt


Practical tips5
Practical Tips:

  • Include compliance with Section 3 as a rating factor when selecting “responsible bidders”

  • Assess bidders on their ability to meet the requirements of Section 3


Responsibility 4
Responsibility #4

Incorporate the Section 3 clause into covered solicitations and contracts


Practical tips6
Practical Tips:

  • Section 3 references in bid packages, RFPs, etc.

  • Review clause with developer and have them certify compliance


Responsibility 5
Responsibility #5

Facilitate training and employment of Section 3 residents and award contracts to Section 3 businesses, as appropriate to reach the minimum numerical goals


Practical tips7
Practical Tips:

  • Assess needs of developers at time of contract award

  • Match potential employees or subcontractors with developers

  • Ensure that developers advertise vacancies in accordance with the agency’s policies


Practical tips8
Practical Tips:

  • Conduct local career/business development trainings

  • Sponsor Job-Fairs

  • Develop Partnerships with local Michigan Works office

  • YouthBuild/Apprenticeship Programs


Practical tips9
Practical Tips:

  • Provide guidance for determining Section 3 eligibility

  • Develop strategies for recruiting new hires


Responsibility 6
Responsibility #6

Minimum Numerical Goals:

  • 30% of new hires annually

  • 10% of the total dollar amount of covered construction contracts

  • 3% of the total dollar amount of covered non-construction contracts


Minimum numerical goals
Minimum Numerical Goals

  • Numerical Targets (may and should be exceeded)

  • Safe Harbor Compliance

  • Other Efforts Taken to Achieve Compliance


Practical tips10
Practical Tips:

  • Identify short- and long-term projects, job vacancies, training opportunities, contracts, etc.

  • Implement strategies to target Section 3 residents and businesses

  • Review Appendix to Regulation


Practical tips11
Practical Tips:

  • Consider all hiring and subcontracting needs of developers and contractors

  • Maintain evidence of efforts taken to achieve compliance

  • Describe efforts taken on Section 3 annual report


Responsibility 7
Responsibility #7

Assisting and actively cooperating with HUD in obtaining the compliance of contractors


Practical tips12
Practical Tips:

  • Section 3 Enforcement Actions

  • Hold developers/contractors accountable

  • Develop appropriate penalties and apply them fairly and consistently

  • Withhold Final Payments for “Section 3 Training/Implementation Fund”


Responsibility 8
Responsibility #8

Refrain from entering into contracts with contractors that fail to comply


Practical tips13
Practical Tips:

  • Determine appropriate timeframe for suspensions

    (i.e., 90 days, 1 year, 3 years)

  • Be Consistent!!!

  • Publicize actions taken


Responsibility 9
Responsibility #9

Documenting actions taken to comply with the requirements of Section 3, results of actions taken, and impediments,

if any


Practical tips14
Practical Tips:

  • Records of notification/ recruiting efforts

  • Copies of vacancy announcements

  • Participation in local events

  • Signed contracts

  • Penalties imposed

  • Outcomes produced

  • Submit 60002 forms



Implementing section 3 for successful compliance
Implementing Section 3for Successful Compliance


Two main goals of section 3
Two Main Goals of Section 3

  • Employment and Training of Low and Very-Low Income Individuals

  • Contracting with Section 3 Business Concerns


Keys to success
Keys to Success

  • Communication with Stakeholders

  • Assessing hiring and subcontracting needs

  • Discussing responsibilities

  • Monitoring to track progress and to address problems


Hud mshda will examine records to determine the following
HUD/MSHDA will examine records to determine the following:

  • If the program participant implemented procedures to notify Section 3 residents and business concerns about employment, training, and contracting opportunities generated by its agency or covered contractors;

  • If the program participant notified covered contractors and sub-recipients about their responsibilities pursuant to Section 3;


  • If the Section 3 Clause is included in covered contracts;

  • If the program participant monitored its covered contractors for compliance with Section 3 and imposed penalties for noncompliance as appropriate;

  • If the program participant or its contractors met the minimum numerical goals for employment and contracting opportunities;



Section 3 monitoring checklist questions
Section 3 Monitoring Checklist Questions failed to meet the minimum numerical goals for Section 3;


Program participant responsibilities
PROGRAM PARTICIPANT RESPONSIBILITIES failed to meet the minimum numerical goals for Section 3;

For the time period reviewed, did the program participant’s records include written procedures governing:


(a) How Section 3 failed to meet the minimum numerical goals for Section 3; residents are to be notified about employment and training opportunities generated by program participant or its contractors as a result of the expenditure of covered financial assistance?

[24CFR 135.32 (a)]


(b) How Section 3 failed to meet the minimum numerical goals for Section 3; business concerns are to be notified about contracting (or subcontracting) opportunities generated by the program participant or its contractors involving covered financial assistance?

[24 CFR 135.32 (a)]


(c) How potential contractors for covered projects or sub-recipients of covered funds are to be notified about their requirements pursuant to Section 3?

[24 CFR 135.32(b) and 24 CFR 135.32(f)]


(d) How covered contractors and sub-recipients are to be monitored for compliance with the requirements of Section 3?

[24 CFR 135.32(d) and 24 CFR 135.32(f)]

(e) Steps taken by the program participant to facilitate meeting the minimum numerical goals for employment and contracting opportunities?

[24 CFR 135.32(c)]


(f) Did the program participant provide evidence and/or documentation of the procedures described above?


Use of section 3 residents as trainees
USE OF SECTION 3 RESIDENTS AS TRAINEES documentation of the procedures described above?

For the time period reviewed, did the program participant’s records indicate:


(a) The total number of training positions generated by the program participant or its contractors? [24 CFR 135.34(a)(2)]

(b) The number of training positions generated by the program participant or its contractors identified above that was provided to Section 3 residents? [24 CFR 135.34(a)(2)]


(c) Description of how the project or its contractors determined the eligibility for Section 3 residents? [24 CFR 135.34(b)]


Use of section 3 residents as employees
USE OF SECTION 3 RESIDENTS AS EMPLOYEES determined the eligibility for Section 3 residents? [24 CFR 135.34(b)]

(a) The total number of permanent full-time positions generated by the project or its contractors as a result of the expenditure of covered funding? [24 CFR 135.30(b)(3)(iii)]

(b) The number of permanent full-time positions generated by the project or its contractors identified above that was filled by Section 3 residents? [24 CFR 135.30(b)(3)(iii)]


(c) Description of how the project or its contractors determined eligibility of Section 3 residents? [24 CFR 135.34(b)]

(d) Whether the minimum numerical goal for employment was met by the project or its contractors [30% of the aggregate number of new hires was Section 3 residents]? [24 CFR 135.30(b)(3)(iii)]


(e) If the minimum numerical goal for employment was not met, did the project provide an explanation of why it was not feasible to meet the goal? [24 CFR 135.30(d)(2)]


Contract awards to section 3 business concerns
CONTRACT AWARDS TO SECTION 3 BUSINESS CONCERNS met, did the project provide an explanation of why it was not feasible to meet the goal? [24 CFR 135.30(d)(2)]

For the time period reviewed, did the project's records include information about:


(a) The total dollar amount of covered construction contracts generated as a result of the expenditure of covered financial assistance? [24 CFR 135.30(c)(1)]

(b) The total dollar amount of covered construction contracts (or Sub-contracts) listed above that were awarded to Section 3 business concerns? [24 CFR 135.30(c)(1)]


(c) Description of how the project or its contractors determined the eligibility of Section 3 business concerns? [24 CFR 135.36(b)]

(d) Whether the minimum numerical goal for contracting was met by the project or its contractors [10% of the total dollar amount of covered construction contracts were awarded to Section 3 business concerns]? [24 CFR 135.30(c)(1)]


(e) If the minimum numerical goal for construction contracts was not met, did the project provide an explanation of why it was not feasible to meet the goal? [24 CFR 135.30(d)]


Did the project s records include information about
Did the project's records include information about: was not met, did the project provide an explanation of why it was not feasible to meet the goal? [24 CFR 135.30(d)]

(a) The total dollar amount of covered non-construction contracts generated as a result of the expenditure of covered financial assistance? [24 CFR 135.30(c)(2)]

(b) The total dollar amount of covered non-construction contracts (or subcontracts) listed above that were awarded to Section 3 business concerns? [24 CFR 135.30(c)(2)]


(c) Description of how the project or its contractors determined the eligibility of Section 3 business concerns? [24 CFR 135.36(b)]

(d) Whether the minimum numerical goal for contracting was met by the project or its contractors [3% of the total dollar amount of covered non-construction contracts were awarded to Section 3 business concerns]? [24 CFR 135.30(c)(2)]


(e) If the minimum numerical goal for determined the eligibility of Section 3 business concerns? [24 CFR 135.36(b)]non-construction contracts was not met, did the project provide an explanation of why it was not feasible to meet the goal? [24 CFR 135.30(d)]


Procurement procedures
PROCUREMENT PROCEDURES determined the eligibility of Section 3 business concerns? [24 CFR 135.36(b)]

For the time period reviewed, did the project's records include evidence of the following:


(a) Notification of covered contractors regarding their responsibilities pursuant to the requirements of Section 3? [24 CFR 130.32(b)]

(b) Monitoring covered contractors for compliance with Section 3? [24 CFR 135.32(d)]


(d) Whether covered solicitations (RFPs, RFQs, IFBs, etc) contain the Section 3 clause found at 24 CFR 135.38 or otherwise indicates the applicability of Section 3 to the covered project? [24 CFR 135.32(b)]

(e) Whether the Section 3 clause found at 24 CFR 135.38 was included in all covered contracts that were reviewed? [24 CFR 135.32(b)]


Reporting and recordkeeping
REPORTING AND RECORDKEEPING contain the Section 3 clause found at 24 CFR 135.38 or otherwise indicates the applicability of Section 3 to the covered project? [24 CFR 135.32(b)]

(a) Did the project provide evidence of the submission of a update of Section 3 Summary Report to MSHDA (form HUD-60002) for the time period reviewed? [24 CFR Part 135.90]


(b) For the time period reviewed, did the project's records include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]


Individual complaint
Individual Complaint include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

Who can make claims under

Section 3?:

  • Individuals

  • Business concerns

  • Personally or by authorized representative

  • And on behalf of others similarly situated


Guidelines for determining if claim is strong
Guidelines for Determining if Claim is Strong: include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

  • Individual meets the qualifications for the position 24 CFR 135.34(c)

  • Business is responsible and has the ability to perform successfully under the proposed contract 24 CFR 135.36(c)


Section 3 obligations of recipients
Section 3 Obligations of Recipients: include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

  • Notify Section 3 residents about training and employment opportunities generated by Section 3 covered assistance and Section 3 business concerns about contracting opportunities

  • Notify contractors about Section 3 requirements and ensure their compliance

  • Place Section 3 clause in all solicitations and contracts

  • Facilitate training and employment of Section 3 residents and award of contracts to Section 3 businesses so as to meet the numerical goals


Obligations of recipients
Obligations of Recipients include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

  • Document compliance with the Section 3 goals or the results of actions taken, and impediments (such as why it was not feasible to meet the numerical goals), if any

  • File annually HUD form 60002

  • Assist the AS in obtaining compliance of contractors and subs.

  • Refrain from entering into contract with contractor has been found in violation of 24 CFR 135

  • If a state or county that distributes to local government, notify them of obligations, assist and monitor


Process for filing a complaint
Process for Filing a Complaint include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

  • HUD form 958 Complaint Register Under Section 3

    Additional information that could be filed with an individual complaint:

  • Longer statement of facts

  • Evidence of non compliance by recipient or contractor with Section 3 obligations

  • Resume of applicant

  • References

  • Job listing/description

  • Job application


Process for filing a complaint1
Process for Filing a Complaint include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

Additional information that could be filed with a business complaint:

  • Longer statement of facts

  • Evidence of non compliance by recipient or contractor with Section 3 obligations

  • Qualifications of the business

  • References/other contract experience

  • The request for qualifications (RFQ) or proposal (RFP)

  • The application/proposal of the Section 3 business


Timing once complaint is filed
Timing once Complaint is Filed: include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

  • HUD must respond within 10 days as to whether complaint sets forth sufficient information that if proven would qualify as non compliance

  • Recipient has 30 days to respond to HUD, if it believes that the complaint lacks merit or 60 days to resolve the matter with complainant

  • If the complaint is not resolved within 60 days, the complaint is referred to the AS for Fair Housing

  • AS may seek voluntary resolution or imposed resolution


Case study city of st paul
Case Study: City of St. Paul include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

Complaint was filed by a Section 3 Business Concern

HUD response:

  • A general review of City’s Compliance

  • Found non compliance with Section 3 Regulations

  • No Section 3 plan

  • Could not document compliance with greatest extent feasible


Case study city of st paul1
Case Study: City of St. Paul include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

No procedures to:

  • Notify residents and/or Section 3 businesses

  • Notify contractors so as to ensure compliance

  • Use Section 3 contract clause

  • Facilitate training and employment of residents and contracts with Section 3 businesses

  • Document actions taken to comply with Section 3, results of actions and impediments, if any


Voluntary compliance agreement
Voluntary Compliance Agreement include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

Specific Provisions:

  • Hire staff to oversee compliance

  • Develop system to ensure that contract clause is in all contracts

  • Create Section 3 implementation fund and fund with $650,000 for year one and year two

  • Additional sources of funding for the fund, $175,000 request from city council and any penalties paid by developers or contractors

  • Semi-annual reports to HUD for period of VCA , 4 years


Section 3 plan
Section 3 Plan include documentation of the actions taken to comply with the Section 3 regulations? (Such documentation may include the results of the actions taken and any impediments encountered during the implementation of the program(s) covered by Section 3.) [24 CFR 135.32(e)]]

Develop within 60 days a Section 3 Plan:

  • 10% of construction and 3% of non construction contracts

  • Include specific information about contractors current workforce, plans for hiring additional employees, anticipated subcontracting needs and strategies for targeting Section 3 residents and business concerns

  • Process by which City will certify residents and businesses

  • Maintain list of Section 3 businesses and provide it to contractors

  • Annual list of Section 3 training events for contractors, subs., grantees and residents


Plan to enhance capacity of section 3 residents and businesses
Plan to Enhance Capacity of Section 3 Residents and Businesses

Plan will fund activities, such as:

  • Develop a program to evaluate Section 3 businesses and provide services to improve their success

  • Provide training in business consultation (TA for expansion, outreach and advertising), the City’s project development process, insurance and bonding

  • Helping to establish relationships between business and banking


Plan to enhance capacity of section 3 residents and businesses1
Plan to Enhance Capacity of Section 3 Residents and Businesses

  • Info on tax credits for hiring Section 3 residents

  • No interest revolving fund for Section 3 businesses

  • Job preparation for construction work—class room and field

  • Scholarship fund for residents for union initiation, dues, equipment, etc


Employment and training
Employment and Training Businesses

  • Review hiring practices for full time employees to determine compliance with Section 3

  • Revise practices to comply with Section 3, include preference for Section 3 FT and PT applicants

  • Annually review and identify barriers to hiring Section 3 residents, if applicable

  • If hiring goals are not meet at end of 12 months, require “first source” hiring agreements


Effects of non compliance with vca
Effects of Non Compliance with VCA Businesses

  • Grounds to impose debarment, limited denial of participation

  • HUD may seek specific performance

  • HUD may require City to hire consultant


Section 3 reporting
Section 3 Reporting Businesses

  • Measures efforts to meet numerical goals

  • HUD form 60002

  • Narrative explanations


Tracking job creation
Tracking Job Creation Businesses

HUD form 60002 is the primary existing vehicle to track job creation.


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