1

“Complying with HUD’s Section 3 and Vicinity Hiring Requirements”

Presented by the U.S. Department of Housing and Urban Development

2

Sponsors

• Aida Andujar, Technical Advisor• Florida Housing Coalition• Training and Development

Associates, Inc.

Sponsored by the HUD Jacksonville Field Office

3

Purpose

To educate grantees, subrecipients, contractors, developers and sponsors of the basic principles, concepts, and techniques of compliance with HUD’s Section 3 requirements:

– HUD has placed an emphasis on Section 3 compliance in the new CPD Monitoring Handbook

– Many local grantees have acknowledged a need for a greater understanding of Section 3 requirements

2

4

Participants will learn:

–The basic principles, policies, procedures and requirements governing compliance with Section 3 of the Housing and Community Development Act of 1968; and

–How to properly report compliance with Section 3 activities

What will participants learn?

5

The training session’s agenda

Overview of Section 3 and Vicinity Hiring– HUD’s policy on Section 3

– Who are Section 3 residents?

– Who are Section 3 businesses?

– Compliance and Reporting on Section 3 and Vicinity Hiring

Other Section 3 issues and questions?

6

Class Discussion: What’s up?”

What are your top concerns about Section 3 compliance and reporting?(1)_____________(2)_____________(3)_____________

3

Overview of Section 3

8

Overview – Why ?

– Programs Covered

• Created by the Housing and Urban Development Act of 1968, Section 3 applies to public and Indian housing programs, housing and community development programs, and other Federal and HUD assistance. (24 CFR Part 135).

9

What is the policy on Section 3?

The purpose of section 3 is to ensure that employment and other economic opportunities generated by HUD financial assistance shall, to the greatest extent feasible, be directed to low-and very low-income persons, particularly those who are recipients of government assistance for housing, and to business concerns which provide economic opportunities to low- and very low income persons.

4

10

Goal of Section 3

One of the purposes of the assistance is to give, to the greatest extent feasible job training, employment, contracting and other economic opportunities to

– section 3 residents and

– section 3 business concerns

11

Programs covered by Section 3

Public and Indian Housing

– Modernization Construction– Operations– Development

Other Housing and CommunityDevelopment

– Housing Rehabilitation– Housing Construction– Other Public Construction

12

Thresholds for Section 3

Public and Indian Housing Threshold:– None ( all activities trigger Section 3)

Community Development Threshold:– Recipient - $200K

– Project(s) - $200K

– Contractor/Subcontractor - $100K

5

13

What Triggers Section 3

Section 3 is triggered when a covered project requires new hires or subcontracting.

You do not have to hire or subcontract unless it is necessary to complete the project.

14

Numerical Goals for Recipients

Training and Employment (full time permanent, temporary or seasonal)

– 30% of new hires annually shall be section 3 residents (1out of 3)

Contracting

- 10% of total dollar value of all section 3 covered contracts shall be awarded to section 3 businesses and

- 3% of the total dollar amount of non-construction contracts shall be awarded to section 3 businesses

Minimum Goals

15

Section 3 Safe Harbor Provision

• If you meet numerical goals you are considered to be in compliance.

•If a complaint is filed HUD will determine if the greatest extent feasible policy was met.

•

6

Who are Section 3 residents and businesses?

17

Who are Section 3 residents?

Section 3 residents are:

– Public housing residents

– Low and very-low income persons who live in the metropolitan area or non-metropolitan county where a HUD-assisted project for housing or community development is located.

18

Documenting Eligibility

Determining Income Levels– Low income is defined as 80% or below the

median income of that area

– Very low income is defined as 50% or below the median income of that area

http://www.huduser.org/portal/datasets/il/il12/index.html

7

19

Where are your Section 3 Residents

Public Housing Authority residents

Other assisted housing projects residents

One stop career centers participants

Youthbuild participants

Step up training program participants

Applicants of other programs

Clients served by sub recipients

Recipients of public services

20

Who are Section 3 businesses?

A Section 3 business:

– That is at least 51 percent or more owned by Section 3 residents, or

– Whose permanent, full-time employees include persons, at least 30 percent of whom are currently Section 3 residents, or within three years of the date of first employment with the business concern were Section 3 residents, or

– That provides evidence of a commitment to subcontract in excess of 25 percent of the dollar award of all subcontracts to be awarded to a Section 3 business concern.

21

Where are your section 3 business concerns

Housing Authority

Rehabilitation Contractors

Local businesses

Local Labor Unions

Chamber of Commerce

HUBzone businesses

8

22

How do businesses find Section 3 participants?

Businesses can recruit in the neighborhood and public housing developments to inform residents about available training and job opportunities.

Distributing flyers, posting signs, placing ads, and contacting resident organizations and local community development and employment agencies to locate potential workers are effective ways of acquiring jobs.

23

Section 3 Compared to Minority Business Enterprise

Section 3 of the HUD Act is race-neutral.– The preference required by the Federal act is

• (1) income (to be eligible for the preference, the household income may not exceed the median income standards established by the federal government) and

• (2) location (the preference is for low-income and very low-income persons residing in the proximity to the project or activity where HUD’s financial assistance is being expended)

24

Eligibility

A section 3 resident must meet the qualification for the position to be filled.

A section 3 business concern must have the ability and capacity to perform.

9

25

Who receives Section 3 priority?

For training and employment:– Persons in public and assisted housing

– Very low or low income persons living in the area where the HUD financial assistance is expended

– Participants in Youthbuild programs

– Homeless persons

For contracting:– Businesses that meet the definition of a

Section 3 business concern

What Section 3 opportunities are available?

27

What Section 3 opportunities are available?

Section 3 opportunities can occur in three areas:

– Job Training

– Employment

– Contracts

10

28

WHAT HUD FUNDED PROJECTS ARE SUBJECT TO SECTION 3?

• A Section 3 covered project involves housing construction, rehabilitation, demolition or other public construction such as:•Street repair•Façade improvements•Sewer line repair or installation •Roads•Community Centers•

29

Other Possible Section 3 opportunities

Administrative and Management

Services Construction

accountingpayrollresearchbookkeepingpurchasingword processing

appliance repairfloristsmarketingcarpet installationjanitorialphotographycateringlandscapingprintingcomputer/informationmanufacturingtransportation

architecturebricklayingcarpentrycement/masonrydemolitiondrywallelectricalelevator constructionengineeringfencingheatingiron worksmachine operationpaintingplasteringplumbingsurveyingtile setting

Sample Procurement ProceduresSection 3 Preferences

11

31

Example of Preference for Small Purchase Procurements

There must be an attempt to obtain quotations from a minimum of three qualified sources in order to promote competition.

Where the section 3 covered contract is to be awarded based upon the lowest price, the contract shall be awarded to the qualified section 3 business concern with the lowest responsive quotation, if it is reasonable and no more than 10 percent higher than the quotation of the lowest responsive quotation.

If no responsive quotation by a qualified section 3 business concern is within 10 percent of the lowest responsive quotation from any qualified source, the award shall be made to the source with the lowest quotation.

32

Sealed Bid Procurements

Bids shall be solicited from all businesses. An award shall be made to the qualified section 3 business concern with the highest priority ranking and with the lowest responsive bid if that bid--

– is within the maximum total contract price established in the contracting party's and

– is not more than ``X'' higher than the total bid price of the lowest responsive bid from any responsible bidder.

– “X” is outlined in “Examples of Section 3 Procurement procedures”

– If no responsive bid by a section 3 business concern meets the requirements, the contract shall be awarded to a responsible bidder with the lowest responsive bid.

33

Competitive Proposals Procurements

A Request for Proposals (RFP) to be used to rate proposals.

– One of the evaluation factors shall address both the preference for section 3 business concerns and the acceptability of the strategy for meeting the greatest extent feasible requirement.

• This factor shall provide for a range of 15 to 25 percent of the total number of available points to be set aside for the evaluation of these two components.

– The component of this evaluation factor designed to address the preference for section 3 business concerns must establish a preference for these business concerns in the order of priority ranking as described in 24 CFR 135.36.

12

34

Competitive Proposal Procurements

With respect to the second component (the acceptability of the section 3 strategy), the RFP shall require the disclosure of the contractor's section 3 strategy to comply with the section 3 training and employment preference, or contracting preference, or both, if applicable.

– A determination of the contractor's responsibility will include the submission of an acceptable section 3 strategy. The contract award shall be made to the responsible firm (either section 3 or non-section 3 business concern) whose proposal is determined most advantageous, considering price and all other factors specified in the RFP.

Reporting on Section 3

36

Section 3 Reporting and Recordkeeping Requirements

Recipient agencies should maintain records of job vacancies, solicitation for bids or proposals, selection materials, and contract documents in accordance with Federal or State procurement laws and regulations

– Document efforts taken to achieve Section 3 numerical goals

13

37

Annual Reporting Requirements

Submit annual report on Section 3 using HUD form 60002 to HUD FHEO online www.hud.gov/offices/fheo/section3/section3.cfm

Due with the CAPER (include a hard copy with the CAPER)

Applies to covered activities during the fiscal year

Must be submitted even if all 0

If you are not required to submit a CAPER, report is due by January 10th or within 10 days of project completion.

Required even if you did not undertake activities that trigger section 3 compliance

38

Part III Summary

Always include a narrative of your efforts during the year to comply with the program requirements

Not meeting numerical goals requires detail explanation of actions taken to comply by recipient, contractor or subcontractor, sub-recipients or others

39

AN EXAMPLE OF SECTION 3

Let’s say City wants to build a playground and child care center using in excess of $100,000 of CDBG funds. It wants to find an outside company (“contractor”) to do all of the planning, construction and landscaping. The contractor finds out that it has to hire 10 new people in order to complete the work. Section 3 says that at least 30% of all new hires have to be Section 3 residents. Thus, the contractor would have to hire at least three Section 3 residents.

14

40

Non-compliance with Section 3

Section 3 Complaint Process• Section 3 residents, businesses, or a

representative for either may file complaints• Use Form HUD 958• File no later than 180 days from date of

violation• File with appropriate FHEO office

A complaint that cannot be resolved will result in an administrative hearing

41

How does one file a complaint?

One can file a written complaint with the local HUD Field Office or mail it to:

The Assistant Secretary for Fair Housing and Equal OpportunityAttn: Office of Economic OpportunityU.S. Department of Housing and Urban Development451 Seventh Street, S.W., Room 5100Washington, D.C. 20410-2000

42

Filing a Section 3 complaint

• A written complaint should contain:

–Name and address of the person filing the complaint

–Name and address of subject of complaint (HUD recipient, contractor or subcontractor)

–Description of acts or omissions in alleged violation of Section 3

–Statement of corrective action sought i.e. training, employment or contracts

15

43

Consequences for Failure to Comply HUD holds direct recipients of covered

funding accountable for compliance with Section 3

Sanctions for noncompliance include: – Debarment

– Suspension

– Limited Denial of Participation

– http://www.hud.gov/offices/fheo/section3/section3.cfm

44

Issues that can lead to non-compliance

Failure to:– Meet numerical goals– Ensure that contractors and subcontractors

comply with Section 3– Notify Section 3 Business Concerns about

contracting opportunities – Notify potential contractors of Section 3

requirements

45

Issues that can lead to non-compliance

Failure to:– Incorporate the Section 3 Clause in

solicitations and contracts– Award contracts to Section 3 Business

Concerns– Provide preference to Section 3 residents and

businesses

16

46

Does HUD monitor Section 3?

Yes. As part of the CAPER:

– HUD receives annual reports from recipients, monitors the performance of contractors and investigates complaints.

– HUD examines employment and contract records for evidence of actions taken to train and employ Section 3 residents and to award contracts to Section 3 businesses.

47

Does HUD monitor Section 3?

Section 22-7 of the new CPD Monitoring Handbook

– http://www.hud.gov/offices/cpd/library/monitoring/handbook.cfm

• Notification of potential Section 3 businesses, residents and contractors

• Reporting on Section 3 efforts

• Compliance with HUD’s Section 3 requirements

Vicinity Hiring

17

49

Vicinity Hiring

The purpose of Vicinity Hiring Preference of the Dodd-Frank “Wall Street Reform and Consumer Protection Act,” January 5, 2010, §1497 (a) (8) is to ensure that grantees, “shall, to the maximum extent feasible, provide for the hiring of employees who reside in the vicinity, as such term is defined by the Secretary, of projects funded under this section or contract with small businesses that are owned and operated by persons residing in the vicinity of such projects.”

50

Vicinity Hiring

Vicinity Hiring Preference” a local hiring requirement that is applicable only to NSP3 projects. It is HUD’s expectation that Vicinity Hiring Preference activities “mirror” the Section 3 requirements, and that “vicinity” is the target area for NSP3 funds.

51

Vicinity Hiring

The Dodd-Frank Act, “Wall Street Reform and Consumer Protection Act,” signed into law on January 5, 2010, requires a NSP 3 grantee to describe in its NSP3 application narrative the approach that will be taken for hiring employees and business concerns who reside in the “vicinity” identified as the target area for NSP3 funds.

18

52

Vicinity Hiring

Applies to NSP 3.

Described local approach to vicinity hiring in the NSP3 application narrative.

Does not replace your responsibilities under Section 3.

Include a narrative in Section 3 report and in you DRGR quarterly reports.

Must be documented and tracked just like Section 3 requirements.

53

Vicinity Hiring

1- Vicinity Preference = NSP 3 areas of greatest need

2- service area (are served by local government)

3- Youthbuild Participants

4- other Section 3 residents in the metro area or non-metro County

54

NSP 3 Model Guide

19

Best Practices

56

Valdosta, Georgia

1. Become familiar with the Section 3 rules

2. Meet with local government divisions that will partner in implementing Section 3.

3. Determine what organizations and agencies outside the City need to become partners.

4. Devise an Action Plan.

57

State of Michigan

1. Provide technical assistance training on Section 3 rules and requirements.– Provide tools (templates, forms to successfully

implement section 3 goals)

– Share best practices

– Foster cooperation with the goal of continuity in Section 3 implementation.

• First session covers an introductory overview of the basics.

• Second session covers laws, history and regulations.

• Third session specific recipient responsibilities.

• Fourth session a panel to share experiences.

20

58

Washington, DC

Recipient of funds for converted projects must submit a section 3 plan

Mandatory annual training for all recipient of funds and section 3 businesses

Certification process for section 3 business concerns

Applies Section 3 to all projects over $100,00 even if not HUD funded

59

Westminster, Colorado

Making sure all contractors are aware of section 3 requirements

Tracking contractors new hires and outreach efforts

Rewarding contractors who comply

Finding a pool of section 3 residents

Directly hiring section 3 residents and businesses

60

Use your website

Create a certification form and develop an application process on your website

Establish a Section 3 business registry and post it on your website

Publish your section 3 plan on your website

Post section 3 bids on your website

21

Meeting goals

62

Biggest Problem

Section 3 residents and business concerns don’t know they meet the definition or that they have employment opportunities.

Contractors who need to comply with section 3 do not know where to find section 3 businesses and residents.

Local governments are not sure of the steps they need to take to comply.

Not documenting efforts undertaken to comply.

63

First Step

– Who in your organization is responsible for section 3

– What actions will be undertaken to comply with Section 3

– Developing a list of section 3 residents and businesses

– Developing a system to qualify section 3 residents and businesses

– Monitoring of contractors and sub recipient agencies

– Changing your strategy to ensure compliance

Find resources in your local community

22

64

Responsibilities of Section 3 Coordinator

Develop and adopt a Section 3 Plan

Develop forms and documents to be used for program administration

Include Section 3 clause in all contracts for covered projects

Explain programs to residents, businesses and contractors

Designate contact person for Section 3

Have a plan for compliance monitoring

65

More Duties

Audit reports

Develop Policies and Procedures

Create a Certification Process

Create Training Opportunities

Make sure information is recorded properly

Prepare reports of findings and recommendations

Prepare annual reports

66

How to Comply

– Notify section 3 residents about employment opportunities

– Notify section 3 business concerns about contracting opportunities

– Notify all contractors of Section 3 requirements

– Incorporate the section 3 clause in all solicitations and covered contracts

– Undertake other activities – such as training opportunities – which will facilitate compliance with the goals of Section 3

– Actively monitor contractors and notify HUD of contractors refusal to comply

– Document all Section 3 activities

23

67

Recordkeeping Strategies• Communicate applicable requirements to potential

bidders• Assess bidders on their ability to meet the

requirements of Section 3• Determine if new hires are needed• Identify contracting/sub-contracting needs• Have contractors certify compliance• Develop strategies for targeting Section 3 residents

and businesses• Monitor Section 3 compliance and impose

penalties as appropriate• Compile information from sub-recipients and

contractors Request sub-recipients describe how they will

ensure Section 3 compliance (if applicable) Provide guidance for determining Section 3

eligibility Develop strategies for recruiting new hires

68

Documentation

Copies of new hire resident Certification and back up documentation

Copies of list of current employees, not including new hires

Payroll records to substantiate payment and continuous employment of new hires

Refusal by the contractor to submit documentation is a breach of contract

Contractor must also submit documentation on efforts to comply

69

Documentation

Visit site to interview workers

Verify identity of workers

Have a list questions such as when were they hired

Look for section 3 sign and section 3 plan at project site

24

70

Documentation

Acceptable documentation to determine eligibility as a Section 3 resident includes:

• proof of residency in a public housing development;

• evidence of participation in a HUD Youthbuild program operated in the metropolitan area (or non-metropolitan county) where the Section 3 covered assistance is carried out; (www.youthbuild.org)

• evidence that the individual resides in the Section 3 area and is a low or very low-income person.

71

SBA HUB zonesPotential Section 3 businesses

The firm must be a small business.

The business must be at least 51% owned and controlled by citizens of the United States.

The firm's principal office must be in a HUBZone.

35% of the firms total workforce must reside in a HUBZone.

http://dsbs.sba.gov/dsbs/search/dsp_profilelist.cfm?RequestTimeout=180

72

Work Opportunity Tax Credit

Part of American Recovery and Reinvestment Act

Tax benefits to employers that hire among 12 groups of job seekers

3 step certification process

http://www.doleta.gov/business/incentives/opptax/

25

73

Pilot Business Registry

The information collected from the Section 3 Business Self-Certification Application will allow HUD and recipients of covered HUD funding to identify Section 3 Businesses within their communities.

The information will be posted in a registry of Section 3 Businesses which will be posted on HUD's webpage.

Los Angeles, CA; New Orleans, LA; Detroit, MI; Washington, DC; and Miami, FL

http://www.federalregister.gov/articles/2011/01/20/2011-1156/notice-of-proposed-information-collection-comment-request-section-3-business-self-certification#p-11

74

How to meet objectives

Place an ad, develop flyers, post on your website information on vicinity hiring preferences

Contact local business in the neighborhood by mail out and notify them of the program an potential benefits to their business

Hold local meetings to discuss the program and its benefits

75

Program success

Early, regular communication with contractors, contract officers, section 3 residents and businesses

Monitoring procurement process

Verification of data submitted

Completeness of documentation

Preconstruction conference

26

76

Success

•Develop a tracking system•Enter information on a regular/monthly basis based on information submitted by contractors•Ensure/track compliance•Require that contractors with contracts over $100,000 submit a Section 3 Utilization Plan•Do not pay contractors until section 3 information is submitted

77

What is your agency doing?

How are you complying with section 3 and vicinity hiring?

What new steps or process have been implemented in your organization to meet the goals of these programs?

What is holding you back from meeting your section 3 and vicinity hiring goals?

Final Questions?

27

79

Section 3 Resources

HUD section 3 website

http://www.hud.gov/offices/fheo/section3/section3.cfm

Understand the Basics of Section 3 and Vicinity Hiring Preferences for the NSP Program

http://hudnsphelp.info/media/resources/NSPSection3ModelGuide.pdf

Section 3 monitoring checklist

http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/library/monitoring/handbook

80

For Future Reference:

Training & Development Associates, Inc.

131 Atkinson Street, Suite B

Laurinburg, NC 28352

910/277-1275 (O)

910/277-2816 (F)

www.tdainc.org