Posted on: Saturday, January 1, 2005
HUD wants $174,036 back
By Jim Dooley
Advertiser Staff Writer
Hawai'i's troubled public housing agency has been hammered again by federal officials, this time for trying to turn a $64,446 short-term, sole-source contract into a longer-term non-bid job worth $830,960.
Michael Flores, an official with the Hawai'i office of the U.S. Department of Housing and Urban Development, demanded in late October that the state return $174,036 in federal money already spent on the contract and blocked an effort by the state to add another $592,481 to the value of the contract.
"It is contrary to sound contracting principles to start with a small contract costing only $64,446 and then increase the cost dramatically," Flores said in a letter to Stephanie Aveiro, executive director of the Housing and Community Development Corp. of Hawai'i.
Aveiro said this week that HUD had approved the original, three-month contract and she was "unaware" that the federal agency had to approve any extensions.
"This oversight was unintentional," Aveiro said in a written statement.
"There is no question that the money paid ... was for services provided to residents of public housing," she said.
She said she intends to appeal Flores' demand.
The original contract, to manage 202 units in five HCDCH housing projects in the Kona area, was awarded on an emergency basis in February after HCDCH terminated the incumbent contractor. Residents had repeatedly complained to the state about squalid living conditions and criminal activities.
State personnel tried to manage the properties themselves for several months, then, after Gov. Linda Lingle named Aveiro head of HCDCH, the agency awarded a three-month non-bid contract worth $64,446 to Hawai'i Affordable Properties, Inc. According to state files, five companies were originally asked to submit bids for the job. Three weren't interested, one wasn't qualified, leaving Hawai'i Affordable Properties as the only available contractor.
The sole-source contract award, effective Feb. 1, was approved by HUD and the state Office of Procurement on the understanding that a competitively bid contract would be awarded by June.
That didn't happen. Without HUD approval, Aveiro extended the existing contract to run through October at a cost of $174,036, according to Flores' letter. Then the state tried to extend the contract again for another year at a price of $592,481, Flores said in his Oct. 28 letter to Aveiro.
Flores told Aveiro that the second extension wouldn't be allowed and that HCDCH should reimburse HUD the $174,036 spent on the first contract extension plus "any other payments made without HUD approval."
"As you can see," Flores wrote, "this limited sole source contract has ballooned to almost three times its original amount. If supplemental agreement No. 2 is issued, then it would have increased almost 13 times," he said.
Aveiro said Hawai'i Affordable is still managing the Kona projects under the extended non-bid contract which expires in June, but the state has reduced the level of services because HCDCH has to pay the bills out of its own limited financial reserves. The value of the contract is now $219,810, Aveiro said.
If the state does have to reimburse HUD the $174,036, that money will also have to come out of HCDCH's financial reserves, Aveiro said, meaning a total drain of nearly $400,000 from the state budget.
It's the second demand for reimbursement made in two years by federal officials involving an HCDCH non-bid contract .
In November 2002, Washington HUD official Michael Liu forced the resignation of then-state housing director Sharyn Miyashiro and required reimbursement of $771,000 in federal money spent by HCDCH on a sole-source housing repair contract awarded by Miyashiro to her ex-husband's company.
Liu also forced eight of nine members of the HCDCH board of directors to resign and imposed a "corrective action order" on the local agency that required it to spend $2 million on a study of management deficiencies. The order also required HCDCH to get advance HUD approval before awarding any federally funded contract worth more than $25,000.
Three months ago, Liu formally declared HCDCH a "troubled" agency, a designation requiring extensive and expensive overhauls of HCDCH's management structure by Sept. 1, 2005. The required improvements are listed in a 23-page "memorandum of understanding," and if they aren't met, HCDCH could face loss of millions of dollars annually in federal housing subsidies or even a federal takeover.
Flores said in his October letter that problems with the Kona contract make it "clear" that "HCDCH has not managed this particular contract in compliance with the corrective action order."
State records show HCDCH went to the state Office of Procurement but not to HUD for approval of the first contract extension.
In August, HCDCH executive assistant Pamela Dodson sought and received state approval for the second, eight-month extension of the contract, according to state Procurement Office records. Procurement Office director Aaron Fujioka approved the request Aug. 24.
HCDCH told Fujioka the new extension was necessary because the U.S. Navy is helping the state prepare new procurement procedures that would meet HUD requirements.
The Navy work, which is costing HCDCH $50,000, "will not be ready for six months," Dodson told Fujioka in August.
