Federal Court of Appeals Denies HUD's Request for PBCA Rehearing

On Aug. 8, the Court of Appeals for the Federal Circuit denied HUD’s request for a rehearing and rehearing en banc in the ongoing performance-based contract administrator (PBCA) lawsuit. PBCAs administer Section 8 housing assistance payment (HAP) contracts for HUD.

The lawsuit began after the 2011 notice of funding availability (NOFA) to solicit bids for PBCA contracts was completed. Several PBCAs sued HUD, claiming that the NOFA wasn’t an appropriate method for awarding PBCA contracts. And PBCAs in the contested 42 states and territories are continuing to operate (without conducting Management and Occupancy Reviews) under a series of three-month extensions that’s expected to last until awards can be made.

In March 2014, the United States Court of Appeals for the Federal Circuit ruled in favor of the PBCAs, deciding that HUD didn’t comply with federal procurement laws by classifying the PBCA contracts as cooperative agreements instead of procurement agreements. This decision reversed a prior decision of the Court of Federal Claims.

Procurement agreements carry tighter restrictions for contract awards than cooperative agreements. First, the Appeals Court in the March decision explained the distinction between procurement contracts and cooperative agreements:

The Federal Grant and Cooperative Agreement Act (FGCAA) sets forth the type of legal instrument an executive agency must use when awarding a federal grant or contract. 31 U.S.C. § 6301. In pertinent part, “[a]n executive agency shall use a procurement contract as the legal instrument . . . when . . . the principal purpose of the instrument is to acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the United States government.” 31 U.S.C. § 6303. When using a procurement contract, an agency must adhere to federal procurement laws, including the Competition in Contracting Act (CICA), 41 U.S.C. § 3301, as well as the Federal Acquisition Regulation (FAR).

In contrast, an “agency shall use a cooperative agreement as the legal instrument . . . when . . . the principal purpose of the relationship is to transfer a thing of value to the [recipient] to carry out a public purpose of support or stimulation authorized by a law of the United States instead of acquiring . . . property or services.” 31 U.S.C. § 6305. The FGCAA notes that “substantial involvement is expected between the executive agency and the [recipient] when carrying out the activity contemplated in the [cooperative] agreement.” 31 U.S.C. § 6305(2). When using a cooperative agreement, agencies escape the requirements of federal procurement law.

The Appeals Court agreed with the PBCAs that the PBCA contracts were procurement agreements because, “Based on this record, the primary purpose of the PBACCs is to procure the services of the PBCAs to support HUD’s staff and provide assistance to HUD with the oversight and monitoring of Section 8 housing assistance.”