South Carolina Community Development Block Grant Program Engineering Guide

South Carolina Community Development Block Grant Program Engineering Guide 1201 Main Street, Suite 1600 Columbia, SC 29201 Revised 11 2010

SC CDBG PROGRAM Engineers Guide TABLE OF CONTENTS Mini-Guide for Engineers Working on CDBG-funded Projects: An Overview of the Key Requirements and Your Role in Ensuring Project Success... i Introduction... 1 Staff Contact List... 2 Information on Public Facilities... 4 Procurement and Contracting... 20 Construction Management... 43 Attachments Environmental Allowable Costs Acquisition Public Facilities Procurement and Contracting Construction Management

Mini-Guide for Engineers Working on CDBG-funded Projects: An Overview of the Key Requirements and Your Role in Ensuring Project Success Welcome to the world of Community Development Block Grant (CDBG)! Engineers play an important role in many CDBG funded construction projects at the local level. As a key player in a CDBG funded project, it is critical that you understand and adhere to a myriad of rules and requirements to ensure each project s success and full compliance. Below is a summary of some of the requirements that apply with the use of CDBG funds, including some of the Federal cross cutting requirements that are triggered when CDBG funds are used in a project. Each is described in a summary fashion with information on what the requirement means with regard to a project you may be working on, as well as some information on the typical role that is expected of an engineer with regard to that requirement. Engineers should have a good working relationship with their recipient (local government entity that receives the CDBG funds) or, if applicable, the grants administrator (entity or person overseeing the project on a recipient s behalf, e.g., COG personnel) and should adhere to the scope of work in the engineering contract. Excerpts of the manual are attached to this guide. For more detailed information on these and other requirements, please refer to the SC CDBG Implementation Manual, available on-line at: http://www.sccommerce.com/cdbgformsanddocuments/cdbgformsanddocum ents.aspx 1. Environmental Review What is it? Environmental review refers to the process of assessing the impact of a Federallyfunded project on the environment as well as the impact of the environment on the project in accordance with procedures and processes outlined in Federal regulations and other authorities. Under 24 CFR Part 58, CDBG recipients (units of local government) are required to conduct an environmental review. Part 58 implements the policies of the National Environmental Policy Act (NEPA) of 1969, other Federal laws and authorities, and HUD specific environmental requirements. Once a recipient has submitted an application for CDBG funds to the State, Part 58 requirements are applicable to the project. At this point, the recipient (and any other project participants) must cease all project activity until the environmental review has been completed. A phase I environmental study done on a project is helpful in preparing the necessary Part 58 reviews but does not substitute for these requirements. What does it mean for the project I am working on? First and foremost, engineers must understand and comply with Part 58, which prohibits nearly all types of project activities and actions from being undertaken prior to completion of the environmental review and, if applicable, the receipt of environmental clearance from the state. Secondly, engineers should CDBG Engineering Guide 10/08 Mini-Guide for Engineers Working on CDBG Funded Projects i

note that even if another Federal funding source is involved in a project (e.g., USDA), an environmental review that meets the HUD requirements will have to be completed. The entire environmental review process for projects such as infrastructure can take 90 120 days on average. Roles of engineers in the process: Engineers may be requested to provide essential information for the recipient (or its grants administrator on its behalf) for the environmental review. Tasks might include: designating wetlands, providing maps showing project, describing how the project will be carried out (i.e., in existing right of way, a stream crossings, etc.). Engineers should NOT authorize any project activity without the approval of the recipient/grants administrator. 2. Property Acquisition What is it? The Uniform Relocation and Real Property Acquisition Act of 1970 (URA) and HUD's implementing regulations at 49 CFR Part 24 ensure that owners of real property to be acquired as part of a HUD assisted project are treated fairly and consistently, to encourage and expedite acquisition by agreements with such owner, to minimize litigation and relieve congestion in the court, and to promote public confidence in Federally assisted land acquisition. (The URA also protects tenants residing in property that is part of a Federally funded project.) The regulations set forth requirements for negotiating with property owners including notifications, establishing value, and payment of just compensation. What does it mean for the project I am working on? Any acquisition, including obtaining easements, is subject to the URA if Federal financial assistance is a part of any portion of the project, regardless of whether or not the Federal financial assistance is actually used for the acquisition of real property. Specifically, any acquisition which takes place on or after the date of request of a CDBG application to fund an activity on that property is subject to the URA, unless the recipient shows that the acquisition was unrelated to the proposed CDBG activity. Also, even an acquisition that took place before the date of submission of the application can be subject to the URA if the state (referred hereinafter as SC Grants Administration) determines that the acquisition was intended to support a subsequent CDBG activity. Roles of engineers in the process: Engineers may be asked to do surveys to identify the number, size and locations of easements or properties for tanks, pump stations, etc. Engineers should NOT discuss or negotiate the purchase of an easement or other type of property acquisition at any time without consultation with the recipient and grant administrator and following the URA required steps. 3. Procurement What is it? The use of CDBG funds requires compliance with 24 CFR Part 85 (referred to as the Common Rule) and state/local procurement procedures to ensure maximum open and free competition and to ensure that supplies, services and construction are obtained efficiently and economically. Recipients are required to adhere to a written code/standards of conduct which must comply, at a minimum, with the ethical standards of the South Carolina Ethics, Government Accountability, and Campaign Reform Act of 1991. Affirmative steps must be taken to assure that small, minority and female owned businesses have the opportunity to provide CDBG Engineering Guide 10/08 Mini-Guide for Engineers Working on CDBG Funded Projects ii

supplies, equipment, construction and services. Recipients must perform some type of cost or price analysis in connection with every procurement, including contract changes, and must only permit allowable costs to be included. The cost plus a percentage of cost method of contracting may not be used. The design build process, which is sometimes used for exceptionally unique or complex projects, must be approved by SC Grants Administration prior to its use. What does it mean for the project I am working on? Engineering services are typically procured using Competitive proposals. Competitive sealed bids (formal advertising) must be used for all construction contracts, which requires publicly solicited sealed bids and a firm fixed price contract (including unit prices) awarded to the lowest most responsible bidder. The process must meet certain minimum conditions including the information provided to bidders, the publication period, bid opening process, bid review and selection process, etc. (Refer to the SC CDBG Implementation Manual for detailed guidance.) The scope of work in bid and contract documents must be the same as what was approved by SC Grants Administration (if not, approval is required). Negotiations after an unsuccessful competitive sealed bidding process has been conducted (i.e., when bids are over budget) are permitted ONLY within prescribed guidelines established by SC Grants Administration (detailed in the Implementation Manual). Recipients cannot sign construction contracts without the prior approval of SC Grants Administration (refer to the Implementation Manual for a list of the required items to be submitted for this review). Roles of engineers in the process: Engineers will typically prepare the technical bid specifications. The specs should provide a complete and accurate description of the materials, products and services to be provided or performed, all of the required Federal and state CDBG clauses (some of which have been referenced in this document) and bonding and insurance requirements. Engineers conduct a cost analysis of the construction contract and any change orders to determine cost reasonableness. They also make a recommendation for contract award and approval of change orders. Engineers must adhere to all requirements pertaining to the bidding, review and selection process and should not approve or give any indication of approval of a bid that has not adhered to the required process and been approved by the recipient/grants administration and, if applicable, the state. 4. Construction Management What is it? Construction management refers to the process of overseeing any type of construction project using standard procedures and tools such as pre construction conferences, inspections prior to payment, pre approval of change orders, coordination and communication regarding project timelines, etc. CDBG grantees are monitored on whether or not they have properly overseen CDBG funded projects to ensure funds are spent in compliance with all applicable requirements and within the project time periods outlined in the grant agreement with the state. What does it mean for the project I am working on? It is critical that engineers establish a good working relationship with the recipient/grants administrator. The engineer must adhere to all of the procedures that have been put in place and communicate regularly regarding all aspects of the project. Regular project meetings or conference calls are recommended. Change orders must be approved by SC Grants Administration PRIOR to execution at the local level. In addition, CDBG Engineering Guide 10/08 Mini-Guide for Engineers Working on CDBG Funded Projects iii

the schedule for construction is critical to the grant period. Any failure to get the project underway and completed in a timely manner can cause a loss of grant funds and affect the recipient s ability to obtain future funding; therefore, information regarding any possible delays must be conveyed to recipient/grants administrator as soon as they arise. Roles of engineers in the process: Engineers will play a key role in the pre construction conference by reviewing plans and explaining contractual requirements and expectations, reviewing the construction schedule, establishing procedures for change orders, inspections and payments, etc. In addition, engineers must submit change orders to the recipient/grant administrator so approval can be obtained from SC Grants Administration. The engineer needs to coordinate and communicate regularly and fully with the recipient/grants administrator during the entire project, including informing the grantee/grants administrator of any issues that may have arisen (or will arise) with the project schedule. 5. Davis Bacon and Related Acts (Labor Standards) What is it? Labor standards refer to a set of requirements that apply to Federally funded projects to ensure a minimum level of pay and safety standards for workers. The Davis Bacon Act is applicable to all contracts for construction and requires that workers be paid certain minimum wages. The Copeland "Anti Kickback" Act requires that payment to employees must be made at least once a week without subsequent deductions or rebate on any account except "permissible" payroll deductions. The Contract Work Hours and Safety Standards Act (CWHSSA) requires that laborers and mechanics not work in excess of forty hours in any work week on a covered project unless they receive overtime compensation at a rate not less than one and onehalf times the basic rate of pay for those overtime hours plus any fringe benefits. CWHSSA also provides for safety protections of workers on the job site. The Fair Labor Standards Act (FLSA) contains Federal minimum wage rates and overtime (O/T) requirements. What does it mean for the project I am working on? Recipients are required to document compliance with the above referenced requirements. Wage decisions must be obtained to be included in all bid documents along with certain regulatory language to inform potential bidders of the applicable requirements. The wage decision must also be included in all contracts and subcontracts. Labor requirements should be discussed at the pre construction conference by the CDBG administrator. Certain information must be posted at the construction site by the contractor (wage decisions, posters, etc.). During construction, weekly payrolls in a prescribed format, must be submitted by all contractors. If there are any issues with the submission of payrolls or any other issues, the recipient/grants administrator will have to hold payments to the prime contractor until the issues are resolved. The grants administrator will have to verify compliance by contractors by conducting periodic on site interviews with workers. Roles of engineers in the process: Typically, the recipient/grants administrator manages the labor standards compliance for construction projects. The engineer can help to ensure that the wage decision and required labor standards language are included in all bid and contract documents. The engineer can also help to avoid any problems and/or construction delays by being informed of the requirements and conveying the importance of compliance to the contractor and subcontractors on a regular basis. CDBG Engineering Guide 10/08 Mini-Guide for Engineers Working on CDBG Funded Projects iv

6. Section 3 What is it? Section 3 of the Housing and Urban Development Act of 1968, as amended, requires that training, employment and other economic opportunities generated by certain types of construction projects shall, to the greatest extent feasible, be directed to low and moderate income persons and to businesses that provide economic opportunities to low and very lowincome persons. These requirements apply to contractors and subcontractors performing work on construction projects for which the amount of the assistance exceeds $200,000; and the contract or subcontract exceeds $100,000. If this threshold is met, the Section 3 requirements apply to the entire project or activity that is funded with Section 3 covered assistance, regardless of whether the Section 3 activity is fully or partially funded with Section 3 covered assistance. What does it mean for the project I am working on? If the project meets the threshold described above, the contractor and subcontractors will have to make efforts to train and hire local low income residents and/or to hire businesses owned by local low income residents. Similar to labor standards, clauses spelling out these requirements must be in all bid and contract documents and the contractor will have to report to the recipient/grants administrator to document its efforts. Roles of engineers in the process: Typically, the recipient/grants administrator manages Section 3 compliance for construction projects. Engineers can help to ensure that Section 3 clauses and forms are included in bid and contract documents and assist contractors with hiring questions to ensure compliance and decrease the chances of project delays. 7. Financial Management What is it? CDBG recipients are held accountable for all funds, property and assets of the CDBG program. Recipients must maintain a financial accounting system for grants that meets the CDBG regulations, 24 CFR Part 84 and OMB Circulars A 87 and A 133. This includes requirements pertaining to financial management systems and records, allowable costs and audits. Recipients are required to ensure that CDBG funds are spent only on reasonable and necessary costs associated with approved grant activities and must have a procedure for determining the reasonableness, allowability and allocability of costs. What does it mean for the project I am working on? Recipients/grants administrators are required to review all requests for payments to ensure that costs are allowable under regulations, approved in the CDBG grant application, allocated to the correct program activity, and are reasonable. As an example, engineering costs may not exceed the amounts allowable under the USDA Rural Development Community Facilities Program. Roles of engineers in the process: Engineers need to be aware that recipients/grants administrators are subject to these requirements. Engineers should ensure that their recommendations for payments to contractors are only for costs that are eligible, reasonable, and adhere to approved budgets, contract specifications, plans and other applicable requirements. CDBG Engineering Guide 10/08 Mini-Guide for Engineers Working on CDBG Funded Projects v

Excerpts from CDBG Implementation Manual

Introduction The State CDBG Program The South Carolina Community Development Block Grant (CDBG) Small Cities Program is designed to provide assistance to units of local government in improving economic opportunities and meeting community revitalization needs. Funding for the CDBG Program is provided to the State of South Carolina by the U. S. Department of Housing and Urban Development (HUD) under Title I of the Housing and Community Development Act of 1974, as amended. HUD has established the following three National Objectives for the CDBG program: Benefit low and moderate income persons, Aid in prevention or elimination of slums or blight, and Meet other community development needs having a particular urgency because existing conditions pose a serious and immediate threat to the health or welfare of the community where other financial resources are not available to meet such needs. Under Title I, all units of general local government are eligible to apply for CDBG financial assistance with the exception of the eleven large cities and six urban counties that participate in the CDBG Entitlement Program and receive CDBG funds directly from HUD. The ineligible cities include: Aiken, Anderson, Charleston, Columbia, Conway, Florence, Greenville, Myrtle Beach, Rock Hill, Spartanburg and Sumter. The unincorporated areas of the following urban counties are also not eligible: Charleston, Greenville, Horry, Lexington, Richland, and Spartanburg. Some of the municipalities within these counties are included in the HUD urban County designation and some are not. For an eligibility determination, please contact the urban county or the state. The South Carolina Department of Commerce, Grants Administration is assigned the primary responsibility for the administration of the CDBG program at the State level. The South Carolina Department of Commerce, Division of Administration is responsible for processing requests for payments and financial monitoring of CDBG recipients. CDBG Engineering Guide 11/09 1

Staff Contact List Grants Administration Name, Title Bonnie Ammons Assistant Director, Federal Programs Lisa Kalsbeck CDBG Program Manager Dale Culbreth Grants Manager: Appalachian and Lowcountry Regions, Economic Development & ARC Programs Cassandra Jones Office Manager Keely McMahan Grants Manager: Santee-Lynches, Pee Dee, BCD and Waccamaw Regions Liese Ross Program Planning, Data Management and Reporting Dick Scott Compliance Specialist: Environmental, Acquisition, Relocation, Fair Housing/ Equal Opportunity and Section 504 Disability Requirements Martha Whitaker Grants Manager: Central Midlands, Catawba, Upper Savannah and Lower Savannah Regions Lauren Wise Planning Manager/Compliance Specialist Procurement, Contracts and Labor Phone Number Email Address 734-1399 bammons@sccommerce.com 734-0452 lkalsbeck@sccommerce.com 734-0221 dculbret@sccommerce.com 734-0429 cjones@sccommerce.com 734-1125 kmcmahan@sccommerce.com 737-1988 lross@sccommerce.com 734-0555 dscott@sccommerce.com 734-2466 mwhitaker@sccommerce.com 734-0709 lwise@sccommerce.com CDBG Engineering Guide 11/09 2

Mailing address: Department of Commerce, Grants Administration 1201 Main Street, Suite 1600 Columbia, South Carolina 29201 CDBG Engineering Guide 11/09 3

PUBLIC FACILITIES AND SERVICES Introduction Under the State s Community Development Program, local recipients may utilize CDBG funds to undertake a variety of public facilities and infrastructure improvement projects. Communities may also undertake more comprehensive programs involving neighborhood or commercial revitalization that include infrastructure and/or public facilities activities as part of those projects. The purpose of this section is to explain the requirements and key implementation steps associated with infrastructure, public facilities and public service activities. The State is advocating the use of new approaches in community development. In light of shrinking resources it is necessary to target investments on a few priorities and strategies. These include: Comprehensive planning for revitalization and development Healthy and safe communities Sustainability economic and environmental Stimulus for additional investments Sustainability is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. It involves economic and environmental resources and social equity. Sustainable development is environmentally sensitive, economically viable, and community-oriented. It is similar to European villages where development is compact and concentrated around the village market. There is a mix of residential and commercial within walking distance. Farmland and open space is protected. These types of communities possess the following characteristics: Attractive communities with strong sense of place Mix of land uses Open space and natural areas are preserved Range of housing opportunities and choices Walkable neighborhoods Development directed toward existing communities/infrastructure Compact and green building design Community and stakeholder collaboration CDBG Engineering Guide 11/09 4

Regional solutions support planning and development in conjunction with your neighbors. There are economies of scale and efficiencies that can be gained by working together and consolidating resources. To ensure the economic vitality of communities, it is necessary to support and improve existing business centers. By building on assets, improving the physical design and appearance, providing basic infrastructure services that protect the health and safety of residents and guide a more compact development, communities can build and retain a quality of life that is sustainable. Workforce development is an essential ingredient to successful economic development. It is an investment in our human infrastructure. It is a commitment to our best resource- people. The provision of skills training and problem solving techniques will benefit our workforce and allow them to compete for higher paying jobs. Educational excellence leads to innovation and creativity and this builds opportunities for community and economic development. Although communities face many challenges, there is no one size fits all solution. Communities should develop a plan and get the entire community involved. They must seek partners, include the business community, and engage a corps of volunteers to help. Communities must also be willing to invest in themselves first in order to solve problems and create a new future. But with limited resources, it is necessary to prioritize and target expenditures and leverage resources so that they serve as a catalyst for future investment. Communities should plan carefully so that they do not create unexpected new tax burdens for its citizens. CDBG can be a resource to strengthen and improve communities, to make them more livable and sustainable. The project activities presented in this chapter provide guidance on developing projects that will help achieve these outcomes. The full range of activities are listed in Section 105(a) of Title I of the Housing and Community Development Act, as amended. Section 1 Infrastructure Activities Infrastructure Improvement Projects Infrastructure projects typically include the construction, rehabilitation or extension of publicly-owned water, sewer, streets, and/or drainage improvements. These improvements may be undertaken to benefit residents of an area, or may be carried out for the purpose of economic development. During the implementation of a public facility or infrastructure project, recipients should follow the Implementation Steps for Public Facilities Projects. CDBG Engineering Guide 11/09 5

Grants Administration encourages communities to evaluate regional alternatives to providing water and sewer service to its residents where such alternatives are cost effective and appropriate. CDBG grant funds should not be used to supplant local funds or to cause user rates to be maintained at levels that are not viable. Rates should be adequate to provide funding for necessary capital improvements, operations and maintenance. The rates and user fee structure for water and sewer systems should demonstrate an adequate level of local effort. Rates are considered feasible if the annual user fee is 1% or more of the area median income. Systems should generate sufficient revenues to cover operations and maintenance and some level of repair and growth. Grants Administration reserves the right to request such information as necessary to make a determination of financial viability and local level of support as it relates to a proposed CDBG project. A preliminary engineering report may also be requested. Infrastructure activities that are not for economic development or to meet a jobs national objective, should be undertaken in primarily residential LMI areas. Because it is required that all low and moderate income persons be connected at no cost, an infrastructure project must meet the 51% LMI area benefit test for persons and households. For new services to be considered a feasible investment, at least 80% of all homeowners should be committed to connect to the system once installed. If water, sewer, or drainage lines are being installed, typically all residents along the line must be counted as beneficiaries. For a system-wide improvement, such as a water tank or a waste water treatment plant, all residents in the service area must be counted as beneficiaries. The service area must be justified and clearly defined in the application. Sometimes a water tank may serve residents inside and outside of the town limits. Improvements to drainage systems, pump lift stations, trunk outfall lines, tanks, or treatment plants may not benefit the entire system, town, or neighborhood. Residents directly served may need to be determined by an engineer, and all appropriate residents included in beneficiary numbers. If CDBG funds are used to provide water or sewer service to an area outside municipal limits, a municipality may not require an area to be annexed as a condition of receiving the water or sewer. It must also show a compelling reason for going outside its county/municipal boundaries. The capacity of water/sewer systems may only be designed to meet regulatory requirements for the intended beneficiaries. Any excess capacity must be paid with non-cdbg funds, but may be counted toward local match requirements. Any contracts must be bid for CDBG eligible activities, with non-cdbg eligible activities (such as for excess capacity) included as alternates or additional cost items in the bid. While upgrades to an eligible area are allowed, projects to primarily repair or replace a water/sewer system are not permitted. Line replacements may be considered an upgrade if there is an increase in the line size or when sufficient CDBG Engineering Guide 11/09 6

justification is approved. Evidence may include the type of materials and age of lines versus intended useful life of lines, documentation of ongoing maintenance and repairs made to the system, documentation that an increase in line size is not necessary, etc. Equipment for operation and maintenance is not eligible for CDBG assistance. Under no circumstances may CDBG funds be used to newly connect non-lmi households, non-residential, or vacant units in target areas. Stub outs for future residential or non-residential units or vacant units may not be paid with CDBG funds. In projects where water and/or sewer lines are being upgraded from a smaller size to a larger one, all current customer households, including LMI and non-lmi, may be reconnected to the upgraded line using CDBG funds. The service reconnection is considered part of the overall system and it does not belong to any particular household. However, vacant and non-residential reconnects may not be paid for with CDBG funds. Further, if new service lines (on private property) are installed, CDBG funds can only be used for LMI households. CDBG funds may only be used for hard construction and installation costs for low and moderate income hook-ups/connections to public water and sewer, and not to pay any water or sewer connection, impact or capacity fees. Any associated fees for low and moderate income hook up/connection to public water and sewer must be waived or paid with non-cdbg funds, and may be considered part of the local match requirement. Impact fees generally are not eligible to be paid with CDBG funds, partly because they are providing funds for future, undefined public improvements and there is no way of telling whether the use of those CDBG funds would be for an improvement that would meet a national objective of the program. CDBG will allow waiver of such fees for LMI persons to count as local match. Limited Rehabilitation The installation of service/lateral lines on private property and connections is considered housing rehabilitation and is required for all housing units occupied by LMI households at no cost to the household. LMI households that do not have any indoor plumbing (e.g., bathroom/kitchen plumbing facilities) must be connected to the system and provided with indoor plumbing facilities at no cost to the LMI household as part of a service line lateral project. This is referred to as Limited Housing Rehabilitation. This requirement is not intended to provide bathroom or kitchen repairs, but is intended solely for those units that have no facilities. Limited rehabilitation costs generally may not exceed $10,000 ($7,500 for 2008 grants only). Contact your grants manager for approval if costs are expected to exceed this amount. CDBG Engineering Guide 11/09 7

Households benefiting from a Limited Rehabilitation Activity are required to be LMI. With other housing rehabilitation activities 3 rd party income verification is required. However, for the installation of lateral lines and associated connection costs which do not exceed $3,500, household income may be self certified prior to providing the assistance. In determining the cost, consider all costs to connect a particular LMI household, including connection, tap fees, individual grinder pump station (if applicable), service line on private property, etc. The self-certification should include information on the amount and source of income of all of the adult members of the household and shall include a statement that such information may be verified. (A Self Certification form can be downloaded from the Forms section of CDBG website.) The self-certification of income must be done within the twelve months preceding the beneficiary receiving the assistance. Local Administrators should pursue further income documentation where evidence suggests a household may not be low- and moderate-income. Grants Administration and HUD retain the right to verify any households income and to disallow costs and require repayment of funds if the documentation does not support the low- and moderate-income status. Recipients should note that if indoor plumbing is provided or if the costs to connect LMI residents exceed $3,500, it is necessary to verify the income status of households assisted prior to providing the assistance (i.e., the self-certification is not sufficient with indoor plumbing assistance). Refer to Chapter 7 and Chapter 13 of the CDBG Implementation Manual for more information. An agreement must be obtained from the homeowner to install the service line and connection on the owner s private property. The agreement can be obtained as part of the self-certification of income process, or can be a separate document. A housing unit will not be brought up to a minimum housing code in its entirety; however, the work that is being performed should be done to the HQS or appropriate local codes and standards. Recipients implementing Rehabilitation are encouraged to provide home maintenance education in their programs. Renters Assisted With Infrastructure For rental units to be connected to water/sewer, if an LMI tenant does not occupy a particular rental unit, the owner must pay for any connection, or service line on private property. CDBG Engineering Guide 11/09 8

For rental units or mobile home parks occupied by LMI tenants, the investor should pay for any connection, or service line for private property. However, CDBG funds may pay these costs after the rental property owner enters into an agreement with the unit of local government to maintain affordable rents and rent to LMI households for at least five years (pre-2008 grants) or 1 year (2008 grants). Refer to Chapter 7 of the Implementation Manual for affordable rental agreements and definitions. If the LMI service lines on private property are included in a larger water and/or sewer contract, Davis-Bacon labor standards requirements will apply. (Refer to the Construction Management chapter for more information.) If service lines are bid separately from a larger water and/or sewer contract, it is considered housing rehabilitation and Davis-Bacon requirements do not apply to individuallyowned properties. Section 2 - Public Facilities Activities Public facilities or community facilities are buildings that provide a variety of services for residents of a community. Such buildings may also include police substations and fire stations in LMI areas, libraries, health clinics or workforce and education development facilities. Multi-service centers in LMI neighborhoods that are designed to address crime risk and crime prevention factors are also eligible. Applications for fire stations should include the most recent ISO analysis to document need. City Halls, county administrative buildings or other facilities used for the legislative, judicial or general administrative affairs of government are NOT eligible for CDBG assistance. These facilities should be open during normal business hours (generally forty hours per week), and should generally offer services to everyone in the community or otherwise meet a national objective. Technology and green building techniques or energy efficiencies should be integrated into public facilities, where possible. Under the CDBG regulations, the purchase of equipment or furnishings (e.g., tables, chairs and filing cabinets) for a public facility is not considered eligible. However, projects that involve the purchase of equipment may be eligible as a public service, Section 105(a)(8), as long as it is related to delivering a service to the community such as public safety or job training services. This is discussed in the following section of this chapter. The costs to operate and maintain public facilities are not eligible under CDBG, but the recipient must demonstrate that these funds are available. CDBG will not support projects that create a new, undue operating burden on existing taxpayers. Proposed operating budgets and sources of funding for a five-year period is required with the application to Grants Administration. CDBG Engineering Guide 11/09 9

Prior to applying for CDBG assistance for a public facility, the applicant must determine the service area of the proposed facility. In order to meet a CDBG national objective, the facility must serve a residential area which consists of 51 percent LMI persons, or the facility must be designed to serve one of the limited clientele categories (i.e., severely disabled adults) allowed under the CDBG regulations. In determining the service area, the applicant must evaluate the location of other facilities in the vicinity and the services provided at such facilities in order to avoid duplication of facilities and/or services. For health facilities there must be documentation that the proposed service area is underserved with regard to health care based on DHEC or other similar documentation. The next step is to determine what services and/or activities will be carried out in the facility. These services/activities must be identified in the CDBG application. The applicant must determine if the services/activities can result in a primary benefit to LMI persons. (An example of an ineligible benefit might be if a training program offered courses that would serve all residents in the county in a facility that is located in an LMI neighborhood. Simply because of its location, it cannot be assumed that only the neighborhood residents will benefit if the entire county can attend.) Some communities conduct surveys of area residents or hold public meetings to determine what services may be desired at a facility. Once the services/activities are identified, the community should obtain written commitments from any organizations or agencies that will be providing such activities/services in the facility. Please note that inherently religious services and some political activities are prohibited. Once the service area and the activities have been determined, the applicant must estimate the number of persons who will benefit from the project. Beneficiaries should include the number of persons that can reasonably be expected to be served by the facility. Beneficiaries should not be double counted (e.g., one individual might participate in several activities conducted at the facility but should only be counted once). Beneficiaries may be based on the number of persons currently receiving the services to be provided or may be estimated based on surveys, capacity of the building and other available information. The estimated number should be reasonable and based on an increase in service, if applicable. The number of beneficiaries to be served is generally expected to be met by close out. See Chapter 13 of the CDBG Implementation Manual for more information on meeting a national objective. In most circumstances, local governments must own public facilities because they are funded as public facilities under CDBG eligibility guidelines. The use of Federal funds brings with it the requirement that the property must be protected. As a public facility, the local government ensures the ongoing operation and CDBG Engineering Guide 11/09 10

maintenance of the building for public use. However, in rare circumstances it may be permissible for a non-profit organization to own and operate a facility provided the organization can provide a long-term commitment and a plan for financing the operation and maintenance for the facility. If proposing that a non-profit own the building, prior Grants Administration approval must be obtained. A subrecipient agreement, lease or other contractual document must be executed between the local government and any non-profit organization that will own, operate or maintain the facility. When a public facility will be owned by the non-profit, Grants Administration may require a lien or restrictive covenant on the building to ensure the continued use as a public facility that specifies the building will be used for its intended purpose and if the use of the building changes, or if the non-profit is no longer in operation, ownership of the facility will revert to the locality. This agreement should be for a minimum period of twenty (20) years, and must be approved by Grants Administration prior to release of funds. Costs to operate and maintain public facilities are not eligible under CDBG, but the funds for these must be demonstrated as available at the time of application. Additional requirements on the facility include: No encumbrances may be placed on the building, or on the land (if also owned by the non-profit organization). The building must be used only for the activity being funded and for the primary benefit of LMI persons, and cannot be used for general office or administration space. The facility must be open to the public during normal business hours (generally forty hours per week). Residents and visitors may be charged fees for using such facilities, but the fees must be reasonable and not preclude or restrict low and moderate-income persons from using the facility. User fees which total more than $25,000 annually are considered CDBG program income. Generally, applicants will be allowed to keep the program income if their program income plan (PIP) proposes that the income be used for continued operation and maintenance of the building as a CDBG eligible public service. When serving a specific low/moderate income population such as the unemployed, the family income of the users of the facility must be documented. Chapter 13 of the CDBG Implementation Manual contains additional information, and a form entitled Sample Local Income Survey Public Facilities Projects can be used for this purpose. (The form can be downloaded from the Forms section of CDBG website see National Objectives.) For more information on income documentation, please refer to the CDBG Implementation Manual. For existing structures being rehabilitated or converted, the community must: CDBG Engineering Guide 11/09 11

Document if the building is of historic significance and whether there are environmental hazards that must be removed or abated (refer to Chapter 2 for more information). Ensure that the structure meets all Section 504/ADA accessibility requirements (see Chapter 12 of the CDBG Implementation Manual). When facilities include kitchen/food preparation areas, have the plans or specifications approved by the Department of Health and Environmental Control (DHEC). Recipients should follow the Implementation Steps for Public Facilities Projects, which is referenced as an attachment to this chapter, when undertaking public facility activities. The Public Facilities Implementation flow chart is also a tool to assist in understanding and implementing public facilities projects. (This form can be downloaded from the Forms section of CDBG website see Public Facilities.) Section 3 Public Service Activities One of the outcomes of community revitalization is to provide healthy and safe communities. All CDBG revitalization activities must incorporate an anti-crime component or strategy. The purpose of this strategy is to help rebuild and restructure communities that have suffered because of criminal activity and social decay. Strategies are designed to prevent, control, and reduce crime, drug abuse, and gang activity in targeted high-crime neighborhoods and bring in services that promote crime prevention and neighborhood revitalization. It often involves a community based, multi-agency approach to address high crime neighborhoods and make them places where people are vested in restoring the community as a safe place to live and raise families. The goal is to strengthen community capacity to increase the quality of life, ensure long term positive change, and provide a higher quality of life for residents. There are four components to a crime prevention and reduction strategy: (1) Law Enforcement Criminal activities are reduced in the neighborhood by local law enforcement agencies. By reducing both crime and citizen fear, the residents living in the neighborhood will have a restored hope that the neighborhood can begin revitalization. (2) Community Policing Two key concepts: community engagement and problem solving. Law officers establish an on-going dialogue with residents to solve crime and address the underlying causes of crime. They work to give residents a sense of responsibility within the community to solve the crime problem together with law enforcement. CDBG Engineering Guide 11/09 12

It includes programs such as crime watches, graffiti removal, and neighborhood cleanup days. (3) Prevention, Intervention and Treatment The third component involves neighborhood efforts to promote a safe crime free area by eliminating risk factors that lead to crime and violence. Neighborhoods are encouraged to have a Safe Haven which is a center that provides various youth and adult oriented human services in a multi-services setting. Some of the activities provided are childcare, after school programs, tutoring, recreation, parenting courses, drug prevention programs, substance abuse treatment, mental health services, family counseling, and medical care. Also included are activities to encourage home ownership and credit counseling. (4) Neighborhood Restoration Coordination of economic development and employment opportunities for residents, improvements to housing stock and physical environment of the neighborhood which go hand in hand with other efforts to make the neighborhood a place where residents want to live. The restoration component involves public facilities, employment and job training, safe clean streets, home ownership opportunities, medical services, recreation, grocery stores and other local needs. Public safety services carried out in conjunction with other CDBG activities will be limited to 15% of the total CDBG project activity costs. As mentioned previously, some projects may involve the purchase of equipment or materials needed to provide training or technology, or other services to the community. The services may or may not be related to a public facility also funded with CDBG. CDBG funded public service activities are only eligible for new or expanded services to residents, not just to continue or improve existing services. The unit of local government must commit to continue such services after the grant without creating a new, undue operating burden. Only major pieces of equipment that have a durable life of five years or more are eligible and must be listed in the application. Generally law enforcement vehicles are not eligible. As with all CDBG-funded activities, public services must meet a national objective. CDBG-funded public service activities are typically categorized under the LMI Benefit National Objective as either area benefit or limited clientele activities. The distinguishing factor between the two categories is whether the service will be offered to all residents of a particular LMI area or to a particular group of LMI residents in the entire community. Please refer to Chapter 13 of the CDBG Implementation Manual for more information. CDBG Engineering Guide 11/09 13

HUD has placed restrictions on the amount of CDBG funds the State may use for public services. In order to meet this requirement, the State reserves the right to reduce the amount of funding approved for grantees proposing such activities. Section 4 Downtown and Neighborhood Revitalization Downtown Revitalization Projects A downtown development or commercial revitalization project may only be conducted in areas with significant business activity and substantial prior investments. The project must increase economic competitiveness by conserving or revitalizing commercial and downtown areas. These projects help to strengthen the local economy by stimulating business activity and development and improving the appearance and functioning of the downtown or commercial area. All revitalization projects must incorporate a component to address public safety. Eligible activities include public infrastructure improvements such as: streets, parking, sidewalks, utilities, water/sewer, lighting and streetscaping; and may also include acquisition, clearance, and other public facilities (except those for the general conduct of government). The requirements discussed in the section above also apply to infrastructure activities undertaken as part of commercial or neighborhood revitalization projects. Specifically: Projects to primarily repair or replace a water/sewer system are not permitted. Line replacements may be considered an upgrade if there is an increase in the line size or when sufficient justification is approved. CDBG funds may not be used to connect non-residential or vacant units in target areas. Stub outs for future residential or non-residential units or vacant units may not be paid with CDBG funds or required local matching funds. Activities that are undertaken as part of downtown or neighborhood revitalization projects must also address one of the national objectives of the CDBG program. To qualify under the Low and Moderate Income Area Benefit National Objective, the service area must be residential and at least 51 percent low- and moderateincome based on HUD census data, or serve an area documented as at least 51 percent LMI based on door-to-door income surveys. (See Chapter 13 of the CDBG Implementation Manual.) If the project is not designed to serve an area that is LMI but is instead based on job creation, it must assist a particular business(es) and the business(es) must commit to the creation of new jobs, 51 percent of which will be filled by low- and moderate-income persons. Other requirements may also apply to these types of projects. Contact Grants CDBG Engineering Guide 11/09 14

Administration for technical assistance in determining which national objective a project may qualify under and which additional program requirements may apply. In addition, CDBG funded commercial or downtown projects must be part of an overall commercial or downtown revitalization strategy. The best projects involve the following components: 1. There must be an active organization involved in the development and ongoing implementation of the commercial revitalization strategy. 2. Projects must have the potential to leverage additional investment downtown. 3. Projects must be a clearly identified component of a larger plan, i.e., a master plan, a strategic plan, or downtown/commercial plan. 4. Projects must include a demonstrated public-private partnership at the local level. 5. Projects should represent a commitment to historic preservation or represent unique community assets as noted in the comprehensive plan. To accomplish their goals, a community may wish to follow the national model of the Main Street USA program or similar planning and organizational processes. The Four Points of the Main Street Program are: 1. Organization involves getting everyone working toward the same goal and assembling the appropriate human and financial resources to implement a Main Street revitalization program. A governing board and standing committees make up the fundamental organizational structure of the volunteer-driven program. Volunteers are coordinated and supported by a paid program director as well. This structure not only divides the workload and clearly delineates responsibilities, but also builds consensus and cooperation among the various stakeholders. 2. Promotion sells a positive image of the commercial district and encourages consumers and investors to live, work, shop, play and invest in the Main Street district. By marketing a district's unique characteristics to residents, investors, business owners, and visitors, an effective promotional strategy forges a positive image through advertising, retail promotional activity, special events, and marketing campaigns carried out by local volunteers. These activities improve consumer and investor confidence in the district and encourage commercial activity and investment in the area. 3. Design means getting Main Street into top physical shape. Capitalizing on its best assets such as historic buildings and pedestrian-oriented streets CDBG Engineering Guide 11/09 15

is just part of the story. An inviting atmosphere, created through attractive window displays, parking areas, building improvements, street furniture, signs, sidewalks, street lights, and landscaping, conveys a positive visual message about the commercial district and what it has to offer. Design activities also include instilling good maintenance practices in the commercial district, enhancing the physical appearance of the commercial district by rehabilitating historic buildings, encouraging appropriate new construction, developing sensitive design management systems, and long-term planning. 4. Economic Restructuring strengthens a community's existing economic assets while expanding and diversifying its economic base. The Main Street program helps sharpen the competitiveness of existing business owners and recruits compatible new businesses and new economic uses to build a commercial district that responds to today's consumers' needs. Converting unused or underused commercial space into economically productive property also helps boost the profitability of the district. Downtown, commercial, and neighborhood projects require that a community comprehensively work on all its opportunities, issues and problems. It requires a self-help approach as well as collaboration and involvement of business, government and the public. Another tool for commercial revitalization projects is the South Carolina Community Development Law. The law authorizes the creation of a redevelopment commission and requires a redevelopment plan involving citizen participation. The law provides a framework for undertaking redevelopment activities in areas that have fallen into neglect and decay and for undertaking preventive measures in areas that appear to be in decline. Redevelopment of such areas under this law must be necessary for the public health, safety, morals or welfare of residents. The law also provides a means to use tax increment financing in redevelopment projects. Please refer to the state law for more information. Neighborhood Revitalization Projects Neighborhood revitalization projects often involve housing activities, but may also include infrastructure or public facilities improvements if needed to achieve the desired level of revitalization in a specific geographic target area. Neighborhoods that are healthy and vibrant are the building blocks for sustainable communities. Smart growth ideas are a lot like the great neighborhoods of older cities and towns. They place a mix of affordable housing options within walking distance of work, stores, schools and services. They pay attention to details like front porches, wide sidewalks, and community parks that encourage people to gather with their neighbors. They plan development so CDBG Engineering Guide 11/09 16

people can spend less time in their cars. And whenever possible, they focus development in already existing communities, so that outlying farmland and open space remain protected. The core communities that are made up of downtown business centers and nearby neighborhoods constitute a valuable resource to build upon. The Main Street Program has been a successful model for revitalizing downtowns. The program s four point plan of action (as listed in the previous section) can be applied to these adjacent neighborhoods, which often suffer from low property values, deteriorating infrastructure, older housing and vacant properties. By linking neighborhoods with the local economy and undertaking revitalization strategies in both, it increases the sustainability of the community as a whole. Neighborhoods should be within walking distance to downtown or business centers (typically no more than ½ mile from the downtown or business center). There should be a comprehensive five year plan that involves neighborhood residents in identifying needs and solutions. Plan elements should include but are not limited to: Comprehensive neighborhood needs assessment and prioritization Land use and housing existing conditions Infrastructure and public facilities existing conditions Public services (police, fire, health, education) Comprehensive strategies for revitalization that guide investments to achieve the following outcomes: Improve neighborhood involvement and interaction Provide safety and neighborhood pride Address infrastructure and public facilities needs Identify in fill housing opportunities Improve physical appearance and property values Promote sustainability and conservation PER cost estimates and preliminary design Analysis of acquisition requirements title search, surveys Complete ERR for all revitalization activities (good for 3 years) LMI survey determination Roles and responsibilities neighborhood and local government involvement and commitment in planning and implementation Timeframes for phased implementation activities CDBG Engineering Guide 11/09 17

Comprehensive neighborhood revitalization will involve multiple activities including a public safety component. Eligible activities include: Infrastructure water, sewer, roads, drainage. Public Facilities sidewalks, security lighting and cameras, police substation, technology, multi-service centers to address crime risk factors, walking trails, green space, landscaping. Housing infrastructure or other activities to support affordable and workforce housing, painting of exterior facades, minor exterior repairs and exterior improvements to make LMI owner occupied housing units more energy efficient. Demolition and clearance of vacant and dilapidated properties. Public Services crime watch program, drug or gang education, awareness or prevention programs (services are limited to 15% of the CDBG project activity costs, must be new or expanded services, and applicant must commit to continue such services after the grant is closed without creating an operating burden on the local government.) It is recommended that environmental reviews address the neighborhood and include all possible phases/activities that might occur in the neighborhood. Projects must address a national objective of the CDBG program. To qualify under the LMI area benefit national objective, the service area must be residential and 51% LMI based on HUD census data or survey. Some projects may also qualify under the area spot blight objective. Housing activities must benefit LMI households. The most successful projects have community buy in and take a self help approach. Under the Main Street Program, having a strong organization is a key to success. The organization provides volunteers, organizes community events and helps to keep the community informed. Resident contributions may include a variety of other activities including trash pickup, clean up vacant lots, plant a community garden, set up a community crime watch, install neighborhood signs, build a neighborhood play ground or picnic area, create an elderly support group (calls to check on them, rides to doctor or grocery store, etc), after school programs, educational programs, and other activities that result in a healthy neighborhood. CDBG Engineering Guide 11/09 18

Acquisition 3BSection 5 Acquisition, Clearance, Demolition, and Brownfields Typical reasons for the acquisition of real property include: Blighted, deteriorated, properties needed to carry out community development; Property for rehabilitation or redevelopment; Property for the provision of public works, facilities, and improvements; or To be used for other public purposes. Costs that may be paid for with CDBG funds under this category include the cost of surveys to identify the property to be acquired, appraisals, the preparation of legal documents, recording fees, and other costs that are necessary to effect the acquisition. Qualifying an acquisition activity under one of the CDBG national objectives depends entirely on the use of the acquired real property following its acquisition. A preliminary determination of compliance may be based on the planned use. The final determination must be based on the actual use of the property, excluding any short-term, temporary use. Where the acquisition is for the purpose of clearance that will eliminate specific conditions of blight or physical decay, the clearance activity may be considered the actual use of property. If $100,000 or more of CDBG funds is spent, any subsequent use or disposition of the cleared property must be treated as a change of use. If property is to be acquired for a general purpose, such as housing or economic development, and the actual specific project is not yet identified, the grant recipient must document the general use it intends for the property, the national objective category it expects will be met, and make a written commitment to use the property only for a specific project under that general use that will meet the specified national objective. If property acquired with CDBG funds, or any interest therein, is subsequently transferred to another entity within five years of closeout, the property or interest must be sold to the entity at the current fair market value unless the property will be used for an activity that meets a CDBG national objective. Sales proceeds would be program income. The purchase of real property by the grant recipient or other entities under this eligibility category is subject to the requirements of the Uniform Relocation Assistance and Real Property Acquisition Policies Act. Among other things, this CDBG Engineering Guide 11/09 19

could mean that persons displaced as a result of the acquisition must be provided with financial assistance. Clearance/Brownfield Activities Activities under this category include: Demolition of buildings and improvements, Removal of demolition products (rubble) and other debris, and Physical removal of environmental contaminants or treatment of such contaminants to render them harmless. Depending on the funding year, CDBG funds may be used for clearance of debris and/or demolition of vacant, dilapidated structures. This may be done through spot slum/blight, area slum/blight or area benefit. An inspection is required to document the blighting condition in accordance with local building codes. Where activities under this category are integral to the construction of a building or improvement on the cleared property, and where such construction is also to be assisted with CDBG funds, the clearance activities may be treated as a part of the construction costs. Localities proposing demolition must have a written anti-displacement and relocation plan and must follow it in the implementation of these activities. Generally, non-housing structures to be demolished with CDBG funds must be publically owned. Generally, multiple clearance or demolitions should be undertaken as part of an overall revitalization program in a targeted area or be part of a comprehensive effort to address all blighted properties. Most localities will use code enforcement tools to clear private properties that are dilapidated and causing a blight. Such local governments have adopted ordinances that specify code enforcement procedures. The International Building Code has an optional International Property Maintenance Code that can be locally adopted to address vacant and blighted properties. State law at Title 31, Chapter 15 also provides procedures for local governments to deal with dwellings that are unfit for human habitation. A link to this law can be found at: http://www.scstatehouse.gov/cgibin/query.exe?first=doc&querytext=demolition&cate gory=code&conid=5971967&result_pos=0&keyval=512 If after being properly cited, the property owner does not bring the property into code compliance, the locality must use its own funds to demolish the unit and then place a lien on the property to recoup the expenses of the demolition and CDBG Engineering Guide 11/09 20

clearance from the owner of the property. A lien also ensures that there is no windfall profit to the owner for improvement of the property. CDBG can be used to help a locality pay for the upfront costs of demolition but will require a lien to recoup those costs, unless: The demolition is done to address and support crime prevention efforts in a targeted LMI neighborhood; and The total cost related to demolition (such as legal, demolition, disposal, etc.) does not exceed $10,000 per property. Liens for properties that do not meet the above guidelines can be structured in several possible ways depending on the circumstances locally and objectives to be achieved. Generally the lien should be repaid if the property is sold within 5 years of the demolition or clearance. If the property is redeveloped for an LMI purpose the lien can be forgiven in whole or in part depending on the amount of assistance. If the clearance and associated costs are more than $100,000, or if the property is sold or redeveloped within 5 years for a non-lmi purpose, then the lien must be repaid. Recovery of CDBG costs from a lien is considered program income. If the structure is privately owned and the local government does not follow the state and local codes enforcement procedures, a voluntary demolition assistance agreement is required prior to demolition which specifies the conditions of the assistance. The agreement grants written permission from the property owner prior to carrying out any demolition/clearance and documents that no persons or businesses will be displaced by the demolition and that the property was vacant for at least 3 months prior to the grantee s application for CDBG assistance. Demolition actions required include: determination of environmental hazards on the property (lead and asbestos) and proper removal; testing and disposal of hazardous materials; utility disconnections; and demolition permits. Once demolition is complete, the site should be leveled and seeded as appropriate, and any damages to sidewalks, curbs, drives, etc. repaired. It is recommended that before and after photos be taken and maintained in the file. A demolition checklist as well as sample private owner agreements and permissions are referenced as attachments to Chapter 7 of the CDBG Implementation Manual. (These forms can be downloaded from the Forms section of CDBG website see Housing.) CDBG Engineering Guide 11/09 21

PROCUREMENT AND CONTRACTING Introduction Recipients involved in procurement and contracting for services related to CDBG funding and activities need to ensure that all applicable Federal requirements are followed throughout the process. Local jurisdictions often have their own procurement and contracting requirements; however, the use of Federal funding requires compliance with Federal regulations at a minimum. This section describes the policies and procedures that must be followed when entering into contractual agreements with other entities when CDBG funds are being used. Such entities may include subrecipients, other governmental agencies, professional services firms, construction contractors, providers of goods and services, and others. Section 1 - General Policies The primary purpose of the procurement procedures is to assure free and open competition is achieved. A copy of the Common Rule for federally funded procurements is contained in the Reference Manual and this section provides details on the specific requirements of the State CDBG Program. Recipients are responsible for ensuring that CDBG funds are used in accordance with all program requirements. The use of designated public agencies, subrecipients, or contractors does not relieve the recipient of Procurement requirements for the State CDBG Program are a combination of 24 CFR Part 85.36 (the Common Rule) and requirements specific to the South Carolina CDBG Program. this responsibility. The recipient is also responsible for determining the adequacy of performance under subrecipient agreements and procurement contracts and for taking appropriate action when performance problems arise. No bidding for construction or demolition activities may occur until the appropriate environmental clearance or approval has been provided by Grants Administration. Section 2 - Written Procurement and Selection Procedures All CDBG recipients must have and abide by written procurement and selection procedures that are equivalent or essentially comparable to those required by the If applicable local and Federal procurement and contracting requirements differ, then the recipient must comply with the more stringent requirement. CDBG Engineering Guide 4/11 22

Common Rule. All procurements funded with CDBG monies must ensure maximum open and free competition and ensure that supplies, services and construction are obtained efficiently and economically. Awards must also be made to responsible and responsive firms. Federal requirements do not allow geographical preferences for local contractors that are not the low bidder, unless the preference is made for Section 3 Businesses. Local procurement procedures must include protest procedures, reflect applicable State Laws and meet standards outlined below. Standards of Conduct The recipient must maintain a written code or standards of conduct to govern the Refer to the South Carolina performance of its officers, employees or Ethics, Government agents in contracting with and expending Accountability, and Campaign CDBG funds. Grants Administration has elected Reform Act of 1991 (included to use the State standards of conduct rather in the Reference Manual) for than those found in the Common Rule. These more information on conflict of standards must, at a minimum, comply with interest. the ethical standards of the South Carolina Ethics, Government Accountability, and Campaign Reform Act of 1991. Open Competition All procurement transactions entered into by the recipient, regardless of whether negotiated or advertised and without regard to dollar value, shall be conducted in a manner so as to provide maximum open and free competition. The recipient must be alert to organizational conflicts of interest or non-competitive practices, which may restrict or eliminate competition or otherwise restrain trade. Examples of what is considered to be restrictive of competition include, but are not limited to: Placing unreasonable requirements on firms in order for them to qualify to do business. Non-competitive practices between firms. Organizational conflicts of interest. Unnecessary experience and bonding requirements. Small & Minority Business Involvement HUD and the State encourage and support the involvement of small, minority and female-owned business firms in CDBG projects. Accordingly, affirmative steps should be taken to assure that small, minority and female-owned CDBG Engineering Guide 11/09 23

businesses have the opportunity to provide supplies, equipment, construction and services. Affirmative steps include the following: Maintain a list of qualified small, minority, and female owned businesses. Ensure that qualified small, minority and female owned businesses are included on solicitation lists. Assure that small, minority and female owned businesses are solicited whenever they are potential sources. Where the requirement permits, establish delivery schedules that will encourage participation by small, minority and female owned business. Use the services and assistance of the Small Business Administration, the Office of Minority Business Enterprise of the U. S. Department of Commerce and the Community Services Administration as required. The Governor's Office of Small and Minority Business Assistance includes a directory of certified minority and female-owned small businesses on its website at www.govoepp.state.sc.us/osmba/. If any subcontracts are to be let, require the prime contractor to take the affirmative steps listed above. Procedural Requirements All CDBG procurement procedures must follow the applicable Common Rule methods and incorporate the following procedural requirements: Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. This description must not, in the case of competitive procurements, contain features that unduly restrict competition. The description may include a statement of the qualitative nature of the material, product or service to be procured, and when necessary, set forth minimum essential characteristics and standards to which it must conform to be satisfactory. Detailed product specifications should be avoided if at all possible. When it is impractical or uneconomical to make a clear and accurate description of the technical requirements, a "brand name or equal value" description may be used as a means to define the performance or other important requirements of a procurement action. The specific features of the named brand that must be met by offerers must be clearly stated. Recipients must perform some type of cost or price analysis in connection with every procurement, including contract modifications, and must only permit allowable costs to be included. CDBG Engineering Guide 11/09 24

Clearly set forth all requirements which offerers must fulfill and all other factors to be used in evaluating bids or proposals. Awards shall be made only to responsive and responsible contractors who possess the ability or have access to resources to perform successfully under the terms and conditions of a proposed procurement. Consideration must be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. Proposed procurement actions must be reviewed by recipient officials to avoid purchasing unnecessary or duplicative items. The cost plus a percentage of cost method of contracting shall not be used. Contracts with other public agencies will only allow actual costs to be paid. Recipients must maintain sufficient records to detail the significant history of a procurement. These records must include, but are not necessarily limited to: No profit is allowable when contracting with other public agencies. Information pertinent to the rationale for the method of procurement, Selection of contract type, Contractor selection or rejection, and The basis for the cost or price. Recipients must maintain a contract administration system that ensures contractors perform in accordance with the terms, conditions and specifications of their contract. Protests of Contract Awards Generally, a recipient must allow for a ten day waiting period prior to an intended contract award to allow for possible protests of the procurement. All protests of intended contract awards are to be resolved at the local level in accordance with written local procurement policies. In any case of the protest of an intended award of a contract funded in part or in whole with CDBG funds, Grants Administration must be notified immediately. Section 3 Section 3 Requirements Section 3 of the Housing and Urban Development Act of 1968, as amended in 1992, ensures that employment and other economic opportunities generated by certain HUD financial assistance shall, to the greatest extent feasible, and consistent with existing Federal, State and local laws and regulations, be directed to low- and very low-income persons, particularly those who are recipients of CDBG Engineering Guide 11/09 25

government assistance for housing, and to business concerns that provide economic opportunities to low- and very low-income persons. Thresholds and Applicability Section 3 applies to training, employment, contracting and other economic opportunities arising in connection with the expenditure of CDBG funds for public construction. These requirements also apply to contractors and subcontractors performing work on Section 3-covered project(s) for which the amount of the assistance exceeds $200,000 and the contract or subcontract exceeds $100,000. Section 3 does not apply to contracts for the purchase of supplies and materials, unless the contract includes the installation of the materials. Grantees must make all bidders and contractors aware of the Section 3 requirements and take appropriate steps to promote and encourage the hiring of Section 3 residents and Businesses. A Section 3 resident is: A public housing resident; or An individual who resides in the metropolitan area or nonmetropolitan county in which the Section 3-covered assistance is expended, and who is a lowincome person or a very low income person. A Section 3 Business is defined as business: That is 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 Section 3 businesses. An information sheet for businesses and contractors that should be included in the bid package can be downloaded from the Forms section of the CDBG website. The Contract Special Provisions will include Section 3 requirements and contractors are required to prepare and submit forms regarding proposed hiring and business utilization, even if there are no new hires anticipated. The Grantee must submit reports to Grants Administration regarding Section 3 compliance and document all efforts to meet these requirements. Procurement Standards Section 3 encourages, to the maximum extent feasible, a preference for Section 3 Businesses in the evaluation of bids or proposals. However, Section 3 does not CDBG Engineering Guide 11/09 26

supersede the general requirement of 24 CFR 85.36(c) that all procurement transactions be conducted in a competitive manner. Geographic preference is generally not allowed for competitive bids, but Section 3 consideration may be included as an evaluation factor in procurements where price is not the sole determining factor or when a business will meet Section 3 hiring goals. Recipients must include Section 3 information in all bid packages and contracts, including: Section 3 Information Sheet for Contractors/Businesses Section 3 Business Self Certification Bidder s Proposed Section 3 Contracts/Subcontracts Bidder s Section 3 New Hires Contractor s Section 3 Business Utilization Report Contractor s Section 3 New Hires Report Also, the recipient should discuss Section3 requirements at the pre-construction conference and determine what efforts are being made to comply. Contractors are required to submit final reports on their efforts prior to Final Payment. A business seeking to qualify as a Section 3 business bears the responsibility to certify or to submit evidence that the business qualifies. A Section 3 Business must also submit evidence, if requested, to demonstrate the ability to perform successfully under the terms and conditions of the proposed contract. A Section 3 Business Self Certification form can be downloaded from the Forms section of CDBG website. General Compliance Recipients and covered contractors may demonstrate compliance with the greatest extent feasible requirement of Section 3 by meeting numerical goals for providing training employment, and contracting opportunities to Section 3 Residents and Section 3 Business Concerns. Numerical goals apply to contracts awarded in connection with all Section 3-covered projects and Section 3-covered activities. Each recipient and contractor and subcontractor (unless the contract or subcontract awards do not meet the threshold) may demonstrate compliance with the requirements by committing to award to Section 3 Businesses: At least 10 percent of the total dollar amount of all Section 3-covered contracts for building trades work and other public construction; and At least 3 percent of the total dollar amount of all other Section 3-covered contracts. CDBG Engineering Guide 11/09 27

The following are examples of efforts to award contracts to Section 3 Businesses: Contacting business assistance agencies, minority contractors associations and community organizations to inform them of contracting opportunities and requesting their assistance in identifying Section 3 businesses which may solicit bids or proposals for contracts for work in connection with Section 3- covered assistance. Advertising contracting opportunities by posting notices, which provide general information about the work to be contracted and where to obtain additional information. (A sample notice can be downloaded from the Forms section of the CDBG website.) Developing a list of eligible Section 3 Businesses. Providing written notice to Section 3 Businesses of the contracting opportunities. Coordinating pre-bid meetings for Section 3 Businesses of upcoming contracting and subcontracting opportunities. Holding workshops on contracting procedures for Section 3 Businesses and make information available in languages other than English where appropriate. Where appropriate, breaking out contract work items or delivery schedules into economically feasible units to facilitate participation by Section 3 Businesses. Advertising contracting opportunities through trade association newsletters, local media, newspapers of general circulation, and radio advertising. Developing a list of Section 3 Residents interested in hiring or training opportunities and providing to Section 3-covered contractors. Supporting businesses which provide economic opportunities to low income persons by linking them to the support services available through the Small Business Administration (SBA), the US Department of Commerce and comparable state and local agencies. Additional information on Section 3 requirements for CDBG Recipients is included in the CDBG Implementation Manual. See Chapter 12 Fair Housing. Cost Estimates Section 4 - General Procurement Requirements Recipients must perform some type of cost or price analysis in connection with every procurement, including contract modifications, and must only permit allowable costs to be included. This cost estimate shall be in the form of a public body estimate and may include, but not be limited to, the following sources: CDBG Engineering Guide 11/09 28

Researching vendors, Inquiring of other local governments for similar procurements, or Inquiring of trade associations. All methods of procurement must have documentation that a cost estimate was conducted. Such analysis should be submitted to Grants Administration for review, along with the contract submission. Methods of Procurement The appropriate method of procurement is determined by the aggregate dollar amount of goods or services acquired from a single source. Items purchased with CDBG funds, in whole or part, may not be categorized into activities in order to avoid these requirements. The following sections describe each method in further detail. Small Purchase Procedures The small purchase procedures allow recipients to acquire goods and services totaling no more than $100,000, without publishing a formal request for proposals or invitation for bids. This method of procurement is typically used to purchase commodities such as equipment or other materials. In the highly unlikely event that a recipient is purchasing materials that will exceed $100,000, they must use the sealed competitive bid process. The small purchases method can also be used to acquire eligible types of services, such as professional consulting, environmental review, or planning. This method cannot be used if the services contract will exceed $100,000 in value. If the services contract will exceed $100,000, the recipient must issue an RFP under the competitive proposals approach (see below). Note that engineering and architectural services cannot be procured using the small purchase method and must always be acquired using the competitive proposal approach. In general, the small purchase procedures also cannot be used to acquire construction contractors. These acquisitions must occur under the competitive sealed bid approach outlined below. The only exceptions to this rule are instances when the recipient is directly contracting for owner-occupied singlefamily housing rehabilitation where the total cost of that rehabilitation will not exceed $100,000. Note: if the individual homeowner procures and selects the contractor, 24 CFR Part 85 is not applicable. Under the small purchases method, recipients send a written request for quotes to potential vendors with a detailed description of the goods or services needed. In return, they receive competitive written quotations from CDBG Engineering Guide 11/09 29

an adequate number of qualified sources. Since this process does not require a public advertisement, written quotes must be received in response to written solicitations from a minimum of three qualified sources. Each quote must include pricing information that allows the recipient to compare costs across bidders and ensure cost reasonableness. Documentation of the quotes shall be attached to the purchase requisition and maintained in the recipient s files. The award shall be made to the lowest responsive and responsible source. Competitive Sealed Bids (Formal Advertising) Competitive sealed bids (Formal Advertising) should be used for all construction contracts or for goods costing more than $100,000. As noted above, the only exceptions to this rule are owner-occupied housing rehabilitation projects where the total cost does not exceed $100,000. These projects may be conducted under the small purchases method. Competitive sealed bidding requires publicly solicited sealed bids and a firmfixed-price contract (to include unit price and quantities) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is lowest in price. In order for formal advertising to be feasible, the following minimum conditions must be present: A complete, adequate and realistic specification or purchase description is available. Two or more responsible suppliers are willing and able to compete effectively for a recipient's business. The procurement lends itself to a firm fixed-price contract, and the selection of the successful bidder can appropriately be made principally on the basis of price. When the competitive sealed bid (formal advertising) process is used, the following requirements apply: Publication Period: The invitation for bids must be publicly advertised and bids directly solicited from competent vendors. The publication should be published at least one time in a newspaper of general circulation 30 days prior to bid opening and/or published in the Dodge Room/Associated General Contractors (AGC) or other trade publication of general circulation. If the publication period is not of sufficient time to attract adequate competition, the bid will have to be re-advertised. CDBG Engineering Guide 11/09 30

A shortened bid period may be requested in advance and will only be approved by Grants Administration when there are extenuating circumstances. Examples of such circumstances include: The project has been bid several times, documentation exists for each bid, and other funding is in jeopardy. The project must get underway or be completed in order to meet the timeline of an industry which has committed to begin operations and create jobs. There is a local emergency affecting health and safety which will be addressed once the project is complete. Bid Advertisement: The advertisement should indicate that it is an Invitation to bid and that project funding is being provided by CDBG and that federal requirements will apply to the contracts. It should also include the title of the project and brief scope of work, the name of the procurement entity, how to get copies of technical specifications and bid package, submission instructions and deadlines, public bid opening date, time and place (competitive bids) and any other appropriate instructions. Clear Definition: The invitation for bids, including specifications and pertinent attachments, must clearly define the items or services needed in order for bidders to properly respond to the invitation. Itemized Costs: Bids must show the quantity and cost of each line item. Lump sum bids and/or bid items that are not specifically identified or are generally grouped as miscellaneous or contingency are not allowed. Bids for buildings should include itemized costs for each structural building system (i.e., framing, electrical, plumbing, etc.) No lump sum bids, miscellaneous or contingency line items are allowed. Use of these may require re-bidding. Review bid forms prior to soliciting bids in order to avoid inappropriately bidding ineligible items. Additive or deductive alternates may be used to allow additional options for contracting. This option may help to avoid the need to rebid or negotiate if bid costs are different than initial estimates. Public Opening: All bids must be opened publicly at the time and place stated in the invitation for bids. The public is allowed at that time to review the bids. Selection and Contracting: A firm-fixed-price contract award must be made by written notice to the responsible bidder whose bid, conforming to the invitation for bids, is lowest. Where specified in the Under Common Rule standards, a minimum of two bidders for each contract shows competition. CDBG Engineering Guide 11/09 31

bidding documents, factors such as discounts, transportation costs and life cycle costs must be considered in determining which bid is lowest. Rejection of Bids: A bid may be rejected when sound documented business reasons exist. The bid documents should include a provision that explains the basis for such decisions. When the lowest bid is rejected, the Project Engineer must provide a recommendation for the selected bidder and document the reason. Additionally, an opinion from the local attorney that this action is consistent with local procurement policies and terms of the bid documents may be required. Such documentation shall be made a part of the files. Negotiations after Unsuccessful Competitive Sealed Bidding: Negotiations are permitted within the following guidelines, which consider that time or other circumstances will not permit a re-solicitation of competitive sealed bids. Bids Over Construction Budget by Five Percent or Less: When bids received pursuant to an invitation for bids and the low bid exceeds available funds and it is determined in writing from the procuring agency that time or other circumstances will not permit the delay required to re-solicit competitive sealed bids, a contract may be negotiated with the lowest responsive and responsible bidder, provided that the lowest base bid does not exceed available funds by an amount greater than five percent of the construction budget established for that portion of work. The procuring agency may change the scope of the work (with prior approval from Grants Administration) to reduce the cost to be within the established construction budget. Bids Over Construction Budget by more than Five Percent: When bids received pursuant to an invitation for bids and the low bid exceeds available funds by more than five percent of the construction budget and it is determined in writing from the procuring agency that time or other circumstances will not permit the delay required to resolicit competitive sealed bids, a contract may be negotiated provided that: Each responsible bidder who submitted a bid under the original solicitation is notified of the determination and is given reasonable opportunity to negotiate. The negotiated price is lower than the lowest rejected bid by any responsible and responsive bidder under the original solicitation. The negotiated price is the lowest negotiated price offered by any reasonable and responsible offerer. If the scope of services originally addressed has been significantly changed, prior Grant Administration approval is required and a project amendment may be necessary. CDBG Engineering Guide 11/09 32

Grantees are required to submit documentation of bid negotiations. The following documentation must be submitted with a negotiated contract for Grants Administration approval: A narrative explaning the negotiation process. For bids 5% over construction budget, document that each bidder had an opportunity to negotiate their bid by submitting a copy of the written notice including revised bid due dates and any revised contract documents and specifications. A revised bid and a written certification from the lowest negotiated bidder agreeing to the negotiated bid. A written explanation from any bidder that decides not to participate in negotiations, if applicable. Competitive Sealed Proposals Competitive sealed proposals are used in two instances: (1) the acquisition of any engineering or architecture services or (2) the purchase of other professional services where the total cost will exceed $100,000. Under this procurement method, the recipient must publish a written request for submissions and then review these submissions based on established selection criteria. This method of procurement differs from the small purchases method in that the solicitation must be published and cannot be restricted to a smaller or limited number of bidders. Under this approach, there are two possible methods of soliciting proposals. A request for proposals asks that offerers submit both qualifications and cost information. A request for qualifications only asks for information on the offerer s expertise/ experience and not on cost. When acquiring any service that is not architecture or engineering, the full RFP process must be used. For example, if a recipient were to hire a for-profit CDBG contract administrator and that contract exceeded $100,000, an RFP would be required. Architectural firms may be procured by the RFP procedure only if cost is not an initial factor of consideration, as State law prohibits compensation from being an initial factor of consideration. When acquiring architectural or engineering services, either a RFP or a RFQ may be used. GA recommends the use of an RFP process when feasible or practical, since it provides the recipient additional information. Note that if an architectural or an engineering firm is being hired to provide a non architectural/engineering service, that service must be procured using either the small purchases process or a RFP. For example, some engineering firms also provide construction and CDBG Engineering Guide 11/09 33

grants management services. In that situation, a RFQ cannot be used and either the small purchases (if it is less than $100,000) or a RFP must be used. Request for Proposals: When a RFP process is required, the recipient must develop a written document outlining the scope of the services and the selection criteria. The scope must be sufficiently detailed so that potential bidders are able to develop effective pricing proposals and submit appropriate qualifications. The RFP process is as follows: Proposals are directly solicited from qualified firms in addition to a published advertisement. The RFP must include a summary of the scope of work and the type and relative weights of the evaluative criteria. The RFP should also include a request for technical and cost information (except for architectural). Cost information should be provided as a fixed price, depending upon the recipient s project. RFPs should be published at least fifteen days before the proposals are due. Evaluative criteria may include, but not be limited to: qualifications of project personnel, education, past performance and related experience on previous projects completed, experience with the CDBG program, experience and/or familiarity with the existing locality s system, recent and current as well as projected workload, and ability to meet time and budget requirements. If the scope of work allows room for differing types of approaches, the recipient may wish to award points for the most appropriate or effective approach. For example, if hiring an architect to design a new community center, the recipient may award points for the most creative or energy efficient design. In addition, cost shall be one of the selection factors for an RFP (except for architectural). The recipient may determine how many points will be awarded for the cost factor. A qualified review committee rates and ranks the proposals using the published selection criteria. The recipient must document this review and the selection process. The review committee must consist of an uneven number of members, to avoid ties in the ranking process, and should include a minimum of three people. This committee is required to evaluate proposals based on the exact criteria and weights published in the bid solicitation and information to bidders. If mathematical errors are discovered during the review process, the individual scorer must verify and initial the correct score. The recipient may choose to interview the top ranked firms following submission and ranking of proposals. If interviews are conducted, the committee must also rank the proposals following the interviews. For architectural services, negotiations CDBG Engineering Guide 11/09 34

are entered into with the top ranked firm to determine price since it was not an initial factor of consideration in the proposal. The recipient awards the contract to the bidder that scores highest in its assessment of how the proposal met the selection criteria. Under this procurement method, this contract need not be awarded to the lowest bidder so long as the final price is reasonable and the selection is made following the stated criteria. In some recipients, cost is used as the tie breaker between equally qualified firms. Request for Qualifications: The RFQ process may only be used in two instances: (1) for complicated engineering or architectural services or (2) when the RFQ is used to narrow a pool of potential bidders and a formal RFP will follow. In any other competitive proposal instance, the RFP must be used. The RFQ process does not request cost information at the time of solicitation. However, recipients must still ensure that all services are cost reasonable. The process for undertaking an RFQ is as follows: The RFQ is publicly advertised and qualifications are solicited. RFQs should be published at least fifteen days before the qualifications are due. The solicitation must include the criteria and weights to be used in reviewing qualifications. Qualifications should be listed in order of importance and may include, but are not limited to: resume, previous projects completed, specific personnel to work on the project, and/or specific expertise of the firm in general. As noted above, cost is not a factor in the qualification process. The qualifications are reviewed by a qualified committee and ranked. The review committee must consist of an uneven number, to avoid ties in the ranking process, and should include a minimum of three people. This committee is required to evaluate qualifications based on the criteria and weights published in the solicitation. If mathematical errors are discovered during the review process, the individual scorer must verify and initial the correct score. The recipient may choose to interview the top ranked firms following submission and ranking of proposals. If interviews are conducted, the committee must also rank the proposals following the interviews. The procuring agency may either begin to negotiate with the highest ranked firm, or proposals are solicited from the highest rated firms that submitted qualifications and are ranked. Negotiations are then initiated with the top ranked firm. CDBG Engineering Guide 11/09 35

When Competitive Sealed Proposals are utilized, the following requirements apply. Publication Period: Proposals must be solicited from two or more qualified sources and an advertisement must be published. RFPs/RFQs should be published at least fifteen days before the proposals/qualifications are due. Clear Definition: The RFP/RFQ must identify the general scope of work and all significant factors of evaluation, including price where appropriate, and their relative importance. Technical Evaluation: The recipient must provide a mechanism for technical evaluation of the proposals received, determinations of responsible offerer for the purpose of written or oral discussions and a recommendation of the selection for contract award. Award: Award may be made to the responsible offerer whose proposal will be most advantageous to the procuring party, price and other factors considered. Unsuccessful offerers should be notified promptly. Non-competitive Procurement Non-competitive procurement requires prior Grants Administration approval and may be approved for use only when the award of a contract is infeasible under small purchase procedures, sealed bids, or competitive proposals and one of the following circumstances applies: Where the item is available only from a single source. In any case, some form of cost or price analysis must be made and documented in the procurement files for non-competitive procurement actions. Where a public exigency or emergency is such that the urgency will not permit a delay beyond the time needed to employ one or the other procurement methods. Where after solicitation of a number of sources, competition is determined inadequate. Grantees are required to submit a written request documenting the rationale for a specific product or service. Attach service agreement or other documentation that the company is a single source provider (i.e. utility providers). For contracts that require Grants Administration review, standard documentation must be submitted with the agreement to include the following: Complete and unexecuted contract agreement. A current copy of the CDBG Contract Special Provisions must be incorporated to the agreement. Cost estimate from provider showing unit prices and quantities CDBG Engineering Guide 11/09 36

Recommendation to award contract from Engineer/Architect. Cost reasonable determination from Engineer/Architect Project area maps/drawings, if applicable Complete all standard Grants Administration forms that are applicable (i.e., C-1 Contract Transmittal Form, Section 102 Disclosure Report, Section 3 Forms, etc.). Note: Davis-Bacon wage determination must be included when contracting for services, if applicable. The only time Davis Bacon is not applicable is for contracts less than $2,000 or for local governments providing force account labor. See the Construction and Labor Standards section for further guidance concerning Davis-Bacon applicability and regulations. Design/Build The Design/Build process is a method of project delivery in which one entity (design-builder) is competitively selected to enter into a single contract with the owner to provide for architectural services, engineering design services and construction services. The Design/Build process is normally for exceptionally unique or complex projects and requires a great deal of careful planning and professional execution to be successful. Please contact Grants Administration for the appropriateness and applicability of the design/build process for your project. A checklist identifying key steps and information required in the Design/Build process can be downloaded from the Forms section of CDBG website. Section 5 - Professional Services Contract Approval and Submission Process Grants Administration must approve professional contracts over $5,000 prior to award/execution, regardless of the method. The following procedures must be followed in order to obtain Grants Administration approval: 1. Prepare a Professional Services Contract including: Effective and specific date of contract period. Time for performance and completion of contract services, including project milestones, if any, and any other performance measures. Professional contracts, not including A/E Services, must meet the requirements of Small Purchase Procedures described in this section. Specification of materials or other services to be provided by both parties (e.g., maps, reports, printing, etc.). CDBG Engineering Guide 11/09 37

Provisions for compensation for services including fee and/or payment schedules and specification of maximum amount payable under contract. Cost schedules should be directly related to the scope of services. Any additional costs or reimbursable expenses must be specified in the agreement and be subject to pre-authorization by the owner. CDBG Contract Special Provisions must be incorporated into the contract document. A list of the CDBG Contract Special Provisions can be downloaded from the Forms section of CDBG website. 2. The recipient must provide Grants Administration: Copy of the solicitation of qualifications and/or proposals which should clearly define the items or services needed in order for the offerors to properly respond to the invitation. Copy of proposal tabulation sheet (sample Professional Services Evaluation and Review Panel The following forms can be downloaded from the CDBG Website: CDBG Contract Special Provisions Debarment Certification Form CDBG Contract Transmittal Form (C-1) Selection Summary forms can be downloaded from the Forms section of CDBG website). Copy of the advertisement s Affidavit of Publication and offerer s list or other documentation, as may be requested, as to how responses were solicited. Method of evaluation of responses which include all significant factors and the relative weights used in making an award. Minutes of interviews, if appropriate. A copy of the proposed contract. If the contract is over $100,000, a Debarment Certification Form. An updated CDBG Section 102 Disclosure Form indicating all contractors, services and the amount of the contract (only for HUD grants received by the unit of local government which exceed $200,000 in a fixed year). Housing Rehabilitation contracts are excluded from Grants Administration review requirements unless the activity addressed is water and sewer line connections. The CDBG Contract Transmittal Form (C-1) which certifies that the recipient has included all applicable provisions in the contract. The C-1 must be signed and dated by an official in charge of procurement for the recipient. CDBG Engineering Guide 11/09 38

3. Grants Administration will notify the recipient in writing regarding contract approval. No contracts may be awarded/ executed until Grants Administration has given contract approval. Failure to adhere to this policy could result in disallowed costs. During Grants Administration s review of the procurement process, if mathematical errors are discovered in the review committee s score sheets and overall ranking is affected, the Recipient will be required to re-advertise. 4. Submit the contract to the governing body for action according to standard local procedure. Award and execute the contract. Section 6 - Procurement of Construction Services Grants Administration must review all construction contracts of $25,000 or more prior to award/execution. For construction service contracts, the recipient must follow these steps: 1. Specifications and Bid Package prepared. An architect or engineer will typically prepare the technical bid specifications. These specifications should provide a complete and accurate description of the specifications for materials, products, and services to be provided or performed. Make sure they include required Federal and State CDBG provisions and clauses, such as compliance with minimum standards for accessibility by the physically handicapped. (An Architect/Engineer s Certification for these standards can be downloaded from the Forms section of CDBG website.) Bid and contract documents should include but are not limited to the following: Technical specifications. Local, State and Federal requirements for: Equal opportunity requirements (including Section 3 hiring and contracting, if applicable). Labor standards requirements (including a current, applicable wage decision). General contract terms and conditions such as termination clauses, access to and retention of records, etc. (The Reference Manual contains the required federal terms and conditions.) Timeframe for contract completion. Contract agreements must not be pre-dated. General industry conditions. Itemized cost and unit pricing information. Method of payment and amount of contract. CDBG Engineering Guide 11/09 39

Advertisement for Bid. Copy of proposed Contract Form. Bid Bond Form. Include a request that all bidders return bids even if they are not going to bid. Have them mark that bid "No Bid." A "No Bid" is considered a bid. Any qualification requirements for bidders and provisions to explain the basis for rejecting any bids as well as how bid errors will be handled. Bids should be effective for 60-90 days after bid opening to allow for appropriate review and approvals. 2. Prior to bidding the project, the Grant Administrator should review the bid documents to ensure that the scope of work is consistent with the approved CDBG application. If it is discovered that an unapproved component or activity has been added to the bid documents or significant changes have been made that delete approved activities, and this will change the scope of approved activities for which CDBG funds will be used, the Grantee must obtain Grants Administration approval before proceeding further. Reviews should ensure consistency throughout the solicitation and specifications in regards to the Owner, bid expiration, contract period, etc. Also, make sure the contract period is consistent with the grant period. In general, pre-bid conferences can serve to restrict competition and should not be mandatory. The only time a pre-bid conference should be mandatory is when the nature of the project is unique or complex. The unit of local government must be prepared to provide certification that the pre-bid conference requirement is justified and will not unduly restrict competition. If CDBG funding is needed for additional activities, such a change may require one or all of the following documents be submitted for approval: Project Amendment Request form including documentation of LMI benefit. Public hearing evidence. Revised environmental review documentation. If the Grantee decides to include unapproved, additional activities for which CDBG funds will not be used, then the Grantee must provide a funding commitment for such activities. No contract will be approved until all CDBG-funded activities have been approved. Do not submit proposed contracts for Grants Administration review and approval prior to obtaining bids and selection of the apparent low bidder. CDBG Engineering Guide 11/09 40

3. Construction bids must be publicly solicited using sealed bids. (See Section 4 for a complete description of requirements.) Prior to bid opening: The invitation for bids must be publicly advertised and bids solicited from competent vendors. The publication should be published at least one time in a newspaper of general circulation 30 days prior to bid opening and/or published in the Dodge Room/AGC or other trade publication of general circulation. If the publication period is not of sufficient time to attract adequate competition, the bid will have to be re-advertised. The recipient may consider a longer advertising period for more complex projects to allow bidders more time to prepare their proposals. Provide opportunity for local, women-owned and minority-owned businesses to participate. 4. Amendments or addenda to bid documents, if any, must be sent to all bidders who were sent or who obtained bid documents. Maintain a log of bidders who were sent or obtained bid documents and addenda. All bids received during the bidding period should be logged with the name and address of bidder, and the time and date of receipt. 5. Confirm wage decision ten days prior to bid opening. 6. Conduct a public bid opening. The following referenced forms can be downloaded from the CDBG Website: Architect/Engineer s Certification of Accessibility Notice of Intent to Award Debarment Certification Form Bidder s Proposed Section 3 Contracts/Subcontracts Bidder s Section 3 Estimated New Hires CDBG Section 102 Disclosure Form CDBG Contract Transmittal Form (C-1) All bids should be read aloud during this meeting. Minutes of the meeting should be maintained to document the project name and number, time and date of the bid opening, bidder's name and bid amount in order of opening. Do not accept late bids! They should be sent back unopened. 7. Review bids. Determine if they are legally and technically responsive. Unit prices always prevail in determining the lowest bid in case of adding errors. Check with the State's Licensing Board for General Contractors to verify contractor's business license number and type, and the types of work the contractor is permitted to bid on or to perform under the license. CDBG Engineering Guide 11/09 41

Evaluate the contractor's capacity to perform by considering, among other things, the bidder's experience, past record of performance, capacity of the firm to perform within the stated time and bid amount. If only one bid is received, either re-bid the contract or contact Grants Administration to determine if the provisions for non-competitive procurement found in Section 3 apply. Remember, a bid marked "No Bid" is considered a bid. For contracts that result in re-bid, publish a solicitation in a newspaper of general circulation and directly solicit bids from contractors. A shortened bid period should only be requested if there are extenuating circumstances beyond the control of the local government. Examples include: The project has been bid several times, documentation exists for each bid, and other funding is in jeopardy. The project must get underway or finish in order to meet the timeline of an industry which has committed to begin operations and create jobs. There is a local emergency affecting health and safety which will be addressed once the project is complete. Prepare and mail Notice of Intent to Award form subject to Grants Administration s review of the bid and contract documents to the selected or appropriate bidders. (This form can be downloaded from the Forms section of CDBG website.) 8. Errors in Bidding The bid document should indicate how bidding errors will be handled. When an error is discovered in one or more bids to be submitted, contractors should have an opportunity to correct the bids they have submitted prior to bid opening, by initialing and dating the change. If a contractor has corrected and initialed his bid prior to bid opening, the engineer s recommendation must acknowledge that the correction occurred prior to submittal of the bid. Once bids are opened, unit bid prices may not be altered. If the engineer determines there are computation or mathematical errors while he is preparing the bid tabulation, the engineer may show the correction on the bid tabulation. The correction should be specified as the engineer s correction, based on computations verified for all bidders. The engineer should explain the procedure in his recommendation of award. In addition, each original bid as well as the correction should be listed on the bid tabulation. All contractors must be notified and any contractor may choose to withdraw their bid if the correct computation is not acceptable. Change orders should not be used to correct errors in bidding CDBG Engineering Guide 11/09 42

documents prepared by the engineer after the bids have been opened. Generally, discrepancies should be handled as follows: Discrepancies between the multiplication of units of work and unit prices should be resolved in favor of the unit prices. Discrepancies between the indicated sum of any column of figures and the correct sum thereof should be resolved in favor of the corrected sum. Discrepancies between words and figures should be resolved in favor of the words. It is generally not acceptable to award a bid and then submit a change order for an additional activity(ies) or to remove ineligible items from the contract. The Grantee should allow all bidders the opportunity to include any such proposed changes in their bid or the project may require rebidding. Changes in the price of an item procured through competitive sealed bidding are not generally allowed. If an increase in the price of materials, equipment and/or labor can be determined to be justified and reasonable, a change order request may be submitted to Grants Administration. 9. Within ten days after the bid opening, the recipient must submit the proposed contract, a description of the method of procurement, and selection procedures to Grants Administration for approval, including the following documentation: A copy of the solicitation of the bid which should clearly define the items or services needed in order for the bidders to properly respond to the invitation. A copy of the bid tabulation or proposal tabulation sheet. Copy of the advertisement s Affidavit of Publication and bidder s list or other documentation as to how responses were solicited. Bidder's information which delineates the method of bidding, bid evaluation, the basis of contract award, etc. Evidence that cost analysis was performed to determine the reasonableness of the price, if appropriate, and engineer s recommendation of contract award. When bids for construction projects are significantly under budget, all cost savings must be prorated among funding sources. A budget revision to reflect the contract costs must be submitted to GA with the contract or within 30 days of contract award. CDBG Engineering Guide 11/09 43

A copy of the itemized bid form from the lowest bidder. A copy of the completed but not executed contract. If the contract is over $100,000: Debarment Certification form Completed Section 3 forecasts: Bidder s Proposed Section 3 Contracts/Subcontracts form Bidder s Section 3 Estimated New Hires form Updated Section 102 Disclosure Report form indicating all contractors, services and the amount of the contracts (only for HUD grants received by the unit of local government which exceeded $200,000). The CDBG Contract Transmittal Form (C-1) which certifies that the recipient has included all applicable provisions in the contract. The C-1 should list the CDBG line item budget relevant to each contract activity. If the contract has multiple funding sources, the source and amount should be listed accordingly. This form must be signed and dated by an official in charge of procurement for the recipient. This form, as well as the CDBG Contract Special Provisions, can be downloaded from the Forms section of CDBG website. Contracts submitted for Grants Administration review within fifteen or fewer days before bid expiration must also submit a letter from the contractor agreeing to a thirty day extension of the bid.10. Grants Administration will notify the recipient in writing regarding the contract. No contracts may be executed until Grants Administration has given contract approval. Failure to adhere to this policy could result in disallowed costs. Once a contract has been approved, the agreement should be executed in a timely manner. 11. Award/execute contract and secure performance and payment bonds within ten days. Bidder to whom award is made must submit performance and payment bonds in the amount of the contract price within the period specified in the bid documents or within ten days after contract documents have been presented to the contractor for signature. Performance Bond Form from a surety company appearing on the U.S. Treasury Department's latest approved list, or Best's Key Rating Guide, which shall show a financial strength of at least five times the contract price. The performance bond must equal not less than 100% of the contract price. Payment Bond Form from a surety company appearing on the U.S. Treasury Department's latest approved list, or Best's Key Rating Guide, which shall show a financial strength rating of a least five times the CDBG Engineering Guide 11/09 44

contract price. The payment bond must equal not less than 100% of the contract price. Approve contractor's bonds and execute contract within ten days of receipt. Issue Notice to Proceed and send copy to Grants Administration. Section 7 - Contract Requirements All contracts are required to contain Federal and State clauses pertaining to equal opportunity, labor standards, and general terms and conditions. Grants Administration has prepared a standard set of these provisions for use in professional services or construction contracts. These CDBG contract provisions can be downloaded from the Forms section of CDBG website. The following forms can also be downloaded from the CDBG website: Contractor s Section 3 Business Utilization Report Contractor s Section 3 New Hires Report Section 8 - Change Orders Change orders should be kept to an absolute minimum and are for unforeseen problems or issues that arise during construction. Change orders should not generally be done at the time of contract award, unless all bidders have been given the opportunity to submit the same cost changes. Change orders also should not be used to correct bidding computation errors. The recipient must obtain written approval from Grants Administration prior to execution of the change order if: A change order will result in a significant change in the scope of the approved project as proposed in the CDBG application, OR Any single change order or accumulation of change orders would increase or decrease the original approved total contract amount by more than ten percent or $10,000, whichever is less (regardless of funding source). Documentation submitted with every change order must include: Contract Change Order Transmittal Form (C-2), which must be signed and dated by an official in charge of procurement for the recipient (can be downloaded from the Forms section of CDBG website), Supporting justification which describes why the change is necessary, Itemized cost/unit price/quantities, CDBG Engineering Guide 11/09 45

A cost and price analysis (usually conducted by an engineer) that determines the costs are reasonable, and Any revised plans and specifications. In addition to the change order documentation, the recipient must submit an updated Section 102 Disclosure Form if the construction contract amount or any other pertinent information has changed. The architect/engineer or project inspector usually prepares change orders; however, the recipient must approve and authorize change orders before they are executed. The proposed change should also be verified and/or recommended for approval by the project engineer, project manager, architect or other technical support personnel. The recipient should compare such change orders to the CDBG construction budget prior to approval. If a change order does not require pre-approval, an executed copy should be provided to Grants Administration s Procurement Specialist to document the change in the contract amount. If a change order will result in a significant change in the scope, a new CDBG activity, or a change in location, beneficiaries or how the project will be carried out, a Project Amendment Request form may also be necessary. If the change involves a new activity not previously included on the original bid and will result in a significant cost change order (i.e., greater than 30% of the contract) then the new activity may have to be re-bid. Please contact Grants Administration Procurement Specialist for a determination. Factors to be considered include whether the change order will exceed the project budget, if the service area will change, if the original intent of the project will be altered, etc. Contracts Less Than $100,000 Section 9 - Bonding and Insurance For all contracts of $100,000 or less, recipients will follow local procedures relating to bonding and insurance. Also, please consult your engineer to protect the interest of the recipient. Construction Contracts Over $100,000 For construction contracts over $100,000 the minimum bonding and insurance requirements are as follows: A bid guarantee from each bidder equal to 5% of the bid price. The bid guarantee shall consist of a bid bond, certified check, or other negotiable instrument accompanying the bid. CDBG Engineering Guide 11/09 46

A performance bond from contractors for 100% of the contract shall be executed in connection with each contract. A payment bond on the part of the contractor for 100% of the contract price. All bonds shall be obtained from companies holding certificates of authority as acceptable sureties. Grants Administration encourages recipients to require adequate liability insurance from the contractors. CDBG Engineering Guide 11/09 47

Procurement of Construction Services PREPARE SPECIFICATIONS AND BID PACKAGE ARCHITECT/ENGINEER PREPARES TECHNICAL SPECIFICATIONS TECHNICAL SPECIFICATIONS EQUAL OPPORTUNITY REQ. AMOUNT OF CONTRACT ADVERTISEMENT FOR BID PROVIDE OPPORTUNITIES FOR LOCAL, WOMEN-OWNED, AND MINORITY-OWNED BUSINESS PUBLICLY ADVERTISE USING SEALED BIDS (ADVERTISE FOR 30 DAYS IN PAPER, AGC, ETC.) SEND AMENDMENTS TO BID DOCUMENTS, IF ANY, TO ALL BIDDERS CONFIRM WAGE DECISION 10 DAYS PRIOR TO BID OPENING CONDUCT PUBLIC BID OPENING REVIEW BIDS IF ONLY ONE BID RECEIVED, RE-BID OR CONTRACT GRANTS ADMIN FOR OPTIONS IF CONTRACT IS OVER $25,000, SUBMIT PROPOSED CONTRACT ALONG WITH ALL C-1 CONTRACT SUBMITTAL REQUIREMENTS TO GRANTS ADMINISTRATION FOR REVIEW WITHIN 10 DAYS OBTAIN GRANTS ADMINISTRATION APPROVAL OF CONTRACT AWARD CONTRACT SECURE PERFORMANCE AND PAYMENT BONDS WITHIN 10 DAYS EXECUTE CONTRACT ISSUE NOTICE TO PROCEED CDBG Engineering Guide 11/09 48

Construction Management Introduction Construction management under CDBG requires that certain procedures be followed in order to comply fully with applicable Federal requirements. Federal labor standards are one component that requires recipients and contractors to meet and document compliance with certain rules associated with the employment of workers on construction projects. This section describes the policies and procedures that must be followed when undertaking construction projects with CDBG funds, which include labor standards, payroll requirements, pre-construction meetings, and inspection and approval procedures. Making Davis-Bacon Work, A Contractor s Guide to Prevailing Wage Requirements for Federally-Assisted Construction Projects publication, a helpful resource guide, can be obtained from HUD s Customer Service Center at 1-800- 767-7468. Section 1 Davis-Bacon Act Requirements The Davis-Bacon Act is applicable to all contracts for construction, alteration and/or repairs, or equipment installation in excess of $2,000 that involve CDBG funds (in whole or part), with the exception of rehabilitation of a residential structure or residential properties under one ownership that will contain less than eight units when completed. These provisions do not apply to construction work done by employees of the grantee (force account workers). The requirements of Davis-Bacon are: Minimum Wages: The minimum wage to be paid laborers and mechanics (including apprentices and trainees) must be based on the U. S. Department of Labor's (DOL) determination of the prevailing wage rates for the locality, and may be no less than the federal minimum wage rate established by the Federal Labor Standards Administration (FLSA). On July 24, 2009, the FLSA minimum wage rate increased to $7.25 per hour. More information is available at http://www.dol.gov/esa/regs/compliance/posters/flsa.html. Wage Rate Decisions: Recipients must obtain wage rate decisions from DOL prior to bid advertisement, and these determinations must be included in bid documents and the construction contract. There are two ways recipients can obtain wage rate determinations: CDBG Engineering Guide 11/09 49

Recipients with Internet access can obtain their own wage rate determinations directly from the Wage Determinations OnLine.gov web site at http://www.wdol.gov/ (click on selecting DBAWDs and you may sign up for the alert service which will notify you of any updates or modifications). Recipients must be sure to obtain the correct wage rate determination for each labor category based on project location, construction type, and date. When the correct wage rate determination is found, the recipient must print the document and include it in the contract. Recipients may also obtain wage rate determinations by submitting a request to Grants Administration's Labor Specialist using a Request for Wage Determination form (can be downloaded from the Forms section of CDBG website). If no General Wage Decision has been issued for the project area by DOL, the request for a wage rate determination should be submitted to Grants Administration at least forty-five days in advance of the advertising date. Grants Administration will request the project decision. Once received, the project decision will be forwarded to the recipient for inclusion in the contract. If a General Wage Decision is available, the recipient may request a determination from Grants Administration ten days prior to bid advertisement. The wage decision along with the Request for Wage Determination must be included in the contract. It is critical that recipients obtain the appropriate type of wage decision, particularly if it uses the new web-based system discussed above. There are four types: Building construction Building construction is the construction of sheltered enclosures with walk-in access for the purpose of housing persons, machinery, equipment or supplies. It includes all construction of structures, and incidental items such as the installation of utilities and equipment, incidental grading, utilities and paving. The structures need not be habitable to be building construction. Highway Construction This category includes projects involving the construction, alteration or repair of roads, streets, highways, runways, taxiways, alleys, trails, paths, parking areas and other similar projects not incidental to building or heavy construction. Residential Construction Residential construction projects are those involving the construction, alteration or repair of single family homes or apartment buildings of no more than four stories in height. This includes all incidental items in the construction such as site work, parking areas, utilities, streets and sidewalks. Heavy Construction - Heavy construction projects are projects that are not properly classified in one of the other three categories. Because of this, CDBG Engineering Guide 11/09 50

projects within this classification may require the issuance of separate wage schedules. Examples of projects that may fall into this category include: bridges, drainage projects, flood control projects, sewers, water mains and supply lines. Some counties may have a Heavy construction wage decision which includes sewer and water lines. Other counties may have a separate wage decision for Heavy and a separate wage decision for Sewer and Water Line. You may contact the Grants Administration Labor Specialist for assistance. Labor/Mechanic Classes: If, after obtaining the wage decision, it is found that a class of laborer or mechanic not listed in the wage determination is to be employed on the project, the recipient must notify the Grants Administration Labor Specialist in writing so that an effort can be made to conform the laborer or mechanic to a classification already existing on the decision. If a trade classification does not appear on the wage decision and the laborer or mechanic cannot be conformed, the grantee must complete and submit to Grants Administration a Report of Additional Classification and Rate (can be downloaded from the The Grants Administration Labor Specialist will review a Report of Additional Classification and Rate and the supporting documentation for completeness, then forward the report to DOL for final approval. Forms section of CDBG website). This Report should identify the classification needed, recommend a wage rate, and include supporting documentation such as a copy of the Notice to Proceed issued to the contractor and statements from both the contractor and the employee agreeing to the proposed wage rate. In general, additional classifications and wage rates can be approved if: The requested classification is used by construction industry in the area of the project. (The area is usually defined as the county where the project is located.) The work that will be performed by the requested classification is not performed by another classification already on the applicable wage decision. The proposed wage rate and any fringe benefits bear a reasonable resemblance to the rates on the wage decision. The workers that will be employed in the added classification or the worker s representatives, if applicable, must agree with the proposed wage rate. Period of Effectiveness: A general wage decision is effective for 90 days and a project wage decision shall be effective for 180 days from the date of such decision. If the contract is not awarded within the effective period, the wage decision is void. If it appears that a wage decision may expire prior to contract award, the recipient must request a new wage decision. CDBG Engineering Guide 11/09 51

Modifications: Ten days prior to bid opening, the recipient shall either check the web sites again or contact Grants Administration to determine if any modifications to the wage rate decision have been issued. Maintain documentation that this was done. Retroactive: If the recipient fails to include the wage decision, or for any reason the wrong wage decision is included in the contract, the applicable Follow-up contact with Grants Administration regarding modifications to a wage decision may be done by fax, e-mail, or telephone. wage decision reflecting the proper rates must be incorporated into the contract and be retroactive to the beginning of the construction. The recipient can either terminate and re-solicit or incorporate the wage decision by change order, provided the contractor is compensated for any increases in wages resulting from the change. Contract Delays: If a wage decision has been issued, and if a contract has not been awarded within ninety days of bid opening, or if construction has not begun within ninety days of contract award, the recipient should check the Wage Decisions Online web site or contact Grants Administration to determine if the wage decision is still prevailing and if there have been any modifications issued. Section 2 - The Copeland "Anti-Kickback" Act The Copeland "Anti-Kickback" Act requires that payment to employees must be made at least once a week without subsequent deductions or rebate on any account except "permissible" payroll deductions. The recipient must obtain payrolls and a Statement of Compliance from contractors and subcontractors weekly. The recipient must check these payrolls for accuracy. Each employer and the recipient must maintain the basic records supporting the payrolls for five years after completion of the work. See Section 7 for more information on weekly payroll requirements. Section 3 - Contract Work Hours and Safety Standards Act Work Hours The Contract Work Hours and Safety Standards Act requires that laborers and mechanics shall not work in excess of forty hours in any work week on the covered project unless they receive overtime compensation at a rate not less than one and onehalf times the basic rate of pay for those overtime hours plus any fringe benefits. Safety Standards Safety Standards and Accident Prevention provisions require contractors to: CDBG Engineering Guide 11/09 52

Comply with the safety standards provisions of applicable laws, building and construction codes, the "Manual of Accident Prevention in Construction" published by the Associated General Contractors of America, the requirements of the Occupational Safety and Health Act of 1970, and the requirements of Title 29, Section 1518. Exercise every precaution at all times for the prevention of accidents and the protection of persons (including employees) and property. Maintain at the construction office or other well known place on the job site, all articles necessary for giving first aid to the injured, and make standing arrangements for the immediate removal to a hospital or to a doctor's care those persons (including employees), who may be injured on the job site. In no case shall employees be permitted to work at a job site before the employer has made a standing arrangement for removal of injured persons to a hospital or doctor's care. Proper documentation of violations by the recipient is critical; an appeal by the contractor can be won if there is poor documentation by the recipient. Penalties Contractors in violation of the Contract Work Hours and Safety Standards Act may also be liable to the United States for liquidated damages, computed at $10.00 per day for each employee who worked overtime and was not paid overtime wages. Funds may be withheld from contractors and subcontractors to satisfy unpaid wages and liquidated damages. Contractors and subcontractors must be advised in writing that, if they are aggrieved by the withholding of a sum of liquidated damages, they have the right to appeal within fifty days. A written appeal must state the reason for liquidated damages and should be addressed to Grants Administration. Section 4 - The Fair Labor Standards Act The Fair Labor Standards Act (FLSA) contains Federal minimum wage rates and overtime (O/T) requirements. These requirements generally apply to any labor performed and may be pre-empted by other Federal standards such as the Davis Bacon and Related Act prevailing wage requirements and Contract Work Hours and Safety Standards Act O/T provisions. Only the DOL has the authority to administer and enforce FLSA. HUD will refer to the DOL any possible FLSA violations that are found on HUD projects. CDBG Engineering Guide 11/09 53

Section 5 - General Labor Requirements DOL guidelines include additional requirements as listed below. Recipients should note that they are responsible for insuring compliance by contractors and subcontractors. Inclusion of appropriate clauses in contracts, as well as monitoring by the recipient, is therefore very important. Compliance Responsibility: The prime contractor is responsible for compliance by any subcontractor or lower tier subcontractor with all labor provisions and other Federal or State requirements. Records Availability: The contractor must make pertinent records available for review and permit on-the-job interviews of employees. Monitoring: The recipient must monitor the construction and conduct on-the-job interviews with a representative number of workers on the job site, and from a representative sample of trades. The results should be compared to the applicable payrolls for the date the interview was conducted to determine if there are any discrepancies. Depending on the length of the contract period, whether subcontractors are used, or whether different workers are utilized over the life of the contract, it may be appropriate to conduct interviews on multiple occasions to ensure the samples are representative. A suggested Record of Employee Interview form (HUD-11) can be downloaded from the Forms section of CDBG website. The recipient may use this form or a facsimile to gather the required information. Non-compliance: Contractors and subcontractors may be terminated for noncompliance and will be liable for any excess cost involved in completing the work. Contractor Eligibility: Prior to awarding any prime contract, recipients must verify the eligibility of the prime contractor and document in the file. Subcontractor eligibility is the responsibility of the prime contractor and should be addressed at the preconstruction conference. If there is reason to believe that a subcontractor is ineligible, by all means inquire further to learn the subcontractor s status, and notify the prime contractor immediately that an ineligible subcontractor must be terminated. Contractor eligibility may be checked on-line at http://epls.arnet.gov/. Any person or firm who has been declared ineligible because of previous instances of noncompliance may not participate in any contract involving CDBG funds. Apprentices: The contractor must furnish a certification from the DOL Bureau of Apprenticeship and Training or a Bureau of Apprenticeship and Training recognized state apprenticeship agency for each apprentice employed on the project. All apprentices and trainees must be identified in each payroll submission. The ratio of apprentices to journeymen must not exceed the CDBG Engineering Guide 11/09 54

approved ratio under their respective program and their wage rate must not be less than prescribed under those programs. Volunteers: Exceptions to the labor requirements are made for volunteer services on a case-by-case basis. Contact Grants Administration for approval. Helpers Federal labor standards do not recognize the Helper classification. A contractor must re-classify any employee listed as a helper on weekly payrolls with a classification listed on the appropriate wage decision. Required Postings: The wage decision and the following labor posters must be displayed in a prominent place on the job site. The posters include: Your Rights under the Family and Medical Leave Act of 1993 (WH-1420); Federal Minimum Wage (WHD-1088); Notices to All Employees Working on Federal or Federally Financed Construction Projects (WH- 1321); Notice Employee Polygraph Protection Act (WH- 1462); and ESA Fact Sheet No. 96-13 Fair Labor Standards Act Amendments of 1996. A project sign at a project site is required and recipients must use the format provided by the Department of Commerce The posters are provided in the Reference Manual and may be obtained from Grants Administration's Labor Specialist. The Notice to Employees poster can be downloaded from http://www.dol.gov/dolfaq/go-dol-faq.asp?faqid=441. Definitions: Laborer or Mechanic - Laborers and mechanics mean anyone who is performing construction work on the project, including trade journeymen. Salaried Workers/Working foreman - A Foreman or supervisor that regularly spends more than 20 percent of their time performing construction work are covered laborers and mechanics for labor standards purposes. Employees - Every person who performs the work of a laborer or mechanic is employed regardless of any contractual relationship that may be alleged to exist between a contractor or subcontractor and such person. This means that even if there is a contract between a contractor and a worker, the contractor must make sure that the worker is paid at least as much as the wage rate on the applicable wage decision for the classification of work they perform. Owners of businesses working with their crew may certify to the payment of their own prevailing wages in conjunction with their employees. Owner-operators of power equipment (contracts for man and machine) soleproprietors, self employed mechanics and/or independent contractors (contracts for piece work) may not submit their own payrolls certifying to CDBG Engineering Guide 11/09 55

their own wages BUT must be carried on the responsible contractor s certified payroll report. Split-classification - If you have employees that perform work in more than one classification, you can pay the wage rates specified for each classification only if you maintain accurate time records showing the amount of time spent in each classification of work. If you do not maintain accurate time records, you must pay these employees the highest wage rate of all of the classifications of work performed. Section 6 - Pre-Construction Conference Immediately following contract award, the recipient must hold a pre-construction conference with the prime contractor and any subcontractors. The purpose of the preconstruction conference is to apprise the contractor and subcontractors of labor standards, equal opportunity and other contract obligations and responsibilities. A pre-construction conference also serves as an opportunity for all parties to discuss how the project is expected to progress, the schedule for completion, determine who has review authority for contracts, and determine method and schedule of payments, change orders, etc. It also allows an opportunity to obtain any outstanding contract documents and provide the contractor with posters for the construction site. An Outline for a Preconstruction Conference is can be downloaded from the CDBG Website. The recipient must keep an attendance roster and minutes of the pre-construction conference. The minutes must contain: Project name, location, and description, Contractor and known subcontractor's names, Date, time, and place of conference, Conference attendees, CDBG requirements discussed, and Summary of other items covered. Following execution of contract documents and completion of the pre-construction conference, the recipient should issue a "Notice to Proceed" to each prime contractor that establishes the contract execution date, construction start date and scheduled completion date. Provide Grants Administration with a copy of the Notice to Proceed also. CDBG Engineering Guide 11/09 56

Section 7 - Weekly Payrolls Payrolls must be submitted for each week of actual work. Each contractor, subcontractor and any lower tier subcontractor is required to complete and submit payrolls no later than seven work days following the completion of the workweek. Payrolls should be completed on the Payroll form (DOL Form WH-347) or equivalent information, which must be submitted along with the Statement of Compliance. These forms, along with a Contractor Payroll Checklist, can be downloaded from the Forms section of CDBG website. A fillable PDF Payroll form can found on-line at http://www.dol.gov/esa/forms/whd/wh347.pdf. Submission Requirements Weekly payrolls should be numbered consecutively beginning with Number 1. The last payroll must be marked "FINAL." A payroll must be submitted for each week in which work occurs until completed. If no work is performed during a given week, weekly payrolls need not be submitted. But if no work is performed on the project for a longer period of time, the contractor/subcontractor may submit payrolls saying No work performed or submit a written notice of the no work period. A sample notice form can be downloaded from the Forms section of CDBG website. Contractors and subcontractors must include their Internal Revenue Service (IRS) Employee Identification Number (or Social Security Number if self-employed) on the first payroll in the upper right hand corner of the front page. The president or owner of the company, or an employee certified by the owner or president, must sign the payrolls. Such a certification also designates the authorized individual to sign the payroll Statement of Compliance. Should the designee be changed, a new certification must accompany the next payroll. For contracts executed on or after January 18, 2009, contractors are required to provide the name of each employee and to report only the last four digits of an employee s social security number. Contractors are no longer required to provide the address of employees. Review Process Payrolls should be reviewed weekly by the recipient (initialed and dated) and compared with the wage decision issued for that project. Prompt review will allow the recipient to initiate corrective action before a problem multiplies and while the workers are still available. Also, make sure payroll deductions are adequately documented and permissible. Permissible deductions are identified on the Permissible Payroll Deductions form in the attachments. CDBG Engineering Guide 11/09 57

Deductions that are required by law, such as FICA or income taxes, need no documentation. Adequate documentation for other deductions include a copy of the written agreement between the employee and the employer for the payroll deduction, a copy of a court order, or a written statement from the employee authorizing the deductions. These types of documentation should be in the employee s personnel file. Deductions not included on the list of permissible deductions may be transacted only upon written authorization from the Secretary of Labor or his designee. It is also necessary to check information on the HUD-11 form, Record of Employee Interview, against weekly payrolls. The payroll examiner must sign the HUD-11's as well as initial and date each payroll reviewed. Violations When any violation of labor standards requirements results in an underpayment of wages to employees, the recipient shall take necessary action to insure restitution is made to each affected employee. Contact the Grants Administration Labor Specialist for assistance when violations occur. Underpayment of wages to employees of $1,000 or more must be reported to the Department of Labor. Section 8 Job Site Visits and Employee Interviews The recipient is required to conduct visits of the construction site to see if applicable DOL posters and the wage decision are posted. Labor standards also require the recipient to conduct interviews with construction employees using the Record of Employee Interview (HUD 11) form to determine compliance with the applicable wage decision and payrolls. Job Site Interviews The following standards and requirements apply to job site interviews: The person performing interviews should be knowledgeable of labor standards procedures. Understand that labor standards enforcement is in the same category as other contract requirements. Failure of contractors to comply with labor standards requires corrective action and may result in the imposition of sanctions. Employee interviews shall be: Sufficient in number to establish the degree of accuracy of records. CDBG Engineering Guide 11/09 58

Representative of all classifications of employees on the project. Recipients should attempt to interview a representative sample of all classifications of employees on the project, including a representative number of employees from a representative sample of trades. Interviews should be particularly targeted to projects, groups of employees or contractors where problems are suspected. Results of the interviews should be compared to the applicable payrolls for the date the interview was conducted to determine if there are any discrepancies. Depending on the length of the contract period, whether subcontractors are used, or whether different workers are utilized over the life of the contract, it may be appropriate to conduct interviews on multiple occasions to ensure the samples are representative. Place of Interview: On job site if it can be conducted properly and privately (this is a one-on-one process). Employee's home. Recipient's office. By mail. The interviewer should see that the wage determination and other required posters are properly displayed. The interviewer should observe the duties of workers before initiating interviews. To initiate the interview, the authorized person shall: Properly identify himself/herself. Clearly state purpose of interview. Advise the worker that information given is confidential, and his/her identity will be disclosed to the employer only with the employee's written permission. When conducting employee interviews, the interviewer should pay particular attention to: Employee's full name. Permanent mailing address. The last date the employee worked on that project and number of hours worked on that day. The interviewer should make it clear that these questions relate solely to work on the project and not other work. Hourly rate of pay. The aim is to determine if the worker is being paid at least the minimum required by the wage decision. The interviewer should be sure the worker is not quoting their net hourly rate or "take-home" pay. If it appears the individual may be underpaid, the interviewer should closely question the worker: Ask for any records. CDBG Engineering Guide 11/09 59

Arrange to re-interview the employee. Enter the worker's statement of his/her classification. Observe duties and tools used: If worker's statements and observations made by the interviewer indicate the individual is performing duties conforming to classification, indicate this on the Record of Employee Interview form (HUD-11). If there are discrepancies, detailed statements are necessary. Enter any comments necessary. Enter date interview took place. The payroll examiner must compare information on the HUD-11 form with the payroll submission: If no discrepancies appear, "None" should be written in the comment space of the HUD-11 form. If discrepancies do appear, appropriate action should be initiated. When necessary action has been completed, the results must be noted on the interview form. Section 9 - Restitution for Underpayment of Wages Where underpayments of wages have occurred, the employer will be required to pay wage restitution to the affected employees. Wage restitution must be paid promptly in the full amounts due, less permissible and authorized deductions. Notification to the Prime Contractor: The contract administrator will notify the prime contractor in writing of any underpayments that are found during payroll or other reviews. The notice will describe the underpayments and provide instructions for computing and Employers are no longer required to submit checks (certified or otherwise) to correct underpayments. Restitution payments are reported and certified by the employer on a correction payroll. documenting the restitution to be paid. The prime contractor is allowed 30 days to correct the underpayments. Note that the prime contractor is responsible to the contract administrator for ensuring that restitution is paid. If the employer is a subcontractor, the subcontractor will usually make the computations and restitution payments and furnish the required documentation through the prime contractor. Computing Wage Restitution: Wage restitution is simply the difference between the wage rate paid to each affected employee and the wage rate required on the wage decision for all hours worked where underpayments occurred. The difference in the wage rates is called the adjustment rate. The adjustment rate times the number of hours involved equals the gross amount of restitution due. CDBG Engineering Guide 11/09 60

Correction Payrolls: The employer will be required to report the restitution paid on a correction certified payroll. The correction payroll will reflect the period of time for which restitution is due (for example, Payrolls #1 through #6, or payrolls for a specified beginning date through a specified ending date). The correction payroll will list: Each employee to whom restitution is due and their work classification, The total number of work hours, The adjustment wage rate (the difference between the required wage rate and the wage rate paid), The gross amount of restitution due, Deductions, and The net amount to be paid. A signed Statement of Compliance must be attached to the correction certified payroll. Employee signature: Each employee who has received restitution signs the correction payroll as evidence of their receipt of the payments. Review of correction certified payroll: The contractor administrator will review the correction payroll to ensure that full restitution was paid. The prime contractor shall be notified in writing of any discrepancies and will be required to make additional payments, if needed. Additional payments must be documented on a supplemental correction payroll within 30 days. Unfound workers: Sometimes, wage restitution cannot be paid to an affected employee because, for example, the employee has moved and can't be located. In these cases, at the end of the project the prime contractor will be required to place in a deposit or escrow account an amount equal to the total amount of restitution that could not be paid because the employee(s) could not be located. The Program Administrator should continue to attempt to locate the unfound workers for three years after the completion of the project. After three years, any amount remaining in the account for unfound workers should be credited and/or forwarded by the Program Administrator to Grants Administration. Section 10 - Progress Inspections, Change Orders and Final Inspection Construction contracts must be monitored to make sure contractors and subcontractors comply with technical specifications and State and Federal requirements. Contract administration involves monitoring labor standards and equal opportunity requirements, as well as general inspections and supervision of construction work. Supervision of construction work is the responsibility of a qualified individual such as the project engineer. CDBG Engineering Guide 11/09 61

The recipient is responsible for equal opportunity and labor standards compliance. Progress Inspections The architect/engineer must conduct periodic inspections of the contractor's work for compliance with specifications, drawings and conditions of the contract. These inspections must be documented in writing and kept in the CDBG project files. Prior to approval of progress payments to contractors, recipients must make sure all work is completed as stated; that all payrolls have been submitted and are accurate and complete; wage violations are corrected and any restitution paid; and that all charges are allowable. Recipients should withhold at least 10 percent of each progress payment until the end of the project to ensure there are funds available to address any unanticipated issues (e.g., payroll issues, insufficient progress, etc.). Change Orders Change orders should be kept to an absolute minimum. The recipient must obtain written approval from Grants Administration, using the CDBG Change Order Transmittal (C-2) form (can be downloaded from the Forms section of CDBG website), prior to execution of the change order if: A change order will result in a significant change in the scope of the approved project as proposed in the CDBG application, OR Any single change order or accumulations of change orders would increase or decrease the original approved total contract amount by more than ten percent or $10,000, whichever is less (regardless of funding source) Documentation submitted with every change order must include: Supporting justification which describes why the change is necessary, Itemized cost estimates, A cost and price analysis (usually conducted by an engineer) that determines the basis for costs being reasonable, and Any revised plans and specifications. In addition to the change order documentation, the recipient must submit an updated Section 102 Disclosure Form if the construction contract amount and any other pertinent information has changed. CDBG Engineering Guide 11/09 62

If a change order will result in a significant change in the scope of the approved project as proposed in the CDBG application, a project amendment or budget revision may also be necessary. (See Chapter 15 of the CDBG Implementation Manual.) The architect/engineer or project inspector usually prepares change orders, however, the recipient must approve and authorize change orders before they are given to the contractor and executed. The proposed change should also be verified and/or recommended for approval by the project engineer, project manager, architect or other technical support personnel. The recipient should compare such change orders to the CDBG construction budget prior to approval. Final Inspections When construction work has been completed, the contractor must certify completion of work to the recipient and submit a final request for payment. Before work is accepted and final payment is made to the contractor, the recipient should verify that: All payrolls have been received and checked and any necessary restitution has been made. All other required Equal Opportunity and Labor Standards provisions have been satisfied. All contract submissions have been received. All claims and disputes involving the contractor have been resolved. Files are complete. As-built plans have been filed with the recipient, if applicable. Timeline of Davis Bacon Requirements for CDBG Projects Timeframe Action Required 45 days before bid advertising If General Wage Determination is not available, submit Request for Wage Determination to Grants Administration 10 days before bid advertising If General Wage Determination is available, submit Request for Wage Determination to Grants Administration or obtain from web site 10 days before bid opening Determine if any modifications have been issued for the wage rate determination 90 days after bid opening If no contract awarded, determine if any modifications have been issued for the wage rate determination 90 days after contract award If construction has not begun, determine if any modifications have been issued for the wage rate determination CDBG Engineering Guide 11/09 63

Engineering Guide Attachments Available for Download on Forms Section of CDBG Website Environmental Army Corps of Engineers, Request for Wetlands Determination Wetland Identification Procedures Financial Management USDA Rural Development Community Facilities Program Allowable Engineering Costs Public Facilities Public Facilities Implementation Flowchart Acquisition Flow Chart Acquisition Process Under URA Procurement and Contracting CDBG Contract Special Provisions (Revised 11/2010) Debarment Certification CDBG Contract Transmittal Form (C-1) CDBG Recommended Contract Checklist Construction Only CDBG Contract Change Order Transmittal Form (C-2) Sample Advertisement for Bids (NEW 11-2010) Architect/Engineer s Certification Section 3 Information Sheet for Contractors/Businesses Section 3 Business Self-Certification (NEW 11-2010) Bidder s Proposed Section 3 Contract/Subcontracts Bidder s Section 3 Estimated New Hires Notice of Intent to Award Contractor s Section 3 Business Utilization Report Contractor s Section 3 New Hires Report Notice to Proceed Construction Management Making Davis-Bacon Work: A Contractor s Guide to Prevailing Wage Requirements for Federally-Assisted Construction Projects Request for Wage Determination Report of Additional Classification and Rate Outline of a Pre-construction Conference Payroll Form WH-347 and Statement of Compliance and Instructions