On April 18, HUD issued Notice PIH 2022-10 Implementation of the Final Rule on Section 3 Regulations – 24 CFR Part 75. The notice is helpful in providing a chart of implementation timelines (based on fiscal year-end) on page 11 and a template for Section 3 contract language. Except for the information on contracting and procurement (starting on page 18), which includes references to the General Conditions form HUD-5370 series, the notice largely presents information previously provided. This includes information on what funding sources are covered by Section 3, the thresholds which trigger Section 3 applicability, and sources not covered by Section 3. The notice also reiterates information about the definitions of a Section 3 Worker, a Targeted Section 3 Worker, and Section 3 Businesses.
New Reporting Portal Not Yet Available
The notice does discuss the planned S3R reporting portal that will replace the SPEARS system but provides no timeline. It states, “It is HUD’s expectation that PHAs (including MTW agencies) and other public housing financial assistance recipients will continue to retain Section 3 compliance records until the reporting system is available. Funding recipients should be prepared to produce those records if HUD requests it.” Thus, agencies will need to keep documentation and prepare annual reports for their records and possible review by HUD but are not required to submit these reports.
Unfortunately, the notice does not address challenges housing authorities may face in calculating hours worked when staff is paid from the Central Office Cost Center (COCC) and thus are funded by both covered public housing and non-covered Section 8, and potentially other funding sources. Agencies will have to develop their own methodology for determining the percentage of total hours to include in the baseline of total hours worked. It is presumed, following the guidelines regarding professional services, that all hours worked by COCC-paid Section 3 and Targeted Section 3 employees may be counted without applying the percentage of covered and uncovered funding that supports the position(s). The article in the March 30 Advocate titled, “Section 3 Transition Period Ending; New Rule in Full Effect April 1,” provides updates and suggestions on this and related issues and is consistent with this new notice. Internal or fee accountants may also be helpful in developing methods for counting covered hours paid from the COCC.
For Multiple-source Construction Projects Refer to CPD Notices
While this PIH notice addresses requirements for construction projects utilizing multiple funding sources, the notices from the Community Planning and Development (CPD) division, HUD Notice CPD-21-09 (for CDBG, NSP, and Section 108 funding), and Notice CPD-21-07 (for HOME and Housing Trust Fund-supported projects), provide clearer descriptions and examples for assessing when Section 3 applies. Agencies are reminded that if ANY public housing funds are included in a construction or development project phase, Section 3 applies to the entire project or phase. Finally, the notice addresses HUD monitoring and compliance expectations, providing an extensive listing of the types of documentation and records HAs should retain.
PHADA will provide a more detailed review and analysis in an upcoming Advocate.