HUD Repeatedly Dismissed Staff Concerns About Contracts

By Carol D. Leonnig
Washington Post Staff Writer
Sunday, May 18, 2008

The small Texas property-management company had no experience overseeing hundreds of defaulted homes across the country. It did have two former Reagan administration officials at the helm and warm relations with senior Republican appointees at the federal housing agency.

During a few weeks in 2004, the three-employee company, Harrington, Moran and Barksdale Inc. (HMBI), went from no government work to landing $71 million in contracts with the U.S. Department of Housing and Urban Development to oversee the upkeep and sale of defaulted homes. It had previously managed a handful of apartment buildings and development projects.

The company's meteoric rise -- and HUD's willingness to bend the rules to accommodate it -- surprised veteran agency contracting specialist Gloria Freeman.

"After you've been in the business awhile, you get to know the signs -- 'This is a friend; let's help him out,' " she said in an interview. Not long after Freeman complained to her supervisors, she was asked to return to her previous policy job.

Federal investigators are still sorting through HUD contract awards to friends of Secretary Alphonso Jackson, who resigned last month amid a criminal probe. But some career staff members and agency observers say problems in the agency's contracting process run much deeper than Jackson and involve officials who promoted certain companies while rebuffing concerns about their performance and qualifications.

The contract awards that staff members questioned took place within programs, heavily promoted by Jackson, to help small, minority-owned businesses get a bigger share of the roughly $1 billion in public contracts HUD awards each year. During Jackson's tenure, the proportion of contracts awarded to small black- and Hispanic-owned businesses, including under the Section 8(a) program, rose from 6 percent to nearly 35 percent. The proportion of contracts open to full competition decreased from 71 percent to 33 percent, federal records show.

HUD spokesman Jereon Brown said limiting competition on some contracts was critical to helping "minnows" in the small-business community grow into "whales."

"Nothing is more American than giving the little guy a chance to shine," he said. "The 8(a) program is good for business, good for innovation, good for the agency and, ultimately, good for America."

A Washington Post examination of HUD's contracts shows that HMBI and two other companies won hundreds of millions of dollars in contracts under Jackson while career contracting staff repeatedly raised questions.

A Miami property-management company, National Housing Group, which contributed to President Bush's reelection and other Republican campaigns, won $50 million in contracts from 2003 to 2007. Now, its second in command has been indicted for allegedly falsifying reimbursement requests to HUD. Regional staff members at the agency had expressed concern about the company's small size and inexperience.

Drayton, Drayton & Lamar, of Georgia, is another minority contractor that has recently had significant success in winning HUD work. Through 2002, the company had received almost $1 million in contracts. But since 2003, it has won $35 million in data-technology and information-management contracts at HUD, despite concerns about its performance. Its president has socialized with a HUD official.

Brown said political clout and internal agency connections do not determine contract decisions. "We don't believe any contractor received special treatment. . . . We look at qualifications," he said.

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