56-Doc 00 73 00 10 - Part 3 Section 3 Requirements.pdf

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DEPARTMENT OF HOUSING AND COMMUNITY

DEVELOPMENT

SECTION 3 ACTION PLAN,

POLICY, AND PROCEDURES

HOME INVESTMENT PARTNERSHIPS (“HOME”)

HOUSING TRUST FUND (“HTF”)

EMERGENCY SHELTER GRANT PROGRAM (“ESG”)

CONTINUUM of CARE (“CoC”)

COMMUNITY DEVELOPMENT BLOCK GRANT (“CDBG”)

AND

LEAD HAZARD REDUCTION AND HEALTHY HOMES (“LHR”)

Policy updated February 2024. HCD reserves the right to modify this handbook, amend, or terminate any policies, procedures, or templates described in this handbook at any time. All graphics and symbols are attributed to the HUD Exchange Section 3 Portal and Training Materials.

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Contents

General Policy

History

Purpose

Definitions

Determination of Applicability

Section 3 Requirements Overview

Examples of Efforts to Offer Training and Employment Opportunities to Section 3 Workers and Targeted Workers

Examples of Efforts to Award Contracts to Section 3 Business Concerns

Reporting Responsibilities of Section 3 Compliance

General Contractor Responsibilities

Pre- Sitework Requirements: Bidding Procedures

Pre-Sitework Requirements: Contract Requirements

Reporting Requirements of the Prime Contractor

Reporting Documentation Required by the Prime Contractor

Documentation and Recordkeeping Requirements

HCD Assistance to Subrecipients and Contractors to Achieve Section 3 Benchmarks

Complaints

Appendices and Required Reporting Forms

Section 3 Acknowledgement Form A

Section 3 Certification Form……………………………………………………………………………………...29

Section 3 Summary Report Form C

Policy Guidance Quick Links

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General Policy

The County of Bucks, in accordance with its fiduciary responsibilities as an administrator of funds issued under the HOME Investment Partnerships (HOME), Emergency Shelter Grant Program (ESG), Continuum of Care (CoC), Community Development Block Grant (CDBG), Lead Hazard Control Grants, Housing Trust Fund (HTF), and Healthy Homes Production Grants, in compliance with all governing statutes and regulations of these programs, shall ensure that all relevant grants made for housing, economic, and community development will comply with the Housing and Urban Development Act of 1968, as amended (12 U.S.C.1701u), (Section 3) and via governing regulations found at 24 CFR Part 75.

In compliance with Section 3 of the Housing and Urban Development Act of 1968, as amended, it is the policy of the County of Bucks, Housing and Community Development Department (HCD) to ensure that “employment and other economic opportunities […] shall, to the greatest extent feasible, be directed to low and very low income individuals, especially recipients of government assistance for housing and to business[es] which provide economic opportunities to low and very low income individuals”. In alignment with 24 CFR 75.3, recipients that are not subject to Section 3 requirements are strongly encouraged to consider ways to support the purpose of Section 3 as such actions help to establish strong and sustainable communities within the County.

History

Each year, HUD invests billions of federal dollars into distressed communities across the country for projects. Projects include:

• Building and rehabilitating housing;

• Improving a variety of infrastructures;

• Building community centers;

• Helping families achieve stability and advancement.

The Section 3 program requires recipients of HUD funding to direct employment, training, and contracting opportunities to low-income individuals and the businesses that employ these persons within their community. Section 3 is a provision of the HUD Act of 1968 and is found at 12 U.S.C. 1701(u). The regulations are found at 24 CFR Part 75.

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The United States Department of Housing and Urban Development (HUD) issued a proposed rule on April 4, 2019 (84 FR 13177) to update the existing Section 3 regulations indexed at 24 CFR Part 135 to modernize and simplify regulations, provide program specific oversight, reduce administrative burden, and better align with statutory priorities of the Section 3 program. As the regulations have not updated since 1994, the rule proposed tracking and reporting labor hours instead of new hires to simplify reporting requirements. HUD also proposed tracking labor hours rather than new hires to align more consistently with current business practices.

On September 29, 2020, the Final Rule (85 FR 61524) was officially published with an effective date of November 30, 2020, and active compliance implementation effective July 1, 2021, for all Section 3 projects in which assistance or funds were committed on or after July 1, 2021. Legacy projects for which funds were committed prior to November 30, 2020, adhere to the old rule (hereinafter 24 CFR Part 135) and are expected to maintain records of Section 3 compliance. Reporting to HUD in SPEARS is no longer required. All projects for which assistance or funds were committed in the gap period between November 30, 2020, and July 1, 2021, are expected to adhere to the final rule (24 CFR Part 75).

Section 3 is not an entitlement program; therefore, employment and contracts are not guaranteed.

Low- and very low-income individuals and Section 3 business concerns must be able to demonstrate that they have the ability or capacity to perform the specific job or successfully complete the contract that they are seeking. Section 3 standards are also race and gender neutral. A minority and/or woman owned business enterprise must provide evidence that it meets at least one criterion of a Section 3 business concern outlined above to receive preference under Section 3. However, HUD anticipates that Section 3 will serve to support, and not impede, contract opportunities for minority business enterprises.

Purpose

24 CFR Part 75 establishes the requirements to be followed to ensure the objectives of Section 3 of the Housing and Urban Development Act of 1968 are met. The purpose of Section 3 is to ensure that economic opportunities, most importantly employment, generated by certain United States Department of Housing and Urban Development (HUD) financial assistance shall be directed to low-and very low-income persons, particularly those who are recipients of government assistance for housing or residents of the community in which the Federal assistance is spent.

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The County's annual apportionment of HUD funds must be used to improve the living conditions of low-income residents including but not limited to housing and community development. A significant portion of these funds are used to carry out new construction, demolition, rehabilitation, renovations, and other public construction-based activities which may require training, employment, contracting, and other economic opportunities benefiting low- and very low-income persons, and local businesses. These activities are defined by HUD as "Section 3" covered projects when triggered by a monetary award threshold of both Housing and Community Development and Public Housing financial assistance.

Section 3 applies to all sub-recipients including both for- and non-profit organizations, builders, developers, private agencies, municipalities, local government agencies, and their contractors and subcontractors upon the award of these federal funds. It is the policy of the County of Bucks, Housing & Community Development Department (HCD) to foster active engagement and to ensure compliance with these requirements.

As a recipient of HUD funding, this Section 3 Action Plan, Policy, and Procedures is enacted by HCD as a tool to assist the Department with facilitating successful Section 3 implementation.

This plan sets to identify goals, objectives, and actions that will enable compliance and expand economic opportunities for low and very low-income residents within Bucks County.

This guidance is designed to assist sub-recipients, contractors, subcontractors, workers, and other stakeholders to effectuate successful policies and actions aligned with Section 3 requirements. The within document contains required programmatic and administrative policies and procedures and should be used as a reference for all sub-recipients receiving funds from HCD.

In the event of any discrepancy between the Plan and the Federal requirements, the requirements set forth in 24 CFR Part 75 shall prevail subject to further updates in the Federal Register as published and updated by HUD. It is the responsibility of all sub-recipients to actively disseminate pertinent information and ensure that their staff, contractors, subcontractors, and the like are aware of, understand and comply with the policies and procedures set forth in this guide. Guidance provided herein may be revised or updated as required upon direction by HUD. All updates will be transmitted to sub-recipients immediately upon availability.

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Definitions

Key Terms and Definitions

Business Concern A business entity formed in accordance with State law, and which is licensed under State, county, or municipal law to engage in the type of business activity for which it was formed.

Contractor means any entity entering into a contract with: a recipient to perform work in connection with the expenditure of public housing financial assistance or for work in connection with a Section 3 project; or a subrecipient for work in connection with a Section 3 project.

Subcontractor any entity (other than a person who is an employee of the contractor) which has a contract with a contractor to undertake a portion of the contractor’s obligation for the performance of work generated by the expenditure of Section 3 covered assistance or arising in connection with a Section 3 covered project.

Employment Opportunities Generated by Section 3 Covered Assistance all employment opportunities generated by the expenditure of Section 3 covered public assistance. With respect to Section 3 covered housing and community development assistance, this term means all employment opportunities arising in connection with Section 3 covered projects.

Housing Development low-income housing owned, developed, or operated by public housing agencies in accordance with HUD’s public housing program regulations codified in 24 CFR Chapter IX.

HUD YouthBuild Programs programs that receive assistance under the Workforce Innovation and Opportunity Act (29 U.S.C. 3226) and provide disadvantaged youth with opportunities for employment, education, leadership development, and training in the construction or rehabilitation of housing for homeless individuals and members of low- and very low-income families (see Part 13 FAQ for further information).

Labor Hour hours worked by all workers employed on a Section 3 Project.

Low-income Person defined in Section 3(b)(2) of the 1937 Act, families (including single persons) whose incomes do not exceed 80 per centum of the median income for the area, as determined by the Secretary of HUD, with adjustments for smaller and larger families, except that the Secretary of HUD may establish income ceilings higher or lower than 80 per centum of the median for the area on the basis of the Secretary’s findings that such variations are necessary because of prevailing levels of construction costs or unusually high or low-income families.

Very low-income person families (including single persons) whose income do not exceed 50 per centum of the median family income for the area, as determined by the Secretary with adjustments for smaller and larger families, except that the Secretary may establish income ceilings higher or lower than 50 per centum of the median for the area on the basis of the Secretary’s findings

P a g e | 7 that such variations are necessary because of unusually high or low family incomes.

Material supply contract(s) means contracts for the purchase of products and materials, including, but not limited to, lumber, drywall, wiring, concrete, pipes, toilets, sinks, carpets, and office supplies. [Section 3 requirements do not apply to material supply contracts.]

Metropolitan Area a metropolitan statistical area (MSA), as established by the Office of Management and Budget.

New Hires: full-time employees for permanent, temporary, or seasonal employment opportunities.

Public Housing Authority (PHA)

Public Housing Agency.

Sub-recipient a non‐Federal entity that receives a sub-award to carry out part of a Federal program; but does not include contractors or individuals that are beneficiaries of such program(s).

Section 3 Section 3 of the Housing and Urban Development Act of 1968, as amended (12 U.S.C. 1701u).

Section 3 Business Concern

Pursuant to 24 CFR 75.5, a business concern, which must meet at least one of the criteria set forth below which has been documented within the latest six-month period:

i. It is at least 51 percent owned and controlled by low- or very low-income persons;

ii. Over 75 percent of the labor hours performed for the business over the prior three-month period are performed by Section 3 workers;

or;

iii. It is a business at least 51 percent owned and controlled by current public housing residents or residents who currently live in Section 8-assisted housing.

Section 3 Covered Assistance

i. public housing development assistance provided pursuant to Section 5 of the 1937 Act;

ii. public housing operating assistance provided pursuant to Section 9 of the 1937 Act;

iii. public housing modernization assistance provided pursuant to Section 14 of the 1937 Act;

iv. assistance provided under any HUD housing or community development program that is expended for work arising in connection with housing rehabilitation, construction, or other public construction project (which includes other buildings or improvements, regardless of ownership).

Section 3 Covered Contracts a contract or subcontract awarded by a recipient or contractor for work generated by the expenditure of Section 3 covered assistance, or for work arising in connection with a Section 3 covered project. HUD will exclude professional services from the total number of labor hours as such hours

P a g e | 8 are excluded from the total number of labor hours to be reported per 24 CFR 75.15(a)(4) unless such a worker meets Section 3 and Targeted section 3 definitions. Section 3 covered contracts also do not include contracts for the purchase of supplies and materials. However, whenever a contract for materials includes the installation of the materials, the contract constitutes a Section 3 covered contract.

Section 3 Covered Project the construction, reconstruction, conversion, or rehabilitation of housing (including reduction and abatement of lead-based paint hazards), other public construction which includes buildings or improvements (regardless of ownership) assisted with housing or community development assistance. A Section 3 project further is defined as the site or sites together with any building(s) and improvements on the site(s) that are under common ownership, management, and financing

Section 3 Resident a public housing resident or an individual who resides in the metropolitan area or non-metropolitan county in which the Section 3 covered assistance is expended and who is a low-to very low-income person.

Determination of Applicability

The requirements of Section 3 apply to an entire project that is funded with Section 3 covered financial assistance, regardless of whether the Section 3 project is fully or partially funded with housing and community development financial assistance. Accordingly, when in excess of $200,000 of Section 3 covered housing and community development financial assistance is invested into a project involving housing demolition, rehabilitation, or construction, or the rehabilitation or construction of public buildings, facilities, or infrastructure, the requirements of Section 3 apply to the entire project, both HUD and non-HUD funded portions (24 CFR 75.3(a)(iii)). This threshold is only subject to renovation activities under the emergency shelter component of the ESG program; except that homeless individuals have priority over other Section 3 residents in accordance with 24 CFR 576.405(c).

Exceptions to the above flow chart include instances of funding from Lead Hazard Control and Healthy Homes programs and multiple source HUD funded projects which are inclusive of public housing financial assistance.

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The threshold of $200,000 applies to all HUD programs that provide housing and community development financial assistance except the Lead Hazard Control and Healthy Homes programs. For these programs the threshold is $100,000 as authorized by Sections 501 and/or 502 of the Housing and Urban Development Act of 1970. Additional Section 3 covered programs include University Partnership Grants, Rental Assistance Demonstration (RAD), HOME-ARP, 202/811 Grants, and Economic Development Initiative (EDI)/ Brownfield Economic Development Initiative (BEDI) grants.

Notably, Section 3 requirements do not apply to material supply contracts or contracts that do not require any labor (i.e. a contract for janitorial and office supplies) in addition to Indian and Tribal preferences.

Additionally, Section 3 requirements also apply when a project receives HUD housing and community development financial assistance and receives any amount of public housing financial assistance as defined in 24 CFR 75.3(a)(1). By way of example, if a project is funded with $75,000 of CDBG funds and $10,000 of public housing financial assistance funds, then Section 3 requirements apply to the entirety of the project because of public housing assistance being provided. Further requirements related to projects with multiple funding sources are elaborated at length in 24 CFR 75 subpart D.

The Secretary must update the Section 3 thresholds not less than once every 5 years based on a national construction cost inflation factor through the Federal Register notice not subject to public comment. When the Secretary finds, it is warranted to ensure compliance with Section 3, the Secretary may adjust, regardless of the national construction cost factor, such thresholds through Federal Register notice, subject to public comment. HCD will accordingly update the within document to reflect such changes.

Section 3 Requirements Overview

For subrecipients to meet Safe Harbor compliance, both Section 3 benchmarks must be met (or exceeded) and required prioritization efforts must be followed.

Further information regarding these two efforts is set forth at length below.

Pursuant to 24 CFR 75.27(B), contractors and subcontractors are required to meet Section 3 regulations regardless of whether their agreements or contracts include Section 3 statutory citations and language.

Seasonal, temporary, and long-term employment opportunities qualify to be included under benchmark goals and as such the labor hours completed by all Section 3 worker and Targeted Section 3 Worker should be included in the calculation of all labor hours as a percentage of all labor hours worked on a project. Overall, sub-recipients and contractors are encouraged to provide long-term employment to ensure that they meet the benchmark goals.

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Section 3 Benchmarks (with HCD funding):

To the greatest extent feasible, employment opportunities should be directed to low-and very low-income persons, including seasonal and temporary employment opportunities. The rule does not apply to only new hires, but if someone is currently on staff and qualified as a Section 3 or Targeted worker under 24 CFR part 135, they will need to re-certify as either a Section 3 worker or Targeted Section 3 worker under 24 CFR part 75.

In the absence of evidence to the contrary, a subrecipient will be considered to have complied with requirements of 24 CFR Part 75, Subpart C in the event the following benchmarks are met or exceeded.

a. Twenty-five percent (25%) or more of the total number of labor hours worked by all workers on a Section 3 project are Section 3 workers:

b. Five percent (5%) or more of the total number of labor hours worked on projects funded by Section 3 are Targeted Section 3 workers, as defined at §75.21:

Example:

In this circumstance, the labor hours reported have met the Section 3 safe harbor benchmark, as the percentage calculations are greater than the minimum amounts prescribed by the regulation. Both goals must be met to remain compliant.

If both goals are not met, a report must be completed on the qualitative efforts that were made to comply with the requirements.

Note, that there is a special category of labor hours known as professional services labor hours. The rule under 75.25(a)(4) allows for a bonus opportunity in meeting the safe harbor requirement.

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Professional services or non-construction services are those that require an advanced degree or professional licensing including, but not limited to, contracts for legal services, financial consulting, accounting services, environmental assessment, architectural services, and civil engineering services.

Subrecipients, contractors, and subcontractors may report labor hours by Section 3 workers and labor hours by Targeted Section 3 workers from professional services without including labor hours from professional services in the total number of labor hours worked. If a contract covers both professional services and other work and the recipient or contractor or subcontractor chooses not to report labor hours from professional services, the labor hours under the contract that are not from professional services must still be reported.

HUD wants to ensure the final rule’s emphasis encapsulates the statutory requirement to prioritize low- and very low-income workers and provides this category of exempted workers from reporting given the challenge to hire low- and very low-income workers in jobs that require such degrees and licensing. The effect of this reporting structure is to give a recipient a bonus if they can report Section 3 hires in the professional services context.

Examples of professional services include legal services, financial consulting, environmental assessments services, architectural services, accounting services, and civil engineering services.

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So, who is a “Section 3 Worker”?

A Section 3 worker is any worker who currently fits, or when hired within the past five years fit, at least one of the following categories, as documented:

• The worker’s income for the previous or annualized calendar year is below the income limit established by HUD (low and very low household income limits are attached);

• The worker is employed by a Section 3 business concern or;

• The worker is a YouthBuild participant.

For the purposes of reporting the labor hours for Section 3 workers, an employer may choose whether to define the workers as Section 3 workers for a five-year period at the time of the workers’ hire or when the workers are first certified as meeting the Section 3 definition. The five-year period for a worker cannot begin before November 30, 2020; therefore Section 3 workers hired prior to November 30, 2020, may be certified for a five-year period beginning November 30, 2020.

A prior arrest or conviction cannot negatively affect the status of a Section 3 Worker pursuant to 24

CFR 75.

Who qualifies as a low to very low-income person?

Low- and very low-income limits are defined in Section 3(b)(2) of the Housing Act of 1937 and are determined annually by HUD. These limits are typically established at 80 percent and 50 percent of the area median individual income.

Note: A worker’s individual income will be used to determine Section 3 eligibility not the family or household income.

HUD income limits may be obtained from: https://www.huduser.gov/portal/datasets/il.html. Please visit the following site annually to view updated HUD issued income limits.

https://www.huduser.gov/portal/datasets/il.html

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Who is a “targeted Section 3 Worker”?

A Section 3 targeted worker for Housing and Community Development Financial Assistance projects is a Section 3 worker who:

• Is employed by a Section 3 business concern; or

• Currently fits or when hired fit at least one of the following categories, as documented within the past five years:

o Living within the service area or the neighborhood of the project, as defined in 24 CFR 75.5; or o A YouthBuild participant

Targeted Section 3 workers do not exclude an individual that has a prior arrest or conviction.

What is a service area or a neighborhood for a Section 3 project?

The Section 3 “service area” or the “neighborhood of the project” is defined as the area within one mile of the Section 3 project or, if fewer than 5,000 people live within one mile of a Section 3 project, within a circle centered on the Section 3 project that is sufficient to encompass a population of 5,000 people according to the most recent U.S. Census. (Note: Section 3 Project Service Area is not the same as the service area for a CDBG project.)

Section 3 Service Area: Neighborhood of a Project:

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How can I identify a service area?

To identify a service area specific to a project location, utilize the direct link below which leads to the HUD issued Neighborhood Service Area Definition tool.

Type in the full location address in the search bar and drag the mile radius amount as needed. In green, the population size will be displayed.

https://hud.maps.arcgis.com/apps/webappviewer/index.html?id=1d27b42dd64e4684ba74fe5bd00f97 https://hud.maps.arcgis.com/apps/webappviewer/index.html?id=1d27b42dd64e4684ba74fe5bd00f9755 https://hud.maps.arcgis.com/apps/webappviewer/index.html?id=1d27b42dd64e4684ba74fe5bd00f9755

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What is YouthBuild?

As defined in 20 CFR 672.100, YouthBuild is a community-based pre-apprenticeship program that provides job training and educational opportunities for at-risk youth ages 16-24 who have dropped out or previously dropped out and reenrolled at high school. Additional criteria may also include migrant youth, youth in foster care (including youth aging out of foster care), youth with a disability, and migrant youth.

As part of a workforce development program, YouthBuild participants learn vocational skills in construction, as well as in other in-demand industries that include health care, information technology, and hospitality. These youth also provide community service through the required construction or rehabilitation of affordable housing for low-income or for families experiencing homelessness in their own neighborhoods.

Additional information and contact information can be found here: https://youthbuild.org/ and https://www.dol.gov/agencies/eta/youth/youthbuild.

https://youthbuild.org/ https://www.dol.gov/agencies/eta/youth/youthbuild

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So, what is a Section 3 Business or a Section 3 Business Concern?

A Section 3 business concern can be any type of business, such as a sole proprietorship, partnership, or a corporation, properly licensed and meeting all legal requirements to perform the contract under consideration.

Pursuant to 24 CFR 75.5, a business concern, which must meet at least one of the criteria set forth below which has been documented within a last six-month period:

How do I locate Section 3 Businesses?

• The Section 3 Business Registry is a listing of firms that have self-certified that they meet one of the regulatory definitions of a Section 3 business (formerly located at:

https://portalapps.hud.gov/Sec3BusReg/BRegistry/SearchBusiness). As of September 1, 2023, the portal has been decommissioned and is no longer active. A copy of the registry last updated before being removed is available in excel format upon written request to HCD. Of note, verification must be completed to confirm that each business listed in the registry meets the definition of a Section 3 business concern before awarding contracts to any firm that is self-certified on this registry.

• The U.S. Small Business Administration (SBA), through the Office of Surety Bond Guarantee, and the U.S. Department of Housing and Urban Development (HUD), through the Office of Field Policy and Management, have collaborated to develop the Small Contractors Initiative Training Curriculum also available here to assist with contracting requirements: https://www.hudexchange.info/programs/small-contractors-initiative/ and https://www.hudexchange.info/programs/small-contractors-initiative/espanol/.

• https://www.pacareerlink.pa.gov/jponline/individual Pennsylvania CareerLink offers assistance for jobseekers in obtaining family sustaining employment. Supporting services include new job alerts, job search tracking tools, career planning, and other resources to support individuals in their search for job openings. Additionally, CareerLink caters to employers via the creation of job posting(s) and free candidate search and matching services. The PA CareerLink Labor Exchange uploads live job postings from contractors who are registered with PA CareerLink. Through this initiative enacted by the Pennsylvania Department of Labor & Industry, a user-friendly, premiere job-matching system has been created to help bridge the gap that currently exists between jobseekers and employers.

• HUD intends to create a web-based tool to support recipients, subrecipients, contractors, and subcontractors in determining the geographic area encompassing Targeted Section 3 workers. Once launched, the within Section will be updated accordingly.

https://portalapps.hud.gov/Sec3BusReg/BRegistry/SearchBusiness https://www.hudexchange.info/programs/small-contractors-initiative/ https://www.hudexchange.info/programs/small-contractors-initiative/ https://www.hudexchange.info/programs/small-contractors-initiative/espanol/ https://www.hudexchange.info/programs/small-contractors-initiative/espanol/ https://www.pacareerlink.pa.gov/jponline/individual

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Prioritization Efforts (with HCD funding):

1. Employment and Training

a. To the greatest extent feasible, and consistent with existing Federal, state, and local laws and regulations, recipients covered by this subpart shall ensure that employment and training opportunities arising in connection with Section 3 projects are provided to Section 3 workers within the metropolitan area (or Non-metropolitan County) in which the project is located.

b. Specifically, where feasible, priority for opportunities and training described in paragraph (a)(1) of section 24 CFR 75.19 should be given to:

i. Section 3 worker residing within the service area or the neighborhood of the project, and

ii. Participants in YouthBuild programs

2. Contracting

a. To the greatest extent feasible, and consistent with existing Federal, state, and local laws and regulations, recipients covered by this subpart shall ensure contracts for work awarded in connection with Section 3 projects are provided to business concerns that provide economic opportunities to Section 3 workers residing within the metropolitan area (or non-metropolitan county) in which the project is located.

b. Where feasible, priority for contracting opportunities described in paragraph(b)(1) of this section should be given to:

i. Section 3 business concerns that provide economic opportunities to Section 3 workers residing within the service area or the neighborhood of the project, and

ii. YouthBuild programs

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Examples of Efforts to Offer Training and Employment Opportunities to Section 3 Workers and Targeted Workers

1. Entering into "first source" hiring agreements with organizations representing Section 3 residents.

2. Establishing training programs, which are consistent with the requirements of the Department of Labor.

3. Advertising the training and employment positions by posting notices and flyers (which identify the positions to be filled, the qualifications required, and where to obtain additional information about the application process) in prominent areas of public view within the service area of the Section 3 covered project.

4. Advertising the jobs to be filled through the local media, including online, community television networks, newspapers of general circulation, and radio advertising.

5. Contacting community organizations, resident councils, resident management corporations, or other resident organizations, where Section 3 and Targeted Section 3 workers may reside, to request the assistance of these organizations in notifying residents of the training and employment positions to be filled.

6. Arranging assistance in conducting job interviews and completing job applications for Section 3 and Targeted Section 3 workers within the service area of the Section 3 covered project.

7. Contacting agencies administering YouthBuild programs and requesting their assistance in recruiting YouthBuild program participants for the contractor's training and employment positions.

8. Employing a job coordinator or contracting with a business concern that is licensed in the field of job placement (preferably one of the Section 3 business concerns identified in Part 75, that will undertake, on behalf of the contractor, the efforts to match eligible and qualified Section 3 residents with the training and employment positions that the contractor intends to fill.

9. Where there are more qualified Section 3 residents than there are positions to be filled, maintaining a file of eligible qualified Section 3 residents for future employment positions.

10. Undertaking job counseling, education, and related programs in association with local educational institutions.

11. Undertaking such continued job training efforts may be necessary to ensure the continued employment of Section 3 residents previously hired for employment opportunities.

12. Coordinating plans and implementation of economic development (e.g., job training and preparation, business development assistance for residents) with the planning for housing and community development.

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13. Help apply for/or attend community college, a four-year educational institution, or vocational/technical training.

14. Held one or more job fairs.

15. Provided training or apprenticeship opportunities.

16. Assisted Section 3 workers to obtain financial literacy training and/or coaching.

Examples of Efforts to Award Contracts to Section 3 Business Concerns

1. In determining the responsibility of potential contractors, considering their record of Section 3 compliance as evidenced by past actions and their current plans for the pending contract.

2. 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.

3. Advertising contracting opportunities by posting notices, which provide general information about the work to be contracted and where to obtain additional information, in the common areas or other public places within the service area of the Section 3 covered project.

4. Contacting resident councils, resident management corporations, or other resident organizations, and requesting their assistance in identifying business concerns.

5. Providing written notice to all known Section 3 business concerns of the contracting opportunities. This notice should be in sufficient time to allow Section 3 business concerns to respond to the bid invitations or request for proposals.

6. Following up with Section 3 business concerns that have expressed interest in the contracting opportunities by contacting them to provide additional information on the contracting opportunities.

7. Coordinating pre-bid meetings of which Section 3 business concerns are informed of upcoming contracting and subcontracting opportunities.

8. Carrying out workshops on contracting procedures and specific contract opportunities in a timely manner so that Section 3 business concerns can take advantage of upcoming

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9. Advising Section 3 business concerns as to where they may seek assistance to overcome limitations such as inability to obtain bonding, lines of credit, financing, or insurance.

10. Arranging solicitations, times for the presentation of bids, quantities, specifications, and delivery schedules in ways to facilitate the participation of Section 3 business concerns.

11. Where appropriate, breaking out contract work items into economically feasible units to facilitate participation by Section 3 business concerns.

12. Contacting agencies administering YouthBuild programs and notifying these agencies of the contracting opportunities.

13. Advertising contracting opportunities online and through trade association papers and newsletters, and through the local media, such as community television networks, newspapers of general circulation, and radio advertising.

14. Actively supporting joint ventures with Section 3 business concerns.

“With Section 3, everyone benefits - from those living in public housing, local employers and neighbors, taxpayers, and the nation as a whole.” Dr. Ben Carson, June 18th, 2018.

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Reporting Responsibilities of Section 3 Compliance

Sub-recipients are required to ensure their own compliance and the compliance of their contractors and/or subcontractors with the Section 3 regulations, as outlined at 24 CFR part 75. Compliance with Section 3 requirements entails: 1. meeting all benchmark goals set forth in 24 CFR 75.23 and 2.

certifying compliance with prioritization requirements found in 24 CFR 75.19.

Failure to comply with the requirements of Section 3 may result in sanctions including: debarment, suspension, or limited denial of participation in HUD programs.

General Contractor Responsibilities

Sub-recipient responsibilities include but are not limited to the following:

1. Facilitating the training and employment of Section 3 workers

The sub-recipient agency shall act as a facilitator, connecting Section 3 workers, residents, and business concerns to training and employment opportunities. This action includes implementing a procedure to identify and document qualified Section 3, and Targeted Section 3 workers.

2. Facilitating the award of contracts to Section 3 Business Concerns The sub-recipient agency must also work to link developers and contractors with capable Section 3 business concerns. Additionally, sub-recipient agencies, when necessary, may direct Section 3 business concerns to organizations that provide capacity-building training.

3. Ensuring Contractor and Subcontractor Certification of Section 3 Goals and Responsibilities The sub-recipient shall notify contractors of requirements and include Section 3 clauses in contracts. HCD jointly with the sub-recipient shall notify contractors and subcontractors of non-compliance and direct instructions to obtaining compliance of regulation 24 CFR 75.

4. Ensuring Compliance and Meeting Numerical Benchmarks

The sub-recipient shall ensure compliance with Section 3 by assessing the hiring and subcontracting needs of contractors; regularly monitoring contractor compliance, providing incentives for good performance; penalizing non-compliance; and refraining from entering into contracts with any contractor that previously failed to comply with the requirements of Section 3.

5. Documenting Actions Taken The sub-recipient will document and report to HCD all actions taken to comply with Section 3 including but not limited to the timely completion of Section 3 related forms set forth in the Appendices. If numerical goals are not attained, the sub-recipient will document the reasons why the benchmarks were not reached, and the best efforts exercised to encourage and facilitate Section 3 compliance.

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Pre- Sitework Requirements: Bidding Procedures All contractors must certify their willingness to comply with Section 3 requirements when submitting a bid or proposal via the execution of a Section 3 Acknowledgment Form (Form A) as provided in the Appendices. Failure to provide this document may jeopardize the bid proposal as being non-responsive, and therefore an ineligible bid.

Advertisements for a bid secured by the sub-recipient must include a reference to Section 3 requirements as required by HCD. Furthermore, the invitation to bid shall include the following language:

The work to be performed under this Agreement is a project assisted under a program providing direct Federal financial assistance from HUD and it’s subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended (12 USC 1702). Section 3 (24 CFR Part 75) requires that to the greatest extent feasible opportunities for training and employment be given to low-and very low-income residents of the project area, and that contracts for work in connection with the project be awarded to business concerns that provide economic opportunities for low-and very low-income persons residing in the metropolitan area in which the project is located."

Of note, and as provided in 2 CFR 200.318, contract awards shall only be made to responsible contractors possessing the ability to perform under the terms and conditions of the proposed contract.

Pre-Sitework Requirements: Contract Requirements

All executed project contracts and subcontracts shall incorporate the HCD Section 3 Requirements attachment which contains the Section 3 Certification Form. In addition to the HCD Section 3 Requirements, the following language must be included verbatim in all contracts with contractors and sub-contractors for construction, rehabilitation, and professional services:

“The work to be performed under this Agreement is a project assisted under a program providing direct Federal financial assistance from HUD and it’s subject to the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended (12 USC 1702).

Section 3 requires that to the greatest extent feasible opportunities for training and employment be given to low-and very low-income residents of the project area, and that contracts for work in connection with the project be awarded to business concerns that provide economic opportunities for low- and very low-income persons residing in the metropolitan area in which the project is located. For businesses, noncompliance with HUD’s regulations in 24 CFR Part 75 may result in sanctions, terminations of this contract for default, and debarment or suspension from future HUD assisted contracts."

Failure to incorporate the above language does not absolve any subrecipient, contractor, or subcontractor from reporting requirements in conformance with 24 CFR 75.27(b).

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Appropriate processes must be implemented by the subrecipient in determining the eligibility for a bid prior to award. The contractor selected must be confirmed to not be on the list of debarred contractors. If further assistance is needed in making this determination, please contact the assigned HCD project administrator.

Reporting Requirements of the Prime Contractor

To comply with Section 3 regulations, the prime contractor must:

1. Certify that they have followed the prioritization effort of 24 CFR 75.19.

2. Report in accordance with 24 CFR 75.25(a):

a. The total number of labor hours worked;

b. The total number of labor hours worked by Section 3 workers; and

c. The total number of labor hours worked by Targeted Section 3 workers.

The labor hours reported must include the total number of labor hours worked on a Section 3 project, including labor hours worked by any contractors, and subcontractors [24 CFR 75.25(a)(3)].

If the contractor does not meet the benchmark requirements, a separate report must be submitted to HCD on the qualitative activities completed in meeting Section 3 requirements.

Reporting Documentation Required by the Prime Contractor The following forms should be submitted to the assigned project administrator after a contract is issued or during the contract lifespan as required (such as personnel changes) to document Section 3 efforts and compliance. A project administrator may request additional periodic Section 3 reports to ensure Section 3 compliance.

1. Form A – Section 3 Acknowledgment Form. This form is to be completed and forwarded to HCD by all Section 3 reporting parties. At a minimum, this form should be executed at time of the bid process.

2. Form B – Section 3 Certification Form. This form is to be executed to verify Section 3 qualifications as a Section 3 Worker, Targeted Section 3 Worker, or a Section 3 Business Concern. Acceptable documentation to establish Section 3 eligibility includes, but is not limited to: proof of residency in a public housing project; or evidence of participation in the YouthBuild program.

3. Form C - Section 3 Compliance Reporting Form. This document tracks prioritization efforts, employees, trades, hours worked, and projects. This form should be completed at time of sitework completion.

a. Section 3 Acknowledgment Form

b. Section 3 Certification Form

c. Section 3 Compliance Reporting Form

Forms are provided in the Appendices. Attachments can be submitted to supplement these forms as needed.

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Part 10 –Documentation and Recordkeeping Requirements Pursuant to 24 CFR 75.34, the final rule requires that HUD has access to all recipient records, reports, and other documents that are maintained to demonstrate compliance. Sub-recipients are expected to plan and to revise processes, systems, and record keeping practices as needed to comply with these requirements.

Requirements for unmet benchmarks [24 CFR 75.25(b)]

If the Section 3 benchmarks described in 24 CFR 75.23 have not been met, the sub-recipient must report on the qualitative nature of its activities and those its contractors and subcontractors pursued. Such justifications should describe best faith efforts that were taken, barriers encountered, and other relevant information that will enable the Department and HUD to make a compliance determination.

Best efforts” and “greatest extent feasible” are terms used in the statute to track compliance.

Traditionally, HUD has used the terms interchangeably. These terms are integral to the statutory intent and provide flexibility, rather than administrative burden, to grantees, recipients, and sub-recipients of HUD funding. HUD has determined not to define the difference between these two terms but rather to increase the emphasis on outcomes because of these efforts. HUD program staff will evaluate the level of effort expended by the grantees and sub-recipients that fail to meet the benchmark safe harbor, and thus will ensure that the statutory terms are being properly enforced.

Each sub-recipient may submit documentation of such efforts in their own formats. A general guide or template to be submitted to HCD is listed as “Form C”. In accordance with 24 CFR 75.25(b), these efforts may include but are not limited to the following:

d. Engaged in outreach efforts to generate job applicants who are Targeted Section 3 workers;

e. Provided training or apprenticeship opportunities;

f. Provided technical assistance to help Section 3 workers compete for jobs (e.g., resume assistance, coaching);

g. Provided or connected Section 3 workers with assistance in seeking employment including: drafting resumes, preparing for interviews, and finding job opportunities connecting residents to job placement services;

h. Held one or more job fairs;

i. Provided or referred Section 3 workers to services supporting work readiness and retention (e.g., work readiness activities, interview clothing, test fees, transportation, child care, etc.);

j. Provided assistance to apply for/or attend community college, a four-year educational institution, or vocational/technical training;

k. Assisted Section 3 workers to obtain financial literacy training and/or coaching;

l. Engaged in outreach efforts to identify and secure bids from Section 3 business concerns;

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m. Provided technical assistance to help Section 3 business concerns understand and bid on contracts;

n. Divided contracts into smaller jobs to facilitate participation by Section 3 business concerns;

o. Provided bonding assistance, guaranties, or other efforts to support viable bids from Section 3 business concerns;

p. Promoted use of business registries designed to create opportunities for disadvantaged and small businesses;

q. Outreach, engagement, or referrals with the state one-stop system as defined in Section 121(e)(2) of the Workforce Innovation and Opportunity Act.

Part 11 – HCD Assistance to Subrecipients and Contractors to Achieve Section 3 Benchmarks

HCD Staff will have direct oversight of Section 3 related activities and will conduct regular compliance reviews including monitoring (as outlined in the Appendix) to support the section 3 program. HCD Staff will also support sub-recipients and their contractors with little or no experience in achieving Section 3 hiring and contracting goals by:

• Clearly communicating recordkeeping requirements;

• Requiring the contractor to present a list of the number of subcontracting and/or employment opportunities expected to be generated from the initial contract;

• Providing the contractor with a list of interested and qualified Section 3 residents for construction projects;

• Sending an “e-blast” to the HUD Section 3 Business Registry and providing the contractor with a list of Section 3 business concerns interested and qualified for construction projects;

• Reviewing bid documents and contracts prior to execution to ensure that the Section 3 requirements are clearly enumerated and incorporated;

• Presenting Section 3 Requirements during the mandatory project Pre-Construction

Conference;

• Providing an overview of the Section 3 Opportunity Portal and supplemental resources available on the HUD Exchange Section 3 webpage;

• Verifying completion of and submission of Section 3 related documentation including but not limited to completed Section 3 Certification forms and related reporting forms;

• Wherever possible, encouraging local businesses to register on the HUD Section 3 Business

Registry;

• Periodically provide updates to Section 3 Requirements and available resources…