Lesson 10: Cost limits, match and defensible procurement

Reading

Keep three different ceilings visible

The HRA activity budget must satisfy the applicable TDHCA cost limits, the federal HOME subsidy ceiling and the homeownership value limit. They measure different things. A house can satisfy one and fail another. Use a budget worksheet that identifies the assistance type, applicable commitment dates, current limit sources, approved costs, match and other financing. Do not call every dollar in the file a construction cost.

The adopted 23.27 text sets the ordinary site-built limit at the lesser of $150 per square foot of conditioned space or $175,000. For qualifying households of five or more persons requiring four bedrooms, the stated comparison uses $200,000 instead of $175,000. The MHU acquisition and placement limit is $125,000. These are the adopted rule's base amounts: 23.27(a) allows specified Board adjustments and directs users to current posted limits. Confirm any adjustment and the executed household commitment before approving a live budget.

Calculate before adding special categories

For a training example using the unadjusted ordinary base rule, 1,100 square feet times $150 equals $165,000. The lesser of $165,000 and $175,000 is $165,000. At 1,300 square feet, the product is $195,000, so the ordinary base limit is $175,000. The larger-household exception requires both the household-size condition and the need for a four-bedroom unit; it is not an elective upgrade.

Section 23.27(e) provides up to $15,000 for each applicable listed additional category: necessary environmental mitigation or qualifying hazardous conditions, aerobic septic installation, and requested accessibility features for a household member with a disability. These amounts are not automatic cash bonuses. Document the need, scope, eligibility, reasonable price and approval. The federal ceiling and other applicable restrictions still apply.

Separate soft costs, administration and contingency

The rule lists site-built and MHU soft-cost categories and specified reasonable third-party costs. Use the actual line-item classifications rather than moving an over-budget construction charge into administration. The HRA administrative cap in 23.27(j)(1) is no more than five percent of Direct Activity Costs excluding match. The contingency provision in 23.31(a)(2) is a separate maximum of five percent of hard construction costs. Their bases are not interchangeable.

For a hypothetical approved Direct Activity Cost base of $160,000 excluding match, five percent is $8,000. That arithmetic does not itself approve a fee or a draw. Administrative disbursement must also follow the proportional-draw requirement and agreement. For an eligible hard-cost base of $140,000, a five-percent contingency is $7,000. Do not represent contingency as permission to perform unapproved work.

Document match by activity

Section 23.23 sets population-based match requirements and specified exceptions. Determine the actual rate for the approved service area and funding source; do not assume every Region 6 activity has zero match. Section 23.25(d) prevents transferring match between activities. Record source, eligible value, timing and supporting evidence for each contribution. A contribution is not eligible merely because someone labels it a donation.

Under 23.31(c)(3), no more than fifty percent of an activity's funds may be drawn before match evidence is supplied, and subsequent evidence must track the required draw proportion. Keep the match ledger connected to the draw ledger. Confirm valuation and eligibility before counting donated work, fee waivers or other contributions. Avoid double-counting the same contribution across households or programs.

Procure the actual work fairly

The current 23.26(4) requires written procurement procedures, conduct standards, defined criteria and competition. A consultant cannot direct its own procurement. Professional services are not selected solely on lowest price. Construction procurement must not include prohibited geographic preferences or insurance requirements exceeding the rule's limits. Solicitations need clear specifications, disclosures and the required protest and evaluation information.

Prepare an independent estimate, issue a consistent scope, document questions and responses, evaluate bids using the announced criteria, check exclusions and conflicts, and preserve the award rationale. A cheap bid that omits required work is not directly comparable with a complete bid. Resolve ambiguities through the authorized procurement process. Obtain required program review before committing funds, and reconcile the final award with the approved budget and design.

Apply it in the file

• Identify current base limits and any authorized adjustment.
• Calculate the lesser-of test with documented conditioned area.
• Support each additional category and cost classification.
• Verify match rate, eligibility and timing.
• Retain the independent estimate, competition and award rationale.

Open the budget and draw practice calculators

Authorities for this lesson

• 10 TAC 23.20–23.29: text adopted without changes
• 10 TAC Chapter 23: current official rule portal
• 24 CFR Part 92: HOME regulations
• TDHCA current HRA subsidy and value limits

Practice questions

Glossary

Direct Activity Costs

Costs classified under the program definition for the specific activity.

Soft costs

Eligible activity costs other than the applicable construction categories.

Contingency

A limited budget allowance subject to program approval rules.

Retainage

A portion of construction cost withheld pending required conditions.

Independent estimate

A documented cost estimate prepared apart from bidders.

Cost reasonableness

Evidence that a proposed charge is reasonable for the required work.