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Session PurposeSession Purpose

Clarify Section 3 responsibilities Clarify Section 3 responsibilities to: to:

1)1)Ensure compliance with the Ensure compliance with the annual reporting requirements; annual reporting requirements; and and

2)2) Increase overall Increase overall compliance with the objectives compliance with the objectives of the regulatory requirements of of the regulatory requirements of Section 3Section 3

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A Changing DiscussionA Changing Discussion

Renewed emphasis on Renewed emphasis on enforcement of Section 3.enforcement of Section 3.

Previous discussions largely Previous discussions largely involved “how to involved “how to avoidavoid the the intent of the law.intent of the law.

New discussion “how to New discussion “how to implement creatively the spirit implement creatively the spirit of the law to get of the law to get results.”results.”

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What is Section 3?What is Section 3?

Section 3 of the Housing and Section 3 of the Housing and Urban Development Act of 1968 Urban Development Act of 1968

Implementing regulations at: Implementing regulations at: 24 CFR Part 13524 CFR Part 135

Statute: 12 U.S.C. 1701uStatute: 12 U.S.C. 1701u

Purpose/IntentPurpose/Intent

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Section 3Section 3 To ensure that economic To ensure that economic opportunities generated by opportunities generated by

certain HUD funded projects certain HUD funded projects shall, shall, to the greatest extent to the greatest extent

feasiblefeasible, , andand consistent with consistent with existing Federal and State laws, existing Federal and State laws, be directed to low- and very low-be directed to low- and very low-

income persons (particularly income persons (particularly those receiving assistance for those receiving assistance for

housing), and to the businesses housing), and to the businesses that provide economic that provide economic

opportunities to these persons.opportunities to these persons.

To the Greatest Extent Feasible

…what does this mean???

Simply Stated….Simply Stated…. HUD funds are one of the largest HUD funds are one of the largest

sources of federal dollarssources of federal dollars

Typically result in new contracts, Typically result in new contracts, employment or training employment or training opportunitiesopportunities

If economic opportunities are If economic opportunities are created…Section 3 residents and created…Section 3 residents and businesses receive preferencebusinesses receive preference

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Failure to Comply with Failure to Comply with Section 3Section 3

HUD holds direct recipients HUD holds direct recipients of covered funding of covered funding

accountable for their own accountable for their own compliance, and the compliance, and the compliance of their compliance of their subrecipients and subrecipients and

contractorscontractors

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Penalties for Penalties for NoncomplianceNoncompliance

Sanctions for noncompliance Sanctions for noncompliance include:include:

DebarmentDebarment SuspensionSuspension Limited Denial of Participation Limited Denial of Participation

in HUD Programsin HUD Programs

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Funding ThresholdsFunding Thresholds

The requirements for Section 3 The requirements for Section 3 apply to recipients of HUD CPD apply to recipients of HUD CPD funding exceeding funding exceeding $200,000$200,000. .

Contractors or subcontractors Contractors or subcontractors that receive contracts in excess that receive contracts in excess of of $100,000$100,000 are required to are required to comply with Section 3 in the comply with Section 3 in the same manner as the recipients.same manner as the recipients.

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Applicability to Entire Applicability to Entire ProjectProject

Section 3 requirements apply Section 3 requirements apply to the to the entireentire project or project or

activity regardless if the activity regardless if the project is fully or partially project is fully or partially

funded with covered financial funded with covered financial assistance. assistance.

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What What SectionSection 3 is 3 is NOTNOT……

A Racial Quota ProgramA Racial Quota Program

An Entitlement for Eligible An Entitlement for Eligible Individuals and Businesses Individuals and Businesses

Only applicable to Direct Only applicable to Direct RecipientsRecipients

Optional—It’s the law!Optional—It’s the law!

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Section 3 Economic Section 3 Economic OpportunitiesOpportunities

Section 3 regulations do not Section 3 regulations do not require hiring/contracting unless require hiring/contracting unless it is necessary to complete the it is necessary to complete the project. project.

**** Only triggered when covered Only triggered when covered projects projects require “new” hires or require “new” hires or contracting contracting opportunitiesopportunities

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Section 3 Economic Section 3 Economic OpportunitiesOpportunities

Not limited to low-wage Not limited to low-wage construction jobsconstruction jobs

Prospective Section 3 Prospective Section 3 eligible employees or eligible employees or businesses must businesses must demonstrate that they are demonstrate that they are qualified qualified

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Section 3 ResidentsSection 3 Residents

Residents of Public Housing; Residents of Public Housing; or or

Low- and very low-income Low- and very low-income persons residing in the persons residing in the metropolitan area or non-metropolitan area or non-metropolitan countymetropolitan county

Certification of EligibilityCertification of Eligibility

Section 3 & MinoritiesSection 3 & Minorities

Section 3 of the HUD Act is Section 3 of the HUD Act is race-neutral.race-neutral.

The preferences provided The preferences provided by this federal act are by this federal act are based on based on incomeincome and and location.location.

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Additional Section 3 ResidentsAdditional Section 3 Residents

Persons receiving unemployment Persons receiving unemployment benefits or other government benefits or other government subsidiessubsidies

Returning VeteransReturning Veterans

Recent College or Vocational Recent College or Vocational School Graduates School Graduates

Women in non-traditional careersWomen in non-traditional careers

Youthbuild participantsYouthbuild participants

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Section 3 Business Section 3 Business ConcernsConcerns

1.1.Owned (51%) by Section 3 Owned (51%) by Section 3 residents;residents;

1.1.Substantially employs Section 3 Substantially employs Section 3 residents (30% or more); or residents (30% or more); or

1.1.Can provide evidence of Can provide evidence of commitment to subcontract commitment to subcontract 25% of work to another Section 3 25% of work to another Section 3 Business Business

Certification of EligibilityCertification of Eligibility

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QuestionsQuestions

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Responsibility #1Responsibility #1

Implementing procedures Implementing procedures designed to comply with designed to comply with

the requirements of the requirements of

Section 3Section 3

Strategies to target Section 3 Strategies to target Section 3 residents and businesses residents and businesses

Certification/Selection criteriaCertification/Selection criteria

Process for informing Process for informing contractor’s about contractor’s about responsibilities and assessing responsibilities and assessing hiring/subcontracting needshiring/subcontracting needs

Section 3 PlansSection 3 Plans

Penalties for noncompliancePenalties for noncompliance

Incentives for good performersIncentives for good performers

Reporting RequirementsReporting Requirements

RecordkeepingRecordkeeping

Section 3 Coordinator Section 3 Coordinator

Section 3 PlansSection 3 Plans

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Responsibility #2Responsibility #2

Notify Section 3 residents Notify Section 3 residents about training and about training and

employment opportunities and employment opportunities and Section 3 businesses about Section 3 businesses about contracting opportunitiescontracting opportunities

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Responsibility #3Responsibility #3

Notify covered Notify covered contractors about the contractors about the

requirements of requirements of

Section 3Section 3

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Responsibility #4Responsibility #4

Incorporate the Section Incorporate the Section 3 clause into covered 3 clause into covered

solicitations and solicitations and contractscontracts

24 CFR Part 135.3824 CFR Part 135.38

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Responsibility #5Responsibility #5

Facilitate training and Facilitate training and employment of Section 3 employment of Section 3

residents and award residents and award contracts to Section 3 contracts to Section 3

businesses, as businesses, as appropriate to reach the appropriate to reach the

minimum numerical minimum numerical goalsgoals

Minimum Numerical Goals:Minimum Numerical Goals: 30% of new hires annually30% of new hires annually

10% of the total dollar amount of 10% of the total dollar amount of covered construction contractscovered construction contracts

3% of the total dollar amount of 3% of the total dollar amount of covered non-construction covered non-construction contractscontracts

Responsibility #6Responsibility #6

24 CFR Part 135.3024 CFR Part 135.30

Numerical Targets (may be Numerical Targets (may be exceeded)exceeded)

Safe Harbor Compliance Safe Harbor Compliance

Other Efforts Taken to Achieve Other Efforts Taken to Achieve Compliance Compliance

Minimum Numerical Minimum Numerical GoalsGoals

Assisting and actively Assisting and actively cooperating with the cooperating with the Assistant Secretary in Assistant Secretary in

obtaining the obtaining the compliance of compliance of

contractorscontractors

Responsibility #7Responsibility #7

Refrain from entering Refrain from entering into contracts with into contracts with contractors that fail contractors that fail

to complyto comply

Responsibility #8Responsibility #8

Documenting actions Documenting actions taken to comply with taken to comply with the requirements of the requirements of Section 3, results of Section 3, results of actions taken, and actions taken, and

impediments, impediments, if anyif any

Responsibility #9Responsibility #9

State or County State or County agencies must attempt agencies must attempt to reach the numerical to reach the numerical goals regardless of the goals regardless of the

number of local number of local governments that governments that receive fundingreceive funding

Responsibility #10Responsibility #10

State or County must State or County must inform sub-recipients of inform sub-recipients of the requirements of this the requirements of this

part, assist them and part, assist them and their contractors with their contractors with

complying, and monitor complying, and monitor performanceperformance

Responsibility #10Responsibility #10continuedcontinued

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Additional ResourcesAdditional Resources

Please visit HUD’s webpage:Please visit HUD’s webpage:www.hud.gov/section3

Guidance for RecipientsGuidance for Recipients Sample DocumentsSample Documents Link to Online Reporting Link to Online Reporting Upcoming TrainingsUpcoming Trainings Model ProgramsModel Programs Contact Information Contact Information Section3@hud.gov

Contact Information

Guy Stockard stockardg@michigan.gov 517-373-6725