Recent Changes to UPCS Inspection Services Purchase Order Terms and Conditions

The Impact of Recent Changes to UPCS Inspection Services Purchase Order Terms and Conditions

On April 15, 2017, HUD REAC released "Uniform Physical Condition Standards (UPCS) Inspection Services Purchase Order Terms and Conditions," which is essentially a set of business rules for HUD REAC Inspectors. Much of this document deals with intricate details known to REAC Inspectors about what processes must occur when conducting inspections. The majority of the information in this document has little or no impact on the Multifamily Housing management industry, but some of it does. For the convenience of our readers, we have highlighted the document linked above, and will summarize the changes here as well:

  • In section 5, there are new changes that relate to scheduling and confirmation requirements for REAC Inspections. Among that is a welcome new requirement that inspectors must provide notification if the REAC inspector assigned to a property is being changed, as well as new, much more precise requirements on the steps and required documentation for giving owner and agents notice of the physical inspection. In the document, there are very specific outlines for cancellation, substitution of REAC Inspectors, cancellation due to conditions outside of owner's control (fire, weather, etc.). The most notable new requirement in this section is included below:5.1 - Scheduling Protocol: In this section, it is clarified that the inspections must be done on a mutually agreed upon date and that inspectors must provide a minimum of 3 unique dates to arrive at a scheduled date. It should be noted that the owner/agent does not have to accept any one of those three dates. If any of the days suggested are not available for the owner/agent, the REAC Inspector will need to continue negotiating a date within the established period of performance (how long the inspector has to complete the inspection). Additionally, the inspection has to be scheduled within 20 days of the date the inspector was awarded the inspection.

In Section 7 of the document, there are considerable changes to Quality Assurance procedures and methods. This includes new and more varied types of Quality Assurance inspections, including essentially a repeat of a REAC Inspection to provide a comparison against the original results, which is referred to as both an Independent Quality Assurance (IQA) Inspection, and a repeat inspection called a Quality Control Inspection (QCI). Most interestingly, HUD REAC is now offering discretionary performance "bonuses" to inspectors who are found to have "excellent" performance. This is essentially a premium paid to contract inspectors if they are found to be within 90% of the QCI or IQA comparison. This does mean that there is an incentive for inspectors to be more accurate, which may result in a higher volume of deficiencies.

  • 7.2 - After the inspector completes the inspection, then it is subject to review by REAC. The review includes timestamp data analysis, verification of the property profile, analysis of the inspector's recordings, and inspections conducted by HUD's Quality Assurance Inspectors. REAC may request and consider feedback from tenants, HUD field offices, owners/agents or any other methods REAC feels appropriate when assessing the quality of the inspection. This review is the basis for whether or not REAC accepts the inspection or throws it out.
  • 7.3.1 - An Independent Quality Assurance (IQA) may be conducted on the same day or within a few days of the contract inspection. If the comparison does not meet REAC standards, then the contract inspectors inspection will be unsuccessful. "if the comparison finds the contract inspection was excellent (meets standards at 90% or greater), the contractor may receive an incentive payment in addition to the full bid price."
  • 7.3.2 - A Quality Control Inspection (QCI) with a QA may be scheduled after the contract inspector has uploaded his inspection and may be weeks after the initial inspection. The same standards apply as the IQA.
  • 7.3.3 - A Collaborative Quality Assurance (CQA) inspection is a training tool used to strengthen inspectors skills regarding the UPCS protocol. The HUD QA inspector does this review of the contract inspector during the inspection while both sets of eyes are observing possible deficiencies.
  • 7.3.4 - The Limited Quality Assurance (LQA) is a review that happens after a contract inspector has uploaded the inspection and is used to determine if the inspection represents the actual condition of the property. If it determines that the inspection did not meet the REAC standards, then the inspection may be rejected, and a re-inspection will be required.

What does this mean to you?

The changes to HUD REAC scheduling guidelines are welcome, as there have been inconsistencies in how inspections are scheduled, and the rules listed for inspectors appear to be right on target with a solid professional approach. In this document there is additional discussion about HUD REAC Inspectors receiving more training, which is also an excellent idea. But all of this increased level of professionalism and an increased level of focus on accuracy and quality of inspector performance, does mean that the industry needs to be more attentive to new and old requirements and stop relying on what happened on the last inspection as a gauge.

As we say at each our training events, REAC Inspections are not meant to be a learning experience; they are meant to be an inspection to determine what you already know and how you are performing. Just as with the rest of HUD and LIHTC Compliance, there are defined rules and regulations, and it is vital that everyone in your organization is intimately familiar with them - it is not good enough to simply have an attractive property, you need to make sure that you are following the rules as well.

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