be desirable under these procedures and including substantially the following provisions:

Housing project at family units as follows:

consisting of

Number of units

Number of bedrooms

per unit

Average maximum gross rent per unit

The project shall be designed to qualify under title VIII of the National Housing Act as amended, at the average maximum gross rents specified for mortgage insurance in an amount not to exceed 90 percent of the FHA estimated total replacement cost, and to this end the A. and E. shall at all times consult with the local office of the FHA to coordinate and comply with its construction and fiscal policies, criteria and standards. Maximum gross rent is defined to include all charges for the dwelling, utilities, equipment and services. It is understood by the A. and E. that upon approval of the final plans and specifications, the Government intends to submit them to the FHA for an appraisal and eligibility statement. In the event that such appraisal and eligibility statement does not qualify the project as designed for mortgage insurance within the maximum gross rents specified herein or in the event it appears from such statement that the project as designed may be materially improved within the maximum gross rents specified herein and still qualify for mortgage insurance, the A. and E., without additional cost to the Government shall make such changes in the final plans and specifications as may be necessary to qualify the project as designed for mortgage insurance, or to provide the maximum housing possible within such rents.

The contract shall also include a provision permitting the use of the plans and specifications for other housing projects without additional compensation to the A. and E. The contracts may provide for either the development and preparation of original plans and specifications by the A. and E., or for adaptation of Government-furnished plans and specifications.

d. The Chief of Engineers and the Chief, Bureau of Yards and Docks, will establish field liaison procedures to insure exchange of information pertinent to negotiation of A. and Ê. contracts in localities of common interest. To the extent feasible, standard plans or plans of projects previously developed will be utilized. In order to obtain construction at the earliest possible date, the Secretaries of the Army and Air Force will delegate final approval of A. and E. contracts for title VIII housing projects to the Chief of Engineers, and a similar delegation will be made by the Secretary of the Navy to the Chief, Bureau of Yards and Docks. Procedures normal to private practice, in regard to specifying the use of proprietary items or equal and types of construction acceptable to FHA, will be followed by the A. and E. in the development of project plans and specifications. e. Contact between the A. and E., military field office, and the FHA insuring office which will furnish detailed advice, counsel and guidance during this phase, will be continuous during the preparation of plans, specifications, and other data required for FHA commitment to insure maximum housing within the prescribed rental. During the initial meeting between the A. and E., the military field office, and the FHA insuring office, a request for appraisal and eligibility statement (FHA Form 3302) will be submitted.

f. When plans, specifications, and other data required by FHA are complete and cost estimates and insurable limits have been arrived at, the FHA will convey to the military field office an appraisal and eligibility statement including statements of maximum average rental, maximum insurable mortgage, and maximum replacement cost. Simultaneously, the local FHA insuring office will send copies of the appraisal and eligibility statement to the FHA Comptroller in Washington who will bill the service concerned at the Washington level and at the rate of $1.50 per $1,000 of the amount of the insurable mortgage. This amount will be refunded to the service by the FHA after the selected sponsor has been given an FHA commitment to insure and after his commitment fee has been deposited with the FHA.

3. Invitation for proposal.—a. When a satisfactory appraisal and eligibility statement has been obtained from the FHA, the military field office will invite proposals from interested sponsors. The invitation will state the following but not be limited thereto:

a-1. That proposals shall include submittal of FHA Form 2013-W completed in detail except for page 1.

a-2. That the approved rental schedule will be based upon a net return not exceeding 61⁄2 percent of the sponsor's estimated replacement cost or the FHA estimate of replacement cost, whichever is the lesser. By "net return" is meant the amount after the provision for payment of all operating expenses, reserves and taxes, and vacancy allowance, but before payment of debt service.

a-3. That the maximum approved amount of insurable mortgage will in no event exceed 90 percent of the sponsor's total estimated replacement cost stipulated in his proposal.

a-4. That the FHA will require escrow deposits or other satisfactory assurance of the mortgagor's ability to complete the project, determined on the basis of the amount required to meet the difference between the mortgage amount and the FHA estimate of replacement cost or the mortgagor's estimate of replacement cost stipulated in his proposal, whichever is greater. Additional escrows will be required to cover offsite requirements and to provide initial working capital in the amount of 11⁄2 percent of the mortgage.

a-5. That the sponsor selected will be required to reimburse the Government for the use of the A. and E. plans and specifications an amount equal to the amount paid by the Government for A. and E. services incident to development of the project, and further will be required to pay the usual processing fees to FHA.

a-6. That the proposal of a sponsor which provides desired housing at the lowest bid replacement cost (total estimated requirements, FHA Form 2013-W) will be selected. The sponsor selected will complete his arrangements with the military field office for obtaining any lease, utilities sales contracts, or other written contracts involved in the project, will make arrangement for mortgage financing and submit to the FHA through the mortgagee, the required application for mortgage insurance with all of the required exhibits attached, including the proposed rent schedule and the certificate of the respective Secretary as to the need for the housing.

a-7. That the sponsor will submit with his proposal the name and business address of his principal contractor and the management firm. Any change in principal contractor or management firm will be subject to prior approval of FHA and the using service.

a-8. The appraisal and eligibility statement information obtained from FHA, including the FHA estimated total replacement cost, the maximum allowable insurable mortgage, the maximum allowable rental schedule, the percentage of assumed vacancies, the amount of total operating expense and reserves for replacements per room per year included in the FHA maximum allowable rent, the estimate of real estate taxes (where applicable) and the equipment and services included in the rent will be made available to sponsor. Sponsors will be advised that this information is made available in order that they may know the factors which enter into the preparation and evaluation of proposals.

b. Copies of uniform land lease and utilities sales contract forms will be furnished to sponsors with the invitation for proposals.

4. Selection of sponsor.-a. The military field office will select the proposal which provides the desired housing at the lowest bid replacement cost, and will request certification to the FHA by the service Secretary concerned.

b. The sponsor selected will be furnished the certification of need for military housing (FHA Form 3301) and will file his completed application for mortgage insurance on FHA Form 2013-W with the FHA insuring office, at which time the qualifications of the mortgagor will be examined.

c. If the sponsor so selected is not qualified, the military field office will be so advised by the FHA, and the sponsor submitting the next higher proposal will file his application for mortgage insurance as outlined in step (b) above. The same procedure will be followed, if necessary, with other sponsors in order.

d. Inspection of construction will be made by FHA in accordance with its normal procedures, and advances of mortgage proceeds during construction will be based on percentages of completion shown by these inspections.

e. The FHA will authorize the inclusion of a sufficient amount in the initial release of mortgage proceeds to permit the sponsor to reimburse the military services for A & E costs incurred by the Government.

f. Reimbursement will be made to the appropriation which was the source of funds advanced to FHA and the A & E by the military services.

5. Lease.-a. A uniform lease form will be used by the repective services for purposes of title VIII housing as a basis for negotiation in accordance with attachment (2) herewith.

6. Utilities sales contracts.-a. A uniform utilities sales contract form will be used by the respective services for purposes of title VIII housing as a basis for negotiation in accordance with attachment (3) herewith.

7. Funds. a. The Secretary of Defense will approve requests for apportionment of funds from public works appropriations to cover the costs of A. & E. services, payment of the FHA appraisal and eligibility statement processing fee and the cost of procuring options from private parties for acquisition of land for off-installation sites intended for title VIII rental housing.

8. Reports. a. Progress records of projects under this program will be furnished to the Office of the Comptroller by the services for the following actions: (1) Directive to OCE or to BuDocks to proceed.

(2) Selection and name of A&E contractor and fee.

(3) Application to FHA for Appraisal and Eligibility Statement.

(4) Appraisal and Eligibility Statement by FHA (amount and date).

(5) Solicitation of proposals.

(6) Selection, amount of proposal, name of sponsor and certification to FHA.

(7) Amount of FHA firm commitment.

(8) Initiation of construction.

(9) Availability for occupancy.

9. FHA, Office of Comptroller relationships.—a. Contacts between any service and the Washington office of FHA will be made through the Office of the Comptroller, OSD.

10. The procedures stated herein will be followed in selection of sponsors on private sites as well as for projects on Government sites. Detailed instructions concerning the procedures to be followed in optioning land will be issued at a later date.

11. The Commissioner of the FHA is in agreement with these instructions, and will issue appropriate directives to FHA field offices accordingly.

AMENDMENTS TO DEPARTMENT OF DEFENSE INSTRUCTIONS FOR THE SELECTION OF SPONSORS AND PROCESSING OF PROJECTS UNDER TITLE VIII OF THE NATIONAL HOUSING ACT (AS AMENDED), DATED APRIL 27, 1950, WHICH WERE AN ENCLOSURE TO THE MAY 1, 1950, DIRECTIVE OF THE ASSISTANT SECRETARY OF DEFENSE (COMPTROLLER) TO THE SERVICE SECRETARIES Paragraph 3 a-1. Change the period at the end of this section to a comma and add the following: "and FHA Form 2417 completed in detail for each principal in the proposed mortgagor corporation; a statement of experience in this type of housing venture from the proposed principals of the mortgagor corporation and the proposed construction contractor and management agents; statements of the proposed construction contractor and management agents acknowledging their participation in this proposal; and an affidavit from each principal in the proposed mortgagor corporation that he is not participating in more than one proposal under this invitation."

Paragraph 3 a-2. Between the first second sentences insert the following: "Further, the maximum average rental shall not exceed that approved by the services for each project."

Paragraph 3 a-6. Following the parenthesis in the first sentence insert the following: "who is deemed acceptable for mortgage insurance processing". Paragraph 3 a-7. Delete the first sentence.

Paragraph 4 a. Delete the entire paragraph and insert the following: "4 a. The military field office will select the proposal of a sponsor who will provide the desired housing at the lowest bid replacement cost and who is deemed acceptable for mortgage insurance processing. Clearance as to acceptability for processing will be given by the FHA insuring office upon request from the military field office. In the event that clearance is not given, the FHA insuring office will furnish the military field office with a written statement to that effect, and the military field office will advise the sponsor accordingly. The military field office will then request certification to the FHA by the Service Secretary concerned of the lowest bidder to obtain clearance".

Paragraph 4 b. Delete the last word "examined" and substitute therefor the word "determined".

Paragraph 4 c. Near the end of the first sentence, delete "step (b)" and substitute therefor “steps (a) and (b)”.

FEDERAL HOUSING ADMINISTRATION
Washington 25, D. C.

May 12, 1950

Title VIII
Military Housing
Letter No. 4

To: Directors of all field offices
Subject: Revised policy and procedure under title VIII of the National Housing
Act.

Attached hereto is a copy of Public Law 498-81st Congress, approved May 2, 1950, which amends Title VIII of the National Housing Act. This amendment to Title VIII was made in order to accelerate the Military Housing program. Set forth herein below are such changes in procedure and policy as are deemed necessary to comply with this amendment.

By agreement between the Department of Defense and the Federal Housing Administration close cooperation and coordination will be maintained at all times. Under the new policy and procedure, the respective Military services will determine the number of dwelling units needed at any one Military installation During this period, the Military will consult with the insuring office with jurisdiction in order to ascertain the number of rental units available for occupancy and the number of rental units proposed for construction in the area that would serve the installation. The insuring office shall furnish the above information and such other advice and counsel as may be desired by the Military at that time. The services of a Housing Market Analyst will generally be available, on request, to assist in the preparation of whatever surveys or analyses may be needed. In the event there is a disagreement between the insuring office and representatives of the Military establishment as to the availability of housing, the matter will be referred to the respective Washington headquarters for resolution.

When the Military and the FHA have agreed upon a definite number of rental units needed to serve the particular installation, the Military will enter into a contract with an architect. Upon request from the Military, if the insuring office with jurisdiction has knowledge of architects with experience in FHA rental housing, the insuring office will furnish a complete list of such architects to the Military.

After the Military has selected an architect in accordance with the preceding paragraph it will submit in triplicate to the local insuring office FHA Form 3302, Request for Appraisal and Eligibility Statement. The original and one copy of FHA Form 3302 shall be retained for the Washington and Field office dockets, respectively. One copy of this form shall be forwarded to the Assistant Commissioner, Rental Housing and Property Management.

Immediately upon receipt of FHA Form 3302, Request for Appraisal and Eligibility Statement, the insuring office shall submit in duplicate to this office FH-21a, Request for Determination of Prevailing Wages. The form shall be dated as of the date that it is submitted to this office and shall be numbered in accordance with the procedure set forth below. It will be necessary for the insuring office to fill in only the blank spaces disclosing the type of buildings, type of construction, number of family units, and the location of the proposed project. The FH-21a need not be signed. Based upon the request for determination of prevailing wages, the Department of Labor will furnish an estimate of prevailing wages listing necessary classifications and the hourly wage rate applicable thereto for constructing the type of project described. You are cautioned that at this time the Department of Labor will make only an estimate of prevailing wages and not a predetermination of prevailing wages. This estimate of prevailing wages is necessary since, in arriving at the total estimate of replacement cost of the property, the cost of labor necessary to construct the project must be based upon the estimate of prevailing wages, as determined by the Secretary of Labor, for the specific project.

Upon receipt of FHA Form 3302, the insuring office will furnish detailed advice, counsel, and guidance to the military and the architect while the plans, specifications, and other data are being developed. During this period contacts between the architect representing the military and the FHA will be practically continuous and the insuring office will afford full cooperation with both the architect and the Military field office. During the development of plans and specifications by the architect, the insuring office will furnish such cost information as may be necessary in connection therewith. As soon as the plans and specifications have been completed the insuring office will make an estimate of the total replacement cost of the property and other appraisal data. Every effort shall be made,

in cooperation with the architect, to develop a rental project with a replacement cost that will permit a rent not in excess of the figure established by the Military. In arriving at the estimated net income, after operating expenses and taxes, it has been determined that in noncompetitive areas, at the discretion of the Director with jurisdiction, an occupancy ratio not exceeding 97% may be used rather than 93% as heretofore.

In arriving at the total estimate of replacement cost, the fee allowed for the architect shall be the exact amount set forth in the architect's contract. A copy of the architect's contract will be furnished to the insuring office by the Military field office along with FHA Form 3302.

After the detailed plans and specifications have been completed by the architect for the Military service and the total estimate of replacement cost has been determined by the insuring office, FHA Form 3303, Appraisal and Eligibility Statement, will be issued to the Military showing the maximum insurable mortgage, the total estimated replacement cost, and the maximum average monthly rent. FHA Form 3303 shall be prepared in quintuple. The original and one copy shall be transmitted to the Military field office involved, one copy shall be retained for the field office docket, one copy for the Washington docket, and one copy shall be forwarded to the Assistant Commissioner, Rental Housing and Property Management. As stated in the note on FHA Form 3303, a copy of the estimate of prevailing wages shall be attached thereto. This copy of the estimate of prevailing wages is for the information of prospective sponsors in order that they may know the wage rates which were used in estimating the cost of labor going into the construction of the proposed project.

FHA Form 3303 shall be for a term of not more than 90 days. The term of the statement may be extended for additional 30-day periods. Letters extending the term of a 3303 shall be distributed in the same manner as the statement.

Upon delivery of FHA Form 3303, there will be due and payable from the Military to the FHA a fee calculated at the rate of $1.50 for each one thousand dollars of the amount of the maximum insurable mortgage stated therein. The Comptroller for FHA will bill the Military for the amount due. If, as a result of the issuance of FHA Form 3303, an Application for Mortgage Insuarance is subsequently received from an approved mortgagee and the Commissioner receives as earned the full established application and commitment fees from the mortgagee, the Comptroller will refund to the Military the amount previously received in connection with the issuance of FHA Form 3303.

When the Appraisal and Eligibility Statement is received by the Military, based upon the information set forth therein and upon the completed detailed working drawings and specifications, the Military will prepare bid documents and invite proposals from interested prospective sponsors. The Military field office will select the sponsor whose proposal provides the desired housing at the lowest bid replacement cost. The bid documents will require that the successful sponsor construct the project for an amount not in excess of FHA total estimate of replacement cost. The approved rental schedule will be based upon a net return not exceeding 6%% of the sponsor's estimated replacement cost of the FHA estimate of the replacement cost, whichever is the lesser. The maximum insurable mortgage may in no event exceed 90% of the sponsor's total estimate of replacement cost stipulated in his proposal.

The Military establishment concerned will furnish the local insuring office with FHA Form 3301, Certification of Need for Military Housing, which will identify the sponsor selected. The sponsor selected will then file through an approved mortgagee a completed FHA Form 2013-W, Application for Mortgage Insurance, along with the usual application fee of $1.50 per thousand of the amount applied for. The sponsor selected shall indicate on FHA Form 2013-W the name of his principal contractor and his management firm. At this time the qualifications of the mortgagor will be examined in the usual manner. If the sponsor selected in accordance with the preceding paragraph is not qualified, the application shall be rejected and the application fee received shall be refunded. The Military field office will be advised of this action and the bidder who submitted the next lowest bid replacement cost will be selected and the same procedure disclosed above will be followed by filing new FHA Forms 3301 and 2013-W, along with the required application fees, without any change in the project number assigned.

After the Application for Mortgage Insurance has been accepted by this Administration there may be no change in the principal contractor or the management firm without the prior approval of the FHA and the Military establishment involved.