42 U.S.C. § 1594: Contracts for construction

Summary

The Secretary of Defense can hire private builders to build urgently needed housing on U.S.-owned or leased land on or near military bases for service members stationed there. Each unit becomes under Defense control when the Secretary of Housing and Urban Development (HUD) says it is ready to occupy. If the builder is a corporation that holds the mortgage, its capital stock (except HUD’s share) must be transferred to the Secretary when HUD says the project is finished. Contracts must protect U.S. interests, require performance and payment bonds acceptable to the Secretary (these meet the bond rules in Title 40), and must be awarded after competitive bids advertised as required by chapters 221 and 241 of Title 10. Eligible bidder: a person or business the Secretary of Defense, after talking with HUD, finds has the right experience and finances and submitted the lowest acceptable bid. The Secretary may buy the stock of mortgage-holding owners whose property is insured under Title VIII of the National Housing Act (as amended by the Housing Amendments of 1955), use those ownership rights during the mortgage, dissolve the company when the mortgage ends, and guarantee or make required payments. The Attorney General must give a written opinion on title if asked. If title is good, the Secretary can guarantee the mortgagee against later title claims. Mortgage loan proceeds insured under Title VIII cannot be used for title searches or title insurance unless the Secretary finds title insurance is needed to get financing; then the Secretary may pay reasonable title costs from the revolving fund under section 1594a(g) and must put the decision in writing and promptly notify the House and Senate Armed Services Committees.

Title 42, §1594

The Public Health and Welfare, Source: USLM XML via OLRC

(a)Contract provisions; competitive bids

The Secretary of Defense or his designee is authorized to enter into contracts with any eligible bidder to provide for the construction of urgently needed housing on lands owned or leased by the United States and situated on or near a military reservation or installation for the purpose of providing suitable living accommodations for military personnel of the armed services assigned to duty at the military installation at or in the area where the housing is situated. Any such contract shall provide that each housing unit in the project shall be placed under the control of the Secretary of Defense, or his designee, as soon as the unit is available for occupancy as determined by the Secretary of Housing and Urban Development. Any such contract shall also provide that, except for stock held by the Secretary of Housing and Urban Development, the capital stock of the mortgagor (where the mortgagor is a corporation) be transferred to the Secretary of Defense, or his designee, when the housing has been completed as determined by the Secretary of Housing and Urban Development. Any such contract shall contain such terms and conditions as the Secretary of Defense may determine to be necessary to protect the interests of the United States. Any such contract shall provide for the furnishing by the contractor of a performance bond and a payment bond with a surety or sureties satisfactory to the Secretary of Defense, or his designee, and the furnishing of such bonds shall be deemed a sufficient compliance with the provisions of section 3131 of title 40, and no additional bonds shall be required under such section. Before the Secretary of Defense shall enter into any contract as authorized by this section for the construction of housing, he shall invite the submission of competitive bids after advertising in the manner prescribed in chapters 221 and 241 of title 10.

(b)“Eligible bidder” defined

For the purposes of this subchapter, the term “eligible bidder” means a person, partnership, firm, or corporation determined by the Secretary of Defense after consultation with the Secretary of Housing and Urban Development (1) to be qualified by experience and financial responsibility to construct housing of the type described in subsection (a) of this section, and (2) to have submitted the lowest acceptable bid.

(c)Acquisition of capital stock of property covered by mortgage

Notwithstanding any other provision of law, the Secretary of Defense or his designee is authorized to acquire the capital stock of mortgagors holding property covered by a mortgage insured under title VIII of the National Housing Act as amended by the Housing Amendments of 1955 [12 U.S.C. 1748 et seq.], and to exercise the rights as holder of such capital stock during the life of such mortgage and, upon the termination of the mortgage, to dissolve the corporation; to guarantee the payment of notes or other legal instruments required by the Secretary of Housing and Urban Development of such mortgagors; to make payments thereon; and to guarantee and indemnify the Armed Services Housing Mortgage Insurance Fund against loss in cases where so required. All housing facilities placed under the control of the Secretary of Defense pursuant to the provisions of this subchapter shall be deemed to be housing facilities under the jurisdiction of the military department to which they are assigned.

(d)Opinion as to title to property; guarantee; title search and title insurance

On request by the Secretary of Defense, the Attorney General shall furnish to the Secretary of Defense, or his designee, an opinion as to the sufficiency of title to any property on which it is proposed to construct housing, or on which housing has been constructed, under this section. If the opinion of the Attorney General is that the title to any such property is good and sufficient, the Secretary of Defense is authorized to guarantee, or enter into a commitment to guarantee, the mortgagee, under a mortgage on such property which is insured under title VIII of the National Housing Act [12 U.S.C. 1748 et seq.], against any losses that may thereafter arise from adverse claims to title. None of the proceeds of any mortgage loan hereafter insured under such title VIII shall be used for title search and title insurance costs: Provided, That if the Secretary of Defense, or his designee, determines in the case of any housing project, that the financing of the construction of such project is impossible unless title insurance is provided, the Secretary of Defense may provide for the payment of the reasonable costs necessary for obtaining title search and title insurance. Any payments by the Secretary of Defense hereunder shall be made from the revolving fund established under section 1594a(g) of this title. Any determination by the Secretary of Defense under the foregoing proviso shall be set forth in writing, together with the reasons therefor. The Committees on Armed Services of the Senate and House of Representatives shall be promptly notified of each such determination, and of the amount of any payment made by the Secretary of Defense for title search and title insurance costs.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The National Housing Act, referred to in subsecs. (c) and (d), is act

June 27, 1934, ch. 847, 48 Stat. 1246. Title VIII of the National Housing Act is classified generally to subchapter VIII (§ 1748 et seq.) of chapter 13 of Title 12, Banks and Banking. For complete classification of this Act to the Code, see section 1701 of Title 12 and Tables. section 1594a(g) of this title, referred to in subsec. (d), was repealed by Pub. L. 87–554, title V, § 501(d),

July 27, 1962, 76 Stat. 237. Codification In subsec. (a), “section 3131 of title 40” substituted for “section 1 of the Act of

August 24, 1935 (49 Stat. 793)” on authority of Pub. L. 107–217, § 5(c), Aug. 21, 2002, 116 Stat. 1303, the first section of which enacted Title 40, Public Buildings, Property, and Works.

Amendments

2021—Subsec. (a). Pub. L. 117–81 substituted “chapters 221 and 241 of title 10” for “section 2305 of title 10”. 1967—Subsecs. (a) to (c). Pub. L. 90–19, § 12(d), substituted “Secretary of Housing and Urban Development” for “Commissioner” wherever appearing. Subsec. (a). Pub. L. 90–19, § 12(h)(1), substituted “Secretary of Defense” for “Secretary” in fourth and sixth sentences. Subsec. (b). Pub. L. 90–19, § 12(h)(2), substituted “Secretary of Defense” for “Secretary”. Subsec. (d). Pub. L. 90–19, § 12(h)(3), substituted “Secretary of Defense” for “Secretary” in last three sentences. 1959—Subsec. (d). Pub. L. 86–149 added subsec. (d). 1956—Subsec. (a). Act Aug. 7, 1956, §§ 506(b), (c), (d), 507, substituted “eligible bidder” for “eligible builder” in first sentence; substituted “the mortgagor” for “the builder” in two places in third sentence; inserted provision before last sentence, relating to furnishing by contractor of a performance bond and a payment bond with surety satisfactory to Secretary; and struck out from last sentence “with any builder” after “Before the Secretary shall enter into any contract”. Subsec. (b). Act Aug. 7, 1956, § 506(b), substituted “eligible bidder” for “eligible builder”.

§1594 Contracts for Construction