Subject: Transmittal of Request for Proposal No. H-55-69
"Operation BREAKTHROUGH--Application of Improved
Housing Systems Concepts for Large Volume Pro-
duction."

IN REPLY REFER TO:

Gentlemen:

The Department of Housing and Urban Development is undertaking a new program, to be identified as Operation BREAKTHROUGH, to provide housing for people of all income levels, through a partnership of labor, consumers, private industry, and local, state and Federal Government, and bringing into play the use of modern techniques of production, marketing and management.

There is a demonstrated need and demand for housing throughout the
country, especially quality housing for low- and moderate-income fam-
ilies. However, the market represented by this demand is fragmented,
with each local element having different rules and requirements, both
as to the type of housing required and the regulations under which this
housing is produced. The housing industry, in response to this frag-
mented market, is itself fragmented into many local units, thereby fore-
going many of the potential economies that could result from large-volume
production methods.

For this reason, as one part of Operation BREAKTHROUGH, state and local bodies are being asked to identify and aggregate the housing market and locate specific land available for installation of the required housing. This Department is working with these authorities and will provide assistance in this effort.

As the second major part of this program, private industry is asked to provide the housing systems and construction concepts which can supply these aggregated markets with quality housing produced in volume, with costs controlled through utilization of economies of scale, efficient management and improvement in existing systems of production, construction, land use, and equity financing.

Two types of proposals will be accepted in carrying out this technical program. The first, identified in the Request for Proposal as Type A, will provide for the design, testing and evaluation, and prototype struction of complete housing systems which can lead to volume production.

con

The technical efforts in BREAKTHROUGH are planned to follow a series of phases, to provide proper program control. Briefly, these consist of Phase I, Design and Planning, Phase II, Prototype Construction, and Phase III, Volume Production; the total program plan is described in Attachment C to the Request for Proposal, and I suggest that this section should be read first.

Contracts will be awarded to those firms or consortia of firms proposing on Type A which demonstrate a capability for, and concept of, developing and producing housing in quantity, with resulting benefits, and will provide for Phase I and Phase II activities. Phase III contracts are expected to be negotiated between the successful contractors and the representatives (such as sponsors, private developers or housing authorities) of individual "aggregated markets." HUD will apply all available incentives and programs to assure the application of the concepts of organizations supported in Phases I and II to projects developed by the "aggregated markets." Organizations interested in responding to this part of the program (Type A) are invited to align themselves into teams or consortia which include all of the various disciplines required.

The second type of proposal, identified in the Request for Proposal as Type B, will be accepted for advanced research and development of ideas or concepts which are not ready for prototype construction or which provide individual elements of a total system. These concepts may include both "hardware" items and elements concerned with management, financing, site development, and processing. We solicit the creative and innovative capabilities of the entire American economy for such ideas, which can provide a basis for a continuing, long-term program to encourage, and where necessary, support such further advanced development. Where HUD considers it beneficial to the overall housing program objectives, separate contracts may be negotiated for this work.

We encourage organizations which have a capability in, and concepts available for, any of the individual elements mentioned, but do not have all the capabilities to do all the elements, to submit their ideas. In this case, the proposer should indicate his willingness to have the fact that he proposed a portion of the total effort made known generally so that other proposers may consider the desirability of matching their efforts with his to form teams. If the Government determines it is in its best interest to do so, it may accept proposals from such newly formed consortia after the required submittal date of proposals.

Finally, we recognize that the existing housing industry is capable of providing housing to a significant and increasing segment of the market through the market aggregation and financing activities we expect to result from BREAKTHROUGH activities. In addition, we look to this program to provide other, long-term benefits to all segments of the industry; among these benefits we see new and improved products and methods, improved management systems, and greater business opportunities through local franchising and contracting arrangements, improved code and code enforcement methods, etc.

We encourage those firms presently producing housing in quantity to review their designs, methods and markets to determine whether they could achieve significant improvements through the support provided in Operation BREAKTHROUGH.