Attachment 1-Single Source Justification.docx

United States Department of Agriculture Sole Source Justification under Simplified Procedures for Certain Commercial Items (FAR 13.5)

1. Identification of the agency and the contracting activity.

United States Department of Agriculture (USDA), Foreign Agricultural Service, Global Programs and United States Department of Agriculture, Departmental administration, Office of Contracting and Procurement Operations Division, 301 S. Howes Street 321, Fort Collins, CO 80521.

2. The nature and/or description of the action being approved.

The USDA proposes to enter into a sole source, proprietary, firm fixed-price contract with Fitch Solutions, Inc, using the simplified procedures for certain commercial items under Federal Acquisition Regulation (FAR) Part 13.5.)

3. A description of the supplies or services required to meet the agency’s needs (including the estimated value).

The USDA FAS requires access to the Fitch Rating online subscription service for member of the FAS Risk and Asset Management (RAM) branch.

Fitch Ratings, a commercial arm of Fitch Solutions, Inc., is an online subscription that provides ratings and research as well as leading analytical tools and ongoing surveillance. Fitch Ratings services includes in-depth bank analyses, using the CAMEL analysis methodology commonly accepted by financial institutions and other entities that extend credit to banks.

The RAM branch reviews and approves limits for foreign countries and foreign banks for the Commodity Credit Corporation’s (CCC) export credit guarantee programs. Given limited travel funds, RAM can do very little travel to the countries in which these banks are domiciled. Therefore, RAM uses reports generated by third parties as a source of current information about countries, banking systems, and specific foreign banks throughout the world in order to conduct financial analysis of these countries and foreign banks. RAM staff relies primarily upon reports generated by Fitch Ratings to fully identify and analyze the financial condition of foreign banks that are granted credit limits in CCC’s Export Credit Guarantee Programs. RAM also uses these reports to validate the financial standing of U.S. banks that apply to participate as lenders in CCC’s Export Credit Guarantee programs.

Fitch Ratings, a commercial arm of Fitch Solutions, Inc., is a proprietary, electronic analytical service available from one source.

The subscription services are required for a 12-month base period beginning the day of contract award, with four 12-month option periods.

Base

Option Year 1

Option Year 2

Option Year 3

Option Year 4

4. The statutory authority permitting other than full and open competition.

41 U.S.C § 1901 - Simplified Acquisition Procedures up to $7.5 million, as authorized by FAR 13.500(a) and implemented by FAR 13.501(a).

5. A statement demonstrating the unique qualifications of the proposed contractor or the nature of the action requiring the use of the authority.

In assessing and monitoring risk, RAM requires the broadest coverage possible provided by a ratings agency who has experts on the ground and can research and monitor the banks and the sovereigns. USDA/FAS links US agriculture to the world to enhance export opportunities and global food security. As part of this goal, the Global Programs’ RAM Branch has the responsibility to conduct country and bank risk analysis for the GSM-102 and Facility Guarantee Programs which facilitate the commercial sales of U.S. agricultural exports. RAM’s duties comply with 7 USC 5622(d) which states, “The Commodity Credit Corporation (CCC) shall not make credit guarantees available in connection with sales of agricultural commodities to any obligor that the Secretary determines cannot adequately service the debt associated with such sale.” In order to successfully meet mission needs and objectives, information on foreign banks, banking systems and sovereigns is required. This information will allow RAM staff to analyze and make a determination whether a sovereign (country) should be assigned a limit under the program and an obligor (foreign bank) can service its debt and should be assigned a credit limit under the program. With broad coverage, this increases the chances of RAM staying abreast of an economic, financial or other development with a bank or country resulting in immediate action to avoid excessive exposure and payment default.

Fitch Ratings, a proprietary analytical service of Fitch Solutions provides the most comprehensive bank coverage covering 74 of RAM’s 100 current banks. Providing coverage for 74 banks will provide RAM with the most coverage available, thereby allowing them to perform their mission-essential activities in a sufficient timeframe. Fitch Ratings has broad based coverage and is considered #1 in coverage of banks in Latin America which is important as Latin American banks comprise the largest share of use under the Export Credit Guarantee program (85%-90% in dollar terms). Fitch also provides coverage in other markets where banks are participating in the Export Credit Guarantee program. These markets include Armenia, Georgia, Egypt, Jordan, Nigeria, Kenya, Philippines, South Africa, Turkey and UAE. The subscription includes in-depth analyses using the CAMEL analysis methodology. The subscription includes access to experienced Fitch Ratings analysts many of whom are based in the countries they cover and spend significant time with each rated foreign bank in order to do in-depth financial and risk analyses. The subscription also includes analyses of sovereigns and the banking system in these countries. Fitch provides quarterly updates on banking regulation. The Sovereigns product offers a macro-prudential risk monitor, a report that examines systemic risk indicators to identify potential stress in the banking systems. These analyses and updates are critical to RAM analysts’ understanding of the environment in which the foreign banks operate which in turn is critical in assessing risk. Fitch offers training and the subscription provides regularly updated quantitative and performance analytics allowing RAM analysts to monitor rating changes and understand credit trends for the foreign and non-foreign banks and the sovereign.

Fitch Ratings is the only external rating agency which specializes in and focuses on banks, and they provide significantly more bank analyses than any other external rating agency. Fitch’s network of offices in numerous countries throughout the world enables them to provide in-depth research and analysis in a timely manner. Fitch’s Ratings services includes in-depth bank analyses, using CAMEL analysis methodology commonly accepted by financial institutions and other entities that extend credit to banks. Fitch also rates these foreign banks using a methodology that is standardized and accepted throughout the investment community, thereby allowing the RAM Branch to compare banks of similar ratings. These reports and updates are designed to fill the analysis gap that RAM has when trying to analyze a bank solely based on its financial statements and without being able to visit the bank on an annual basis.

6. A description of efforts made to ensure offers are solicited from as many potential sources as is practicable.

A notice of intent to sole source to Fitch Solutions, Inc was published on SAM.GOV on 05/20/2024 stating that any responsible sources capable of providing the required subscription service may identify their interest and technical capability to meet this requirement. If any company shows interest, their information will be considered before the award stage.

7. A determination by the Contracting Officer that the anticipated cost to the Government will be fair and reasonable.

The contracting officer determines that the anticipated price will be fair and reasonable based on prior acquisition history (FAR 15.404-1(b)(2)(ii)).

A contract was awarded in FY2019 (12FPC219P0070) to Fitch Solutions, Inc. for the same subscription. To remain consistent with economic conditions and industry standards a 4% escalation cost is included in the estimated total cost.

8. A description of the market research conducted and the results or a statement of the reason Market Research was not conducted.

Market research was conducted, and a combination of resources and methods were used to identify the availability of sources capable of providing the required services.

During the process, FAS’ RAM Branch contacted knowledgeable individuals in the bank ratings industry, conducted internet searches, and received virtual demonstrations to determine the following:

Fitch Ratings, a proprietary electronic analytical service available only from Fitch Solutions, Inc., is fully capable of providing the services required by USDA FAS RAM.

RAM researched 3 vendors, Moody’s, S&P Global, and Fitch Solutions. Only Fitch Solutions fully meets FAS’ requirements. Both Moody’s and S&P Global provide similar/related services but are not sufficient on their own to fully support RAM analytical needs. They have supplemental information but do not provide broad in-depth report coverage on bank/non-bank financial institutions. Neither Moody’s nor S&P Global can provide the analysis tool that RAM requires.

Further, RAM has been using subscription services for many years (since 2015) and is familiar with the marketplace. This knowledge and experience helped RAM to determine that a small business would be incapable of providing this type of service. It requires overseas coverage of foreign banks across a wide geographic region (Africa, Middle East, Asia, Latin America). A substantial team is required to gather the financial statements and annual reports for the information database.

FAS RAM Branch conducted an interview with “undisclosed” (and another Fitch Solution Representative on March 14, 2024, for discussion on Fitch’s Global Banks and Sovereigns Research.

Moody’s and S&P Global do not provide comprehensive bank coverage. Fitch provides coverage for 74 of the approximate 100 eligible banks in the Export Credit Guarantee program. S&P Global only provides coverage for 35 eligible banks, and Moody’s provides coverage for 60 banks. Having coverage for at least 70 banks is crucial to RAM’s work. Anything less than 70 banks would mean RAM would have to rely on other outlets to get the information. RAM would need to spend much more time and resources gathering information. It also increases the potential of RAM being delayed in delivering their mission-essential reports so that the program can continue to operate in a manner which reflects the most current repayment risks and minimizes the risk of default which could affect U.S. taxpayers if a claim payment on the default is required to be made to the holder of the GSM-102 payment guarantee.

A synopsis of Moody’s virtual interview and demonstration conducted on March 20, 2024:

FAS RAM Branch met with “undisclosed” (and others) for a virtual demonstration of Moody’s CreditView and Research Assistant. The demonstration and follow-up information illustrated that the CreditView subscription does not provide the full (or nearly full) breadth of information needed for RAM to analyze bank and sovereign risk for participation in the Export Credit Guarantee Program and monitor ongoing developments. Coverage was available for 60 of the approximately 100 banks and non-banks that are current program participants in the Export Credit Guarantee Programs. Coverage was available for the sovereigns (countries) needed. Bank reports include in-depth bank analyses, discussing CAMEL topics. These bank reports also provide other banking and economic ratios, statistics and other information. Ultimately, full (or nearly full) coverage of the banks/non-bank financial institutions is needed to provide RAM analysts with the necessary information so that the risk (including country risk, bank risk, and ultimately repayment risk with the financial institution) can be assessed and monitored. Without the broadest possible coverage, RAM staff may not be able to monitor developments with a country and bank in a timely manner and take the necessary actions to prevent or limit payment defaults and incurring additional program exposure.

A synopsis of S&P Capital Pro (formerly Global Market Intelligence) virtual interview and demonstration conducted on March 11, 2024:

The FAS RAM Branch met with “undisclosed” (and others) for a demonstration of S&P Global’s Ratings Direct product. The demonstration and subsequent information provided show that full (or nearly full) coverage is not available. S&P provided coverage for 35 of the approximately 100 banks and non-banks that are current program participants in the Export Credit Guarantee Program. Only providing coverage of 35 banks would inhibit RAM from performing mission essential functions on a daily basis as RAM still needs to be able to analyze and monitor the other banks in the program. Ratings Direct is S&Ps own product developed with its own research. This source combines intelligence with market data, credit risk indicators, and data visualization tools on a single platform. S&P’s team is ‘credit-focused’ and contact information for the analysts is provided if RAM needs to reach out directly. S&P will also coordinate meetings between RAM analysts and the S&P analysts as needed. S&P Connect, a separate product that provides in depth economic and country analysis for 200 plus countries integrates with SPGMI’s Ratings Direct product to a limited degree. Though the country coverage is available, SPGMI Ratings Direct is not sufficient due to the lack of broad-based bank coverage. SPGMI’s Ratings Direct provides ‘upside’ and ‘downside’ scenarios with their ratings.

Based on the results of the market research, RAM has determined that only Fitch can provide the required subscription, primarily due to its historical capability. Fitch has and currently focuses its research on banks and provides the broadest coverage for the banks in the Export Credit Guarantee Program covering 74 of 100 bank/non-bank financial institutions.

9. Any other facts supporting the use of other than full and open competition.

None.

10. A listing of the sources, if any, that expressed a written interest in the acquisition.

No other sources expressed written interest in the acquisition.

11. A statement of actions, if any, the agency may take to remove or overcome any barriers to competition if subsequent acquisitions are anticipated.

FAS will continue to review the market for new vendors capable of providing the required subscription access. A Request for Information will be posted prior to any future awards.