JFOC.pdf

U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

ilitilli WASHINGTON, DC 20410-3000

OFFICE OF HOUSING

Control Number: 20-3

JUSTIFICATION FOR OTHER THAN FULL & OPEN COMPETITION

MULTIFAMILY AND HEALTHCARE MORTGAGE LOAN SERVICES; PROPERTY MANAGEMENT

SERVICING, RELOCATION & SALES; AND NON-fHA PROGRAM: 202/811 DIRECT LOAN UCC

FILING SET-UP & MAINTENANCE

Contracting Organization: The Department of Housing and Urban Development, (HUD), Office of the Chief Procurement Officer, 451 7th Street, SW, Room 5256, Washington DC 20410 on behalf of the Office of Multifamily, Housing Asset Management Division, 451 7tStreet, SW., Washington DC 20410.

2. Description of Action: Request approval of a sole source contract to Dynaxys to provide technical assistance to the Office of Multifamily Housing, Asset Management with their Federal Housing Administration (Fl-IA) Programs. This is a new Firm Fixed Price contract utilizing various funding sources; (Mutual Mortgage Insurance program (MMI)- 0183; Housing for the Elderly or Handicapped (4115); (FHA General and Special Risk Insurance Funding and Guaranteed Loan and financial account (4072/4077).

3. Description of Services: To provide technical assistance to the Office of Multifamily Housing, Asset Management with their Federal Housing Administration (FHA) Programs: Multifamily and Healthcare Mortgage Loan Servicing; Property Management Servicing, Relocation & Sales; and their non-FHA Program: 202/811 Direct Loan UCC Filing Set Up & Maintenance. The contractor will assist multifamily and healthcare mortgages & property inventories under a variety of FHA programs. HUD assumes the role of mortgagee as the lender, under certain circumstances, including: (1) when the borrower defaults, and the FHA-insured mortgagee assigns the mortgage to HUD and files a claim or partial claim for insurance benefits; (2) when a current mortgage is assigned to HUD by the mortgagee pursuant to Section 221(g)(4) of the National Housing Act; (3) when a purchase money mortgage is taken back by HUD to finance the sale of property owned by HUD; or (4) when an FHA-insured or HUD-Held first mortgage is restructured under the “Mark-to-Market” (or its predecessor “DEMO”) program or when an outstanding insured loan is refinanced and HUD agrees to a Partial Payment of Claim (PPC) on the insured mortgage and, as a result, one or more new subordinate HUD-Held mortgages are originated. Collectively, this portfolio is referred to as the Multifamily and Healthcare HUD-Held portfolio.

As mandated since October 2002, the contractor must be able to interface data between the contractor’s system and the FHA Subsidiary General Ledger (FHASL) which operates on the current version of PeopleSoft Financial.

FHASL uses the US Standard General ledger chart of accounts and classification consistent with the FEDGAAP requirements and Credit Reform. With this implementation, FHA now has the capability to record and track budgetary resources control expenditure against available resources, and automatically produce financial statements and other reports from the general ledger.

Estimated Value: $15,791,779.78

Period of Performance: 12 months which includes a period of 9 months with one 3- month option.

JUSTIFICATION FOR OTHER THAN FULL & OPEN COMPETITION:

MULHFAMILY MORTGAGE LOAN SERVICES; PROPERTY MANAGEMENT SERVICING,

RELOCATION & SALES; AND NON-FHA PROGRAM: 202/811 DIRECT LOAN UCC FILING SET-UP

& MAINTENANCE

4. Authority: The statutory authority is 41 U.S.C. 3304 (a)(2) as implemented by FAR 6.302-2, Unusual and compelling urgency.

5. Applicability ofAuthority:

A sole source contract with all contintied services to be performed by the incumbent contractor along with transition to take place with the new contractor. Overall, DYNAXYS will continue to provide MFH and Healthcare loan servicing, property and accounting services to aid MFH and Healthcare Office of Asset Management in meeting its core mission. Without the new sole source contract award, the following may occur if the services are not continued and transition-out services are not coordinated smoothly with the new perspective contractor:

• No collections will be applied to project accounts

• No subsidy payments will be applied to project accounts

• No billing statements will be produced

• No taxes will be paid

• No escrow funds can be disbursed

• No HUD-9250s can be processed for release of reserve for replacement requests

• No escrow funds can be invested

• No foreclosure expenses can be disbursed

• No new notes can be established (in the system)

• No payoffs can be processed

• No final claim settlements can be adjusted and posted to accounts

• If an Asset Sale begins, we will be unable to support any of their due diligence requests

• No data transfer to other HUD systems (1REMS, eLOCCS, OPuS, FHASL)

• No financial data reports can be released

• No UCC activity (which when expired causes HUD to lose its first lien position status leaving HUD vulnerable).

• Transfer and location for file storage of legal documents, billing dockets, correspondence dockets, tax and insurance dockets, and all other miscellaneous files for the entire portfolio including those being held for archive during the retention period. The files need to be in fireproof storage.

• No daily accounting transaction updates interfaced to G/L

• Collections would not be applied at the project level and would sit in unconfirmed cash in the default fund.

• Disbursements would have to be processed and tracked manually

• ME and Healthcare would not be able to accurately submit the quarterly Treasury Report on

Receivables.

• Mf Contracts expenditures would have to be paid outside the contractor’s system and recorded manually to the GIL resulting in reconciling differences with the source system

• Our clean audit opinion would be impacted by not being able to provide an accurate financial status of HUD Held assets o No Inventory Roll forward or Gross Accounting Reporting o Would not be able to accurately calculate 4th quarter AFL entries o No complete YTD or cumulative year end trial balance reports

MULTIFAMILY MORTGAGE LOAN SERVICES; PROPERTY MANAGEMENT SERVICING,

RELOCATION & SALES; AND NON-FHA PROGRAM: 202/811 DIRECT LOAN UCC FILING SET-UP

& MAINTENANCE

• Without contractor system, we would lose access to project level financial data and histories and all reporting capabilities.

• Month end close for Notes and Property which would impact GIL reconciliations and loss of final business day of month activity.

• The risk factor would be billions of dollars in lost revenue uncollected by the contractor.

DYNAXYS, LLC is the incumbent contractor and has been responsible for providing the required services for over 27 years. DYNAXYS, LLC has been performing the services satisfactorily. DYNAXYS has the expertise to provide the continuation of services to meet mission critical needs for the Office of Multifamily to assist with the management of property assets and loan servicing for the Department pending the award of the new competitive procurement.

If the sole source contract is not awarded, the MF Notes Servicing Office (MFNSB) would shut down. The MFNSB does not have an internal mechanism for managing this portfolio. HUD staff do not have the capacity to handle such a huge portfolio as downsizing of the Government has resulted in the inability to hire additional accountants that could potentially perform the tasks.

All payments are made into pay.gov. The payments can be pulled down from Treasury by HUD. However, the Department will not have a way to post the funds to the individual loans. The General Ledger posts payments by batch by program, et. al., FHA program, etc. No invoices will be processed at all. No payments will be applied individually orjournalized according to the Credit Reform statute which HUD is required to perform.

Failure to award this contract would result in the following; (a) the Mf and Healthcare HUD-Held portfolio will be non- compliant with regulations which may potentially result in audit findings: and (b) the staff of the MFNSB will need to be reassigned to other areas within MF Operations. Any advances required to preserve a project will not be paid. The Minority Bank program will be closed, and seven (7) current small banks could go bankrupt as they rely on this $33 million that is invested to keep them solvent. The 9250 disbursements cannot be made as HUD will not have a record of how much money each project has in its reserve for replacement escrow accounts. The property taxes will not be paid as HUD will have no record if there are funds in the tax escrow account or not. HUD will just be paying estimates without any manner of cross checking the project. Invoices will not be produced on the 20th of each month and no payments will be applied according to the approx. 2,000 notes for each project as required. All work that is currently performed by the MFNSB will stop completely. The Property Disposition Division (PDD) will not have a mechanism for paying the small bills every day that relates to its renters. Property Disposition Division will not have a method of collecting rents. Property Disposition Division will not have a method for obtaining the detailed statistical data that is required by its program. All data is housed within the CSMS system. HUD does not have an internal system that can read the data and/or download it to any current system that HUD is using.

If this contract is not awarded, HUD’s MF and Healthcare portfolio will not receive a clean audit opinion as it has done over many years with this contract in place. No payoff data can be obtained as HUD will not have a method for knowing how much an owner owes to HUD making it impossible to obtain a statement of indebtedness, collecting the correct amount for payoff and completing all legal satisfaction documents including filing UCCs for the Multifamily and Healthcare HUD-Held portfolio only. January - June of every year is a heavy time for collections on the M2M program as all invoices are paid via surplus cash. Funds are collected, applied and an independent analysis is completed to ensure that HUD has received proper payment of which can take up to approximately 9 months to determine. HUD will have no area to store its legal documents which consists of a large number of fireproof cabinets that cannot be transported to Document Retention Center. In conferring with

RELOCATION & SALES; AND NON-FHA PROGRAM: 202/811 DIRECT LOAN UCC FILING SET-UP

& MAINTENANCE

OGC on several occasions, files are not easily retrieved from the Document Retention Center. Also, the legal documents are scanned and stored within CSMS to ensure that HUD has easy access to all documents being stored by this contract. If the hard copy legal documents are stored in an off-site facility, HUD will have a delay in time retrieving them if we can retrieve them at all.

Additionally, failure to award this contract will result in HUD’s inability to determine which notes are in foreclosure or bankruptcy. Again, HUD does not have another system in house that can manage this data for the Office of Asset Management and Portfolio Oversight (OAMPO), Multifamily Operations, Office of Healthcare and the Property Disposition Division. If not awarded immediately, no IRS 1098/1099 will be sent out as required. Therefore, for the reasons stated above, it is imperative that these services continue.

6. Efforts to Obtain Competition:

The U.S. Department of Housing and Urban Development (HUD) posted, Multifamily Mortgage Loan Support Services (Request for Proposal (RFP), DUIOOR-15-R-0001 on August 31, 2015 as a full and open competitive acquisition. The Contract award was executed on February 27, 2017. After GAO rendered decisions on two protests, the unsuccessful offeror appealed the decisions to the U.S. Court of Federal Claims. The competitive award was terminated for the convenience of the Government on September 12, 2018.

Thereafter, the agency held an industry day for the full and open competition on November 1, 2018. All interested vendors were encouraged to attend the industry day.

October 26, 2018 Draft PWS was posted requesting comments and announcement of industry day.

November 1, 201$ Industry day was held

November 13, 2018 ALU sent introduction email to CO. The ALU/ARRTS process begins.

November 23, 2018 Answers to the Industry questions were posted and list of attendees

November 29, 2018 ALU/Program Office begin work on new PWS/QASP to include comments from the industry.

December 21, 2018 .

Government Shut down due to lapse in Appropriation

- January 2$, 2019 February 25, 2019 ALU/Program Office resumed work on the new PWS/QASP

April 30, 2019 Weekly Progress Meeting began with the DA$, ADAS, OCPO, ACPO, ALU, and PMD

May 24, 2019 PWS/QASP submitted to CO for approval

June 30, 2019 CO acknowledges receipt of PW/QASP email sent on May 24, 2019.

July 2, 2019 CO responds with comments for all documents (PW$, QASP, . Acquisition Plan, Market Research, and IGCE) July 3, 2019 Program Office responds and updates PWS/QASP based on CO’s comments. Program Office points out that many of the CO’s comments are onerous and outside of the ARRTS Template.

RELOCATION & SALES; AND NON-FHA PROGRAM: 202/811 DIRECT LOAN UCC FILING SET-UP

& MAINTENANCE

August 7, 2019 Program Office receives CO’s review and comments of updates to the PWS/QASP submitted on July 3rd. CO is still requiring the onerous comments/updates must be dome for approval by CO.

September 3, 2019 Meeting held with OCPO, ALU and Program Office to discuss outstanding comments. ALU points out that some of the CO’s comments/updates are outside of the ARRTs template.

September 4, 2019 Program Office updates comments except those outside of ARRTs template and resubmits to CO.

September 5, 2019 RC$-H-2020-0000l released to OCPO for the new competitive contract

September 10, 2019 CO’s Supervisor requires that some updates must be made even though ALU and Program Office point out that they are outside of the ARRTs template.

September 12, 2019 Program Office incorporates updated and posts PWS/QASP to Sharepoint.

September 24, 2019 RCS-H-2020-00001 was cancelled by OCPO due to incomplete package.

October 4, 2019 RCS-H-2020-00012 was created.

October 30, 2019 Comments concerning records management are received to incorporate into PWS.

October 31, 2019 Program Office incorporates updates and repost PWS to Sharepoint site.

On September 5,2019, RCS-H-2020-00001 was released to OCPO for the competitive action with the presumed understanding that Housing could continue to work on the FITARA memo while final comments on the PWS and QASP were received. RCS-H-2020-00001 was cancelled on September 24, 2019 by OCPO because the action was determined to be unactionable. Subsequently, RCS-H-2020-00012 was created in PRISM on October 4, 2019 and all supporting documents were re-signed and uploaded. The FITARA is currently with OCIO for approval. Upon receipt of the approved FITARA memo for the competitive action, the requisition will be routed.

The revised milestone reflects a requisition release date of December 3, 2019 and a projected award date of 6/30/2020.

The current Dynaxys contract will expire on January 7, 2020, leaving the Government without a servicing source to support the Multifamily and Healthcare Loan Servicing portfolio.

7. Fair and Reasonable:

The Contracting Officer will determine that the prices were fair and reasonable at the time of the sole source contract award by comparing pricing to previous contract awards for the same services along with referring to the IGCE provided by the program office.

8. A description of the market research conducted (See PART 10) and the results or a statement ofthe reason market research was not condttcted.

RELOCATION & SALES; AND NON-FHA PROGRAM: 202/811 DIRECT LOAN UCC FILING SET-UP

& MAINTENANCE

Market Research has continued since the previous competitive award was terminated in September 2018. The agency held an industry day in November 2018. The list of attendees is posted on FedBizOpps. (now at beta.sam.gov) (see section 10). On HUD’s FY 19 Procurement Opportunity Forecast, this procurement was published as a 4th quarter award for FY 19. The agency has conducted several business out-reach conferences through its Office of Small Disadvantage Business Utilization. Interest vendors who attended the conferences met and received information from the program office regarding this procurement. The program office has determined that there are capable sources available to satisfy the agency’s requirements with some modifications.

9. Any otherfacts support the use ofotiter thanfull and open competition.

HUD has completed a competition for the services identified in item# 6 above under solicitation number DU100R-15-R-0001. The acquisition strategy for this solicitation was ‘full and open competition”.

The solicitation closed, and award was made on February 27, 2017. While the award was made on February 27, 2017, there were two GAO protests filed and one Federal Appeal filed. It was not until September 12, 2018 that HUD terminated the contract for the convenience of the Government and the decision was made to re-compete the contract.

10. A listing of the sources, ifany, that expressed, in writing, an interest in the acquisition.

The Office of the Chief Procurement Officer maintains the list of offers received under the previous competitive acquisition and the list of sources who expressed an interest for this competitive procurement resulting from the industry day held on November 13, 2018. The list of attendees and answers to the questions on the draft PWS were posted on FedbizOpps. (now at beta.sam.gov) on November 23, 2018 under ID- MSP-HY-2019-051, The list below reflects the vendors who met with the program office and expressed interest in the competitive procurement and met with the program office during the industry day conference.

# Vendor Name Socio-economic Category

I CBRE Large

2 Dynaxys Small Women Owned

3 Devall LLC Small Business

4 CGI Federal Inc. Large

5 MAAG 8(a), socially / economically disadvantaged

6 KeyBank Large

Midland Loan 7 . Large

Services

8 SITUS

Woman-Owned Small Business

9 Sutherland Large

10 The Leumas Group Small 8(a) Business

RELOCATION & SALES; AN1 NON-FHA PROGRAM: 2021$11 DIRECT LOAN UCC FILING SET-UP

& MAINTENANCE

11. A statement ofthe actions, jfany, the agency may take to remove or overcome any barriers to competition before any subsequent acquisitionfor the supplies or services required.

A Request for Information was issued in fedbizOpps (now at beta.sarn.gov) on October 26, 2018 and an Industry Day was held on November 13, 2018 for the new competitive award. The competitive acquisition will be posted on FedbizOpps (now at beta.sam.gov).

12. Contracting Officer certjJication:

See form HUD-24012.