47QFDA22F0017_T40_P0006_LSJ_Approved.pdf

CUI//SP-SSEL

Limited Source Justification - Urgent and Compelling

Increase the Overall Task Order Ceiling Value

Task Order PIID Number: 47QFDA22F0017

Advisory and Assistance Services (AAS)

Ginnie Mae Financial Systems and

Information Technology (IT) and

Modernization Support in support of:

Department of Housing and Urban Development (HUD)/Ginnie Mae (GNMA)

U.S. General Services Administration (GSA)

Federal Acquisition Service (FAS)

National Capital Region (NCR)

Assisted Acquisition Services

1800 F Street, NW (QF0B)

Washington, D.C. 20405

Interagency Agreement Number XXXXXXXX (Enter Number)

Controlled by: dennis.harrison@gsa.gov

DocuSign Envelope ID: 25E4FEBB-B134-4973-AE7A-89EA246EA28D

The General Services Administration (GSA) National Capital Region (NCR) makes this Limited Source Justification pursuant to FAR 8.405-6 to increase the ceiling of task order 47QFDA22F0017

i. Identification of Agency and Contracting Activity:

Agency:

General Services Administration Federal Acquisition Service (FAS) National Capital Region (NCR) Contracting Division

Acting in support of:

Department of Housing and Urban Development (HUD), Ginnie Mae, Office of Enterprise Risk 425 3rd Street, SW, Suite 500 Washington, DC 20407

Contracting Activity:

General Services Administration Federal Acquisition Service (FAS) National Capital Region (NCR) Assisted Acquisition Services 1800 F Street NW, Washington, DC 20405

ii. Nature and/or Description of Action Being Approved:

The purpose of this justification is to increase the overall task order ceiling value of GSA Schedule task order 47QFDA22F0017, awarded to Ernst & Young, under Schedule contract number 47QTCA18D003W by $3,703,750.49 for GNMA Financial Information Technology (GFIT) Enhancement and Modernization support services. Task Order 47QFDA22F0017 is a single-award hybrid task order awarded January 26, 2022, with one base year and four optional contract years.

The increase in Task Order 47QFDA22F0017 ceiling value will allow for the Government National Mortgage Association (GNMA) to acquire proper financial management system and modernization services required to complete performance objectives that are as a result of the unprecedented volatility in the reverse mortgage market, and GNMA’s compelling and urgent need to service Home Equity Conversion Mortgage (HECM) assets seized from the reverse mortgage market’s largest loan provider.

In addition to increasing 47QFDQA22F0017’s overall task order ceiling value, the task order will be modified to 1) add tasks to support servicing Home Equity Conversion Mortgage (HECM) assets; 2) move ceiling value forward from Option Year 4 and reallocate this ceiling value equally between Option Year 1 and Option Year 2; 3) increase the ceiling value for CLINs 1003, 2003, and 3003, respectively; and 4) change the contract end date to January 25, 2026.

iii. A Complete Description of Supplies/Services Required to Meet Agency’s Need (Including the Estimated Value):

Schedule Task Order 47QFDA22F0017 will be modified to add tasks so the contractor can support GNMA with the acquired HECM assets. Ernst and Young, LLP, provides technical support under Task Order 47QFDA22F0017 for Financial Systems and Modernization Services. Tasks performed under this task order includes O&M and IT Modernization financial management system as follows:

● Ginnie Mae Financial Accounting Systems (GFAS)

● Non-Pooled Assets Sub-Ledger Database

● Financial Corporate Performance Management (FCPM) Planning and

● Budgeting Cloud Services (PBCS)

● Other Systems Support

The CLINs for GFIT Enhancement and Modernization work are as follows:

● Task 1 – Transition (Phase-In and Phase-In Completion and Phase-Out)

● Task 2 – Program Management

● Task 3 – Systems Operations and Maintenance and OCFO Functional Support

● Task 4 – Finance Transformation and IT Modernization

● Task 5 – System Enhancements

● Task 6 – Special Projects

● Task 7 – Systems Maintenance and Infrastructure Collaboration

● Task 8 – Application Provisioning, Security, and IT Compliance

● Task 9 – Systems Training

● Task 10 – Order-Level Materials (OLMs)

● Task 11 – Travel

GNMA needs contractor services for proper financial systems management of the RMF portfolio and required performance objectives. The agency wants to add tasks for supporting 120,000 reverse mortgage loans and service the existing 46,000 single family loans.

GNMA financial systems (GFAS/SLDB) will provide full accounting transparency at the loan level and perform operational and GAAP accounting for the single family non-pooled assets portfolio. The defaulted HBMS portfolio will introduce 120,000 new HECM assets (pooled and non-pooled) and nearly 1 million journal entries per month. HUD OIG has specific requirements to prove Completeness & Accuracy of the financial statement value for each loan with supported audit trail of individual loan transactions.

HECM processing will require support for a markedly different product (i.e., reverse mortgages) with significant volume increase (+120,000 pooled and non-pooled assets and their corresponding liabilities).

SLDB provides a sufficient level of detail to allow for the identification of trends, effectiveness, and associated costs in the asset disposition process. This enables Ginnie Mae to identify and respond to opportunities to manage its portfolio–particularly for the defaulted issuers.

Modifying the GFIT order allows GNMA to focus on the Finance Transformation and IT Modernization activities that are essential to the efficient use of GFAS/SLDB, increased automation, reduced manual effort, and elimination of waste, as enumerated in the contract. The SLDB system must be scaled up to manage the HECM default. Furthermore, appropriate controls and oversight are still required, which are included in the GFIT contract.

Task Order 47QFDA22F0017 was initially awarded on January 26, 2022, at $64,103,470.87, with a one-year base and four option years. Adding tasks to support the HECM assets in Option Year 1, Option Year 2, and Option Year 3 will require an increase in the overall task order ceiling in the amount of an estimated $3,703,750.49.

Ceiling value will be moved forward from Option Year 4; reallocate ceiling value to Option Year 1 and Option Year 2; and add value to Option Year 3 Option.

● The current ceiling value for Option Year 4 is equally reallocated in the amount of $3,703,750.49 to both Option Year 1 and Option Year 2.

● Option Year 1 ceiling will increase from $14,024,384.89 to $17,728,135.38.

● Option Year 2 ceiling will increase from $13,885,600.90 to $17,589,351.39.

● Option Year 3 ceiling will increase from $13,315,762.47 to $17,019,512.96.

● Option Year 4 new ceiling value is $0

This modification would increase Task Order 47QFDA22F0017 overall total ceiling value by 6% from $64,103,470.87 to $67,807,221.36. This ceiling increase will enable GNMA to get three (3) full years of needed contractor support for HECM assets.

iv. The Authority and Supporting Rationale:

The applicable regulations to facilitate the task order ceiling increase are GSAR 552.212-4(c) Changes and FAR 8.405-6(a)(A)(i)(1) Urgent and Compelling. Without the immediate acquisition of the contractor services provided under the GFIT task order, the HUD/Ginnie Mae OCFO staff will not have the capacity to complete all necessary activities to support HUD/Ginnie Mae’s business and confidently produce materially accurate financial reports.

On November 28, 2022, GNMA exercised its legal authority to seize government-insured reverse mortgages from the estate of Reverse Mortgage Funding (RMF), a lender that filed bankruptcy November 30th. The US government now owns the largest reverse lender in the country; this is the most significant event of default in the government loan market since the collapse of Taylor, Bean & Whitaker in 2011.

Ginnie Mae purchases reverse mortgage-backed securities, and indirectly relieves lenders of their capital commitments and enables them to originate new loans. Fast-rising interest rates, tightening Federal Reserve monetary policy, and additional regulations in the credit markets has created market volatility that has led to a liquidity crisis among the reverse mortgage lenders and credit worthiness issues. If not for Ginnie Mae specifically and the MBS system in general, reverse mortgage lending would be significantly more risky for lenders and necessitate stricter standards and higher costs for borrowers.

The GFIT task order includes operations for the following GNMA financial systems - SLDB, GFAS, and EPBCS. Given recent events (afore-mentioned issuer default), these systems require updates, enhancements, and ongoing IT related support for the newly acquired HECM portfolio, which is crucial to Ginnie Mae’s efforts to stay compliant with federal and commercial reporting standards.

Activities for GFIT include but are not limited to the following:

● systems O&M

● processing MSS data in SLDB and GFAS

● supporting monthly/yearly/annual general ledger close with systems-related close calendar activities including generation of associated financial reports

● systems controls

● systems audit support

It is imperative that Ginnie Mae acquire these contractor services immediately for proper financial systems management of its newly acquired HECM portfolio and other required performance objectives.

The work to be performed will ensure there is compliance with the Federal Managers’ Financial Integrity Act of 1982 (FMFIA). OMB Circular A-123, Appendix A, Internal Control over Financial Reporting requires management to maintain effective internal control over financial reporting (ICOFR), which is designed to report compliance with FMFIA.

https://www.justice.gov/opa/pr/former-chairman-taylor-bean-whitaker-convicted-29-billion-fraud-scheme-contributed-failure

There is also the possibility of non-compliance with Treasury Financial Manual (TFM) Chapter 4700 “Federal Entity Reporting Requirements for the Financial Report of the United States Government”, Governmentwide Treasury Account Symbol Adjusted Trial Balance System (GTAS) reporting deadlines, Office of Management and Budget (OMB) Circular Number A-136, and impact to the United States Department of Housing and Urban Development (HUD) Agency Financial Report. TFM and GTAS requirements include strict monthly timelines for submission and stringent edit and validation requirements for accuracy.

There are two main drivers of GNMA’s history of a disclaimer of opinion on Ginnie Mae’s financial statements: 1) lack of appropriate systems and 2) lack of controls. New financial reporting must be developed for HMBS and HECM portfolios for incorporation in the HUD AFR in compliance with OMB Circular A-136, and in accordance with HUD’s internal timelines for submission of financial reporting information required to allow for appropriate analysis, control, and consolidation at the Agency level.

While Ginnie Mae now has the SLDB from a system standpoint, appropriate controls and oversight are still required. Without appropriate contractor support for these complex and time-constrained tasks and to develop the new analyses, reporting, and controls required to report HMBS activities in compliance with the numerous standards and validation requirements, the risk of missing deadlines, failing to maintain compliance, and unacceptably impacting agency level reporting will significantly increase.

GNMA needs the immediate contractor support from the GFIT task order to focus on validation of transactions and accounting events, as well as preparation of financial statements, which enables GNMA staff to carry out critical activities to support effective Internal control over financial reporting (ICOFR).

Without this immediate contractor support, GNMA’s critical activities will either not occur, or there would be a lack of segregation of duties, which would result in ineffective assessment of financial statement risk and reasonable assurance of reliable financial statements.

Without the appropriate and immediate contractor support for these complex and time-constrained tasks to develop new analyses, reporting and controls required to report HECM mortgage-backed securities (HMBS) activities in compliance with the numerous standards and validation requirements, the risk of missing deadlines, failing to maintain compliance, and unacceptably impacting agency level reporting will significantly increase.

However, considering such factors as market stability and the duration in which to award task orders for the needed financial management system services, there is not sufficient time to competitively award a new task order. The planning process would be elongated and face challenges to improve the utilization and competition for labor resources. Increasing the ceiling value of the existing GFIT order is the most expeditious short-term solution available to the Government.

v. Determination That the Anticipated Cost is Fair and Reasonable:

Task Order 47QFDA22F0017’s contract type is a hybrid firm-fixed-price (FFP) and time and materials (T&M) order. The contract line-item numbers (CLINs) associated with the FFP contract type are CLINs 0001-0003, while CLINs 0004-0011 are T&M. CLINs 0003, 1003, 2003, 3003, and 4003 were awarded as Fixed Price. The added services and tasks for HECM will be added under all CLINs X003 - Systems Operations and Maintenance and OCFO Functional Support and will remain fixed priced.

Task Order 47QFDA22F0017 was awarded at $64,103,470.87. The estimated price increase from $64,103,470.87 to $67,807,221.36 would be a six percent (6%) ceiling increase. The Base Year, January 26, 2022 - January 25, 2022, was executed and performed. The task order is currently in Option Year 1 and is priced at $14,024,384.89. To enable GNMA to get three (3) full years of contractor support for the

HECM assets, the ceiling value for Option Year 4 will be moved forward, and equally reallocated to the ceiling values of Option Year 1 and Option Year 2.

The current ceiling value for Option Year 4 is $7,407,500.98. This ceiling value will be equally reallocated in the amount of $3,703,750.49 to Option Year 1 and Option Year 2. More specifically, the amounts will only be added to CLIN 1003 and CLIN 2003 ceiling values. Additionally, CLIN 3003 ceiling value will increase by $3,703,750.49; however, since there are no additional ceiling values to move forward, the CLIN 3003 ceiling will be increased once the overall task order ceiling value is increased.

The new total ceiling values for each Option Year are as follows:

Current Added New Value

Option Year 1 $14,024,384.89 $3,703,750.49 $17,728,135.38

Option Year 2 $13,885,600.90 $3,703,750.49 $17,589,351.39

Option Year 3 $13,315,762.47 $3,703,750.49 $17,019,512.96

Below shows the value added to the CLINs in the respective Option Years:

Year CLIN Current Added New Value

Option Year 1 CLIN 1003 $2,927,719.10 $3,703,750.49 $6,631,469.59

Option Year 2 CLIN 2003 $2,798,747.66 $3,703,750.49 $6,502,498.15

Option Year 3 CLIN 3003 $2,732,646.42 $3,703,750.49 $6,436,396.91

Given that Option Year 4 value will decrease to $0.00, the ultimate contract end date for Task Order 47QFDA22F0017 will be changed from January 25, 2027, to January 25, 2026. Thus, Option Year 4 is eliminated and deleted from the task order.

vi. Description of the Market Research Conducted Among Schedule Holders and the Results of the Research:

Through its Mortgage-Backed Securities (MBS) programs, Ginnie Mae guarantees privately issued securities backed by pools of mortgages insured or guaranteed by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), the Rural Housing Service of the Department of Agriculture (RHS), or HUD's Native American Program. Ginnie Mae guarantees the registered holder of the securities the timely payment of scheduled monthly principal and interest payments, loan prepayments and early recoveries of principal on the underlying mortgages.

The recent bankruptcy of the Reverse Mortgage Funding (RMF), who filed for bankruptcy on November 30, 2022, added volatility to the reverse mortgage loan industry that is dealing with fast-rising interest rates, tightening Federal Reserve monetary policy, and unforgiving regulations and credit markets.

Without the immediate acquisition of the needed contractor services, the Ginnie Mae OCFO staff will not have the capacity to complete all necessary activities to support/Ginnie Mae’s business and confidently produce materially accurate financial reports.

GSA Multiple Award Schedule (MAS) was researched since this was the underlying contract vehicle for GFIT task order. MAS Special item Number (SIN)/NAICS - 531210 Financial Asset Resolution Services and SIN/NAICS 541611 - Management and Financial Consulting were researched for sources. The first (SIN)/NAICS - 531210 had 62 contractors and SIN/NAICS 531210 had 2,640 contractors. Orders would be placed under FAR 8.4 Ordering procedures. OASIS was also searched. Its Pool 1 and Small Business Pool B, which both cover the NACIS 541611, has 100 and 240 contractors registered, respectively. OASIS utilizes FAR 16.5 Ordering procedures.

Utilizing the existing GFIT contract addresses undetected MSS data issues and includes support in resolving Master Subservicers (MSS) HECM data quality issues, including quantifying, and assisting in developing the adjustments required. The HECM portfolio is complex, given the significant increased cost in servicing these assets. The support related to MSS data quality will help identify issues in a timely manner. If these issues go undetected, it could result in additional losses to Ginnie Mae, as well as increased future costs if undetected issues compound.

vii. Other Facts Supporting the Justification:

Task Order 47QFDA22F0017 establishes the processes which can support HECM loan and HMBS obligation monthly processing and reporting, as well as enhancing the OCFO default playbook, SOPs, and other procedures to prepare for potential future defaults, which are growing more likely. It is critical that these processes and procedures are established and refined up front, so that they are most effective and efficient on a go-forward basis, eliminating future waste.

viii. Statement of the Actions, if Any, the Agency May Take to Remove or Overcome any Barriers that Led to the Restricted Consideration Before Any Subsequent Acquisition for the Supplies or Services is Made GNMA understands that modifying Task Order 47QFDA22F0017 is just a short-term solution. Given the forecast for the market volatility, vendor financial positions, and rising interest rates, GNMA will begin working on more long-term solutions. Increasing the ceiling of this task order is just a short-term solution that will give GNMA, at minimum, enough time to develop long-term solutions.

GNMA will need to work with GSA to develop these long-term solutions, so GSA can compete for the solutions under the appropriate contract vehicles. Recommend GNMA hold an Industry Day so GNMA can discuss its needs with industry and determine who can really provide the appropriate immediate and long-term solutions. If GNMA is not working on a true long-term solution, it will again be reactive to changes in the HECM market.

ix. Contracting Officer Certification that the Justification is Accurate and Complete to the Best of the Contracting Officer’s Knowledge and Belief:

I hereby certify that this justification is accurate and complete to the best of my knowledge, and I determine on the basis of the findings above that the limited sources approach is in accordance with the requirements and is in the best interest of the Government.

Dennis Harrison Date Deputy Division Director Contracting Operations Division FAS National Capital Region

x. Evidence that any Supporting Data that is the Responsibility of Technical or Requirements Personnel and Which Form a Basis for the Justification Have Been Certified as Complete and Accurate by the Technical and Requirements Personnel (If Any): Supporting data provided by technical or requirements personnel has been certified as complete and accurate as demonstrated by.

Reverse Mortgage Funding (“RMF”), a mortgage bank specializing in Home Equity Conversion Mortgages (“HECMs”) and a Ginnie Mae HECM MBS (“HMBS”) Issuer with a $21 billion portfolio, filed for Chapter 11 bankruptcy on November 30, 2022. RMF was the largest HMBS issuer in the GNMA ecosystem with 36% of the total Ginnie Mae reverse portfolio.

Ginnie Mae went to great lengths to have the portfolio be transferred to an alternative reverse mortgage servicer. Ultimately, a transaction with an alternative mortgage bank was not feasible. As a result, Ginnie Mae seized the RMF portfolio on December 20, 2022. Approximately 120,000 assets were onboarded and must be managed by Ginnie Mae. OCFO has not previously performed accounting regarding HECM assets and this unprecedented requirement requires contractor support to properly manage and account for the newly acquired assets. Starting Period 3 (December) FY2023, Ginnie Mae will be required to provide policies, procedures, internal controls, and financial reports on these assets.

This is an urgent need, and the current contractor has the technical expertise and capacity to assume the responsibility for processing the HECM assets. The contractor’s current status with managing GNMA’s systems and existing loan portfolio coupled with their vast technical capability for building and maintaining financial information systems is essential as the GFIT contract includes operations for the following OCFO financial systems - SLDB, GFAS, and EPBCS. Given the current posture these systems require immediate updates/enhancements and ongoing IT related support for the newly acquired HECM portfolio, which is crucial to Ginnie Mae and OCFO’s efforts to stay compliant with federal and commercial reporting standards.

Lorna Wilson Date Technical Point of Contact, (TPOC) Office of Chief Financial Officer

GNMA

xi. Written Determination by Approving Official Identifying the Circumstance that Applies:

I hereby certify that this justification is accurate and complete to the best of my knowledge, and I determine on the basis of the findings above that the increase in the ceiling is in accordance with the requirements and is in the best interest of the Government.

Stacy Williams Date Director, Contracting Operations Division FAS National Capital Region

Darrick Early Date Head of the Contracting Activity FAS National Capital Region

2/22/2023