Amendment_001_Q A.pdf

United States Postal Service Office of Inspector General

Risk Analysis and Research Center (RARC)

Retiree Funds Investment Strategies

6HQOIG-16-A-0012

Amendment 001 Questions & Answers

1. Is there a current company doing this work and if so, could you provide me with the following:

- Contractor Name

- Contract/Task Order Number

- Expiration Date

- Approximate Value

Answer: No Supplier is currently working on this effort.

2. Will the appendix need to conform to the 15 page proposal limit, or can it exceed the page limit?

We noticed that the representations and certs are provided twice within the different parts of the RFP (e.g. in the main RFP, and in attachment 4), was this intentional? And would you want multiple copies in the response?

Answer: Any appendix will need to conform to the 15 page limit. Yes it was provided intentionally. Attachment 4 is easier to complete than the one incorporated as a provision.

3. Can you share the asset size of the Federal Employees Health Benefits Program?

Answer: Assets set aside for the Postal Service’s future premium payments for annuitants participating in the Federal Employees Health Benefits Program are held in the Postal Service Retiree Health Benefits Fund. According to the USPS 2015 Form 10-K, this fund had assets of $50,345 million as of September 30, 2015.

4. Can you share what the current liability is for each of the three asset pools (Civil Service

Retirement System, Federal Employees Retirement System, and Federal Employees Health Benefits Program)?

Answer: According to the USPS 2015 Form 10-K, the Postal Service’s portion of the Civil Service Retirement System has a (projected) actuarial liability of $199.6 billion on September 30, 2015. The CSRS Fund projected fund balance was $179.2 billion on that date.

The Postal Service’s portion of the Federal Employees Health Benefit Fund had projected liabilities of $111.3 billion against projected assets of $107.6 billion.

The Postal Service Retiree Health Benefit Fund (PSRHBF) liabilities were $105,162 million as of September 30, 2015.

5. For each Plan, are you able to share with us how much cash outflow is required on an annual basis for liability payments and other expenses? This data will give us a better understanding of your liquidity needs (impacts asset allocation decisions).

Answer:

As shown on p. 24 of the 10-K on the Postal Service’s website, the CSRS fund made $12.1 billion in disbursements in FY 2014. These were offset by $0.2 billion in contributions and $7.4 billion in investment income.

The FERS fund disbursed $2.1 billion in FY 2014, offset by contributions of $3.1 billion and investment income of $3.4 billion.

As shown on pp. 26-27 of the 10-K, the PSRHBF estimated liabilities increased by $7,422 million in FY 2015. This change consisted of four components. The fund liabilities increased because of an actuarial loss of $3,252 million, normal costs of $2,852 million, and interest of $4,152 million. These increases were partly offset by premium payments of $3,107 million.

The Postal Service made no contributions to the PSRHBF in FY 2015. The fund earned $1,495 million in investment income.

6. In the Scope of Work section of Attachment 1 under item “I.c.ii.”:

• A reference is made to “acceptably low risk” in the first bullet point. In this context, how do you define risk and what is your risk tolerance? Risk can be measured in many different ways (i.e., absolute and relative risk metrics), but it would be constructive to understand your specific definition of risk and your tolerance level.

Answer: Each investment strategy balances risk and return in its portfolio. The current investment strategy is 100 percent invested in risk-free U.S. Treasury securities. We are interested in learning whether there are alternative investment strategies (and portfolios) that provide higher return for a minimal increase in risk. “Acceptability” is a judgmental term that can only be evaluated in the contest of broader considerations such as cash flow and liquidity, managerial cost, and political considerations.

• The sixth bullet point mentions “transitioning from the current system to a new system”. Can this be interpreted as “transitioning from the current investment structure to a new investment structure”? If not, please clarify what you mean by “system”.

Answer: Yes. The current investment portfolio is 100 percent invested in Treasury securities. An investment strategy would include a target portfolio with a mix of assets, perhaps including Treasuries. We expect that, to minimize disruption and liquidity risk, the transition would take place over a number of years. How does the contractor propose to phase in the new target portfolio?

7. Can you provide us with a list of the actual portfolios the Plans are invested in?

Answer:

The CSRS and FERS portfolio is described in the Civil Service Retirement and Disability Fund (CSRDF) 2015 annual report:

https://www.opm.gov/about-us/budget-performance/other-reports/2015-civil-service-retirement-and-disability-fund-annual-report.pdf.

The Postal Service Retiree Health Benefit Fund was established in 2006 and is similarly invested.

8. Do you have an IPS for each of the Plans? If so, can you please share these documents with us?

Answer: The requirements for investing funds for each of the plans is established by law (5 U.S.C. § 8348 (e)-(f) and § 8909a (d)). Assets for the funds are to be invested in interest-bearing securities of the United States. In addition, assets for CSRS and FERS may be invested in obligations guaranteed as to both principal and interest by the United States.

9. Do the fees for Follow-up Work or Potential Queries have to be expressed in Labor Hours, or can we provide fee quotes for general consulting services typically requested following strategic asset allocation studies? These fees would be listed for separate services.

However, if were retained, we would provide a discounted fee for bundled services.

Answer: It is recommended to submit your quote for the follow up work as labor hours mainly because we don’t have a firm requirement. However, you can provide the fee quotes.

10. Provision 4-1 “Standard Solicitation Provisions” makes reference to the following proposal response requirements:

• (4) Terms of any expressed warranty

Please confirm this is not applicable.

Answer: If your proposal includes any kind of warranty, your proposal must show any expressed warranty. If your proposal does NOT include any expressed warranty, then this does not apply.

• (9) Past performance information, when included as an evaluation factor, to include recent and relevant contracts for the same or similar items, and other references (including contract numbers, point of contact, with telephone numbers, and other information) https://www.opm.gov/about-us/budget-performance/other-reports/2015-civil-service-retirement-and-disability-fund-annual-report.pdf https://www.opm.gov/about-us/budget-performance/other-reports/2015-civil-service-retirement-and-disability-fund-annual-report.pdf

Do we need to provide references as part of our proposal response, and if so, how many?

Answer: Past performance is NOT included as an evaluation factor in this RFP. The Instruction to Offerors (Attachment 2) – Technical Factor II only asks for Relevant Experience/Knowledge. You should provide detailed experience relevant to this RFP. No limit.

11. Please confirm that no proposal response requirements are related to “[ ] Provision 3-1:

Notice of Small, Minority, and Women-owned Business and Subcontracting Requirements (March 2006)”.

Answer: This is not a set aside requirement. Provision 3-1 does NOT apply to this RFP.