Approved_JOFOC.pdf

Justification for Other Than US. Department of Housing

Fu I I and Open Corn petition c:rement Officer

PART 1 - PROGRAM OFFICE RECOMMENDATION

recommend the use of other than full and open competition for the acquisition of [describe services or supplies]MFH Loan Servicing Services (Bridge Contract)

Negotiations should be conducted with the following source(s grjj[provide names, addresses and points of contact; continue on separate sheets asneeded]: Dynaxys LLC, 11911 Tech Road, Si ver Spring, MD 20904-1961

The estimated cost of this acquisition Is: $ 16,97220874 The statutory exception which allows this use of other than full and open competition Is [select one]:

Only one responsible source and no other supplies or services will satisfy agency requirements - 41 USC 3304 (a)(1) (see FAR 6.302-1) Unusual and compelling urgency -41 USC 3304 (a)(2) (see FAR 6.302-2) Industrial mobiiization; engineering, developmental or research capability; or expert servIces - 41 USC 3304 (a)(3) (see FAR 6.302-3) Authoriz r required by statute - 41 USC 3304 (a)(5) (see FAR 6.302-5) P Ii in st (NOTP r’’ -‘‘ ‘—‘ and ...

- 41 USC 3304 (ai(7i (see FAR 5302- 71‘4l2’ w ...y,, y,a, Ia, OMIJI wva, ._. - ._ ,s,,,W, yJy ,,w,,yy(,,, ,..a,,w,,y - - -.-.__

Program Office Certification. I certify that the information containi Head of Program Office [name] Brian D. Montgomery

I is accurate and complete to the best my knowledge and belief.

Title/Name of Office: Assistant Secretary for Housing, FH Commissioner, H

1 i For additional information contact: —

Ci /‘-f/ai PART 2 - CONTRACTING OF’FICER REVIEW AND dERTIFICATION

Provide additional Justification and comments here. Continue on back as needed.

Contracting Officer Certification.

I certify that the information contained in this justification is accurate and complete to the best of my knowledge and belief.

A description of the circumstances that support the use Previous edition unusable included as Exhibit 1 to this justification.

form HUD-24012(07/2011)Page 1 of 2

Up to $700000 - Contracting Officer

PART 3- OTHER APPROVALS

Name Title

Signature Date

$700,000 to $13,500,000 - Competition Advocate Name Title

Signature Date

$13,500,000 to $68,000,000 - Head of the Contracting_Activity Name

Signature

Tltle

Date %?/2’7A1

Over$8,00000’enior Procurement Executive Nar9 Title

Signature Date

Additional Contracting Officer justillcationlcomments from front tattach additional pages If needed]

Additional Guidance for Completing the Justification (see HUD Handbook 2210.3, Chapter 4)

PART 2 - Contracting Officer Review and Certification PART 1 - Program Office Recommendation Besides any information provided to support the program olfice’s justification, the

Contracting Officer shall provide:The supporting documentation in the Exhibit 1 must describe:

. The nature of the proposed acquisition that requires other than

• Documented results of any Federal Business Opportuity noticesfull and open competition; or explanation of why no notice was published.

• The unique qualifications of any proposed sole source; and • A statement of actions the Department may take to remove barners to . The market research conducted (see FAR Pad 10) and the results competition for subsequent acquisitions of similar services / supplies; and

A determination that the anticipated cost / price is fair and reasonable.or the reason(s) why market research was not conducted. (See FAR Subpart 6.3 for further guidance.)

The cost estimate must inctude all costs of the proposed The Contracting Officer signing the certitication shall be the same Individual whoacquisition, e.g., options, systems hfe costs, etc. The total will will sign the proposed acquisition action which is the subject of this justification.determine the approval level needed (see 3 below), FAR Subpart 6.3 describes the statutory exceptions, their applicability PART 3 Other Approvals and limitations on their use. The Contracting Officer shall obtain the approval Icr the dollar value ranges indicated.“Head of the Program Office” means:

• Far all Headquarters acquisitions: the cognizant Assistant it any person required to sign in these blocks disapproves this justification,Secretary or designee.

he/she shall return it to the requesting activity with a written determination.• Far field acquisitions: the program office director (e.g., Director, Multifamly Housing) within the State or Area Office. The requesting activity may obtain the name of the “Contracting Activity

Competition Advocate” Irom the cognizant contracting olfice.

The “Head of Contracting Activity” is defined at Subpart 2402.1 of the HUD Acquisition RegulatIon (48 CFR Chapter 24). The cognizant contracting office may also provide the name of this individual.

Previous edition unusable Page 2 of 2 form HUD-2401 2 (07/2011)

U.S. DEPARTMENT OF HOUStNG AND URBAN DEVELOPMENTiiIiiIit - WASHINGTON, DC 20410-3000

OFFICE OF HOUSING

January 4, 2019

JUSTIFICATION FOR OTHER THAN FULL & OPEN COMPETITION

MULTiFAMILY AND HEALTHCARE MORTGAGE LOAN SERVICES; PROPERTY MANAGEMENT

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

FILING SET-UP & MAINTENANCE

1. Contracting Organization: The Office of the Chief Procurement Officer on behalf of Office of Multifamily Housing Asset Management Division will be responsible for this action located in HQ, Washington DC.

2. I)escription of Action: Request approval of a sole source contract to Dynaxys to provide technical assistance to the Office of Multifamily I-lousing, Asset Management with their Federal Housing Administration (FHA) Programs: Multifamily and Kealthcare Mortgage Loan Servicing; Property Management Servicing, Relocation & Sales; and their non-FHA Program: 202/81 1 Direct Loan UCC filing Set Up & Maintenance. This is a new Firm Fixed Price contract.

3. Description of Services: The purpose of this contract is 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 i-ole 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.

Estimated Value: $15,977,208.74

Base: $7,813,014.37 Option Period: $8,164,194.37

Period of Performance: 6 months with a 6-month option period.

4. Authority: The statutory authority permitting the sole sourcing of services is 41 U.S.C. 3304 (a)(2) as implemented by FAR 6.302-2, Unusual and Compelling Urgency.

JUSTIFICATION FOR OTHER THAN FULL & OPEN COMPETITION:

SOLE SOURCE ACQUISITION Of FHA PROGRAMS: MULTIFAMILY MORTGAGE LOAN

SERVICES; PROPERTY MANAGEMENT SERVICING, RELOCATION & SALES; AND NON-FHA

PROGRAM: 202/871 DIRECT LOAN UCC FILING SET-UP & MAINTENANCE

5. Applicability ofA ttthority:

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.

The current Loan Servicing portfolio is approximately $2.2 billion. Any break in service will jeopardize the Department’s ability to service these notes and process collections. For example, no tax payments will be disbursed, no reserve for replacement activity will be performed, no invoice payments will be processed, etc. At this time of year, collections on the approximately 1900 M2M notes will begin to make year-end payments and I-IUD will not be able to process/apply the payments, Typically, payments and paydowns are more than $100 nii II ion.

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 requited to perform.

Without this contract in place, the MF and Healthcare HUD-Held portfolio will be non- compliant with regulations which may potentially result in audit Findings. Without this contract in place, the staff of the MFNSB will need to be reassigned to oilier 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. Without this contract in place, no 9250 disbursements can be made as HUD will not have a record of how much money each project has in its reserve for replacement escrow accounts. Without this contract in place, no property taxes will be paid as HUD will have no record if thet’e are funds in the tax escrow account or not. HUD will just be paying estimates without any manner of cross checking the project. Without this contract in place, no invoices will 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.

Without this contract in place, 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 requited 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 [hat HUD has received proper payment of which can take up to approximately 9 months to determine. HUD will have

SOLE SOURCE ACQUISITION OF FHA PROGRAMS: MULTIFAMILY MORTGAGE LOAN

SERVICES; PROPERTY MANAGEMENT SERVICiNG, RELOCATION & SALES; AND NON-FHA

PROGRAM: 202/811 DIRECT LOAN UCC FILING SET-U? & MAINTENANCE

no area to store its legal documents which consists of a large number of fire proof cabinets that cannot be transported to Document Retention Center, In conferring with 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 [hat 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, NUD will have a delay in time retrieving them if we can retrieve them at all. Without this contract, HUD would be unable 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), DU I OOR- I 5-R-000 I on August 31, 201 5 as a full and open competitive acquisition. Contract award was made on February 27, 2017. The GAO protest resulting from the competitive contract award on February 27, 2017 was filed on March 13, 2017. Although the Office of the Chief Procurement Officer rescinded the first stop work on Dec 29, 2017 on the initial award, a second protest was filed on January 8,2018 which resulted in another “stop work order” being imposed. Consequently, HUD took corrective action to terminate the award to Key Bank for the convenience of the government on 9/1212018.

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 of the reason market research was not conducted.

Because of the urgent need of the continued services, there is no time to conduct additional market research for this action, to award a sole source in a timely manner. Adciitionally, the incumbent contractor has HUD’s data and is the only source that can transition to the new contractor. A second protest was filed on January 8, 2018 and the new contractor is not performing. A third protest was filed on August 6th, 2018 and the new contract is not performing. OCPO awarded the contract to Key Bank on February 27, 2017 and canceled the contract on September 12, 2018 for the Government’s convenience. Therefore, it is imperative that the services continue as described in item 5 above and to eliminate a break in service

9. Any otherfacts support the use of other titan full and open competition.

HUD has completed a competition for the services identified in paragraph 2 above under solicitation number DUIOOR-l5-R-000l. The acquisition strategy for this solicitation was full and open competition”. A sole source contract was awarded to DYNAXYS on September 30, 2016 for a period of performance of 6 months to allow for continued performance and transition out pending the award of the competitive acquisition.

The solicitation closed, and award was made on 2/27/2017. On March 13, 2017, a protest was filed with the Government Accountability Office (GAO) by the unsuccessful offer. Corrective action was taken, and the contract was re-awarded. A second protested was received on January 8,201$. Corrective action was again performed, and the contact was re-awarded. A third protest was received on August 6th, 2018. On September 12, SOLE SOURCE ACQUISITION OF FHA PROGRAMS: MULTIFAMILY MORTGAGE LOAN

SERVICES; PROPERTY MANAGEMENT SERVICING, RELOCATION & SALES; AND NON-FHA

PROGRAM: 202/811 DIRECT LOAN UCC FILING SET-UP & MAINTENANCE

2018 HUD terminated the contract award for convenience and made the decision to re-compete the contract. The current bridge contract expires January 7, 2019.

10. A listing of the sources, if any, that expressed, lit writing, an interest in the acquisition.

To foster greater interest and competition on this acquisition, an industry day was held on November 16, 2018 sponsored by OCPO in collaboration with the MFI-I program office. interested participants were able to attend the industry day, ask questions, and get a better understanding of the requirement. There were questions received from at least 12 or more interested participants. It is envisioned that a competitive solicitation will be issued for this requirement. The Office of the Chief Procurement Officer maintains the finalized list of participants that attended the industry day.

11. A statement of the actions, if any, the agency may take to remove or overcome any barriers to competition before any subsequent acquicitioit for the sctppties or services required.

See response to item #6,

12. Contracting Officer Certification:

See form HUD-24012.