A02.14 SSJ under the SAT - Credit Rating Agency Subscription - S&P Ratings Direct - SAM.docx

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SOLE SOURCE MEMORANDUM FOR ACTIONS UNDER THE

SIMPLIFIED ACQUISITION THRESHOLD IAW FAR 13.106-1(b)(1)(i)

1. Contracting Activity: The United States Army Corps of Engineers (USACE), Humphreys Engineer Center Support Activity (HECSA)

2. Description of Action: Approval is requested for a new Firm-Fixed price contract for the Corps Water Infrastructure Finance Program (CWIFP) to purchase credit rating subscription services using Civil Works funding from the Water Infrastructure Finance and Innovation Act (WIFIA) account (096 X 3139).

3. Description of Supplies/Services: CWIFP must purchase a subscription to S&P’s RatingsDirect (for 5 users), which provides in-depth analysis and research on the creditworthiness, financial health, and credit risk assessments of entities rated by S&P along with sector trends and market developments. S&P’s RatingsDirect provides full access to S&P ratings research and data to include issuer-specific reports, sector outlooks and macroeconomic commentary beyond the S&P-rated universe. S&P’s platform also provides historical ratings data and default/transition studies. In addition, access to RatingsDirect is through a web-based platform and would not require software to be downloaded on a government laptop, reducing network cyber concerns.

Period of Performance/Delivery Date: The contract will include a base year of twelve (12) months with four (4) option years of twelve (12) months, totaling sixty (60) months and an estimated contract value of $xxx,xxx.xx.

4. Authority Cited: 10 U.S.C. 2304(C)(1) or 41 U.S.C. 253(C)(1) as implemented in FAR 13.106-1(b)(1)(i)

5. Reason for Authority Cited: Contracting officers may solicit from one source if the contracting officer determines that the circumstances of the contract action deem only one source reasonably available (e.g., urgency, exclusive licensing agreements, brand-name or industrial mobilization). S&P’s RatingsDirect is a proprietary credit ratings and research platform developed and maintained solely by S&P and is not available through any other vendor or distributor. CWIFP provides federal credit assistance in the form of secured (direct) loans or loan guarantees for eligible water infrastructure projects. The program is actively processing three (3) loan applications and anticipates receiving an additional thirteen (13) applications by September 2025. S&P’s RatingsDirect provides actionable, transparent, and integrated credit analytics with quantitative and qualitative assessments that will directly enhance the speed, accuracy, and defensibility of CWIFP’s credit risk assessments and loan underwriting process.

While there are other credit rating agencies, the following reasons necessitate the use of S&P’s RatingsDirect:

a. Specialized Public Finance and Infrastructure Coverage – S&P’s methodologies are proprietary to S&P and cannot be matched exactly by its competitors. S&P maintains a team dedicated to U.S. Public Finance – Water & Sewer, covering hundreds of municipal utilities, public authorities and project finance issuers tied to water infrastructure. As a result, S&P’s platform maintains unique coverage and historical performance data for water resource-related borrowers, CWIFP’s primary borrower type.

b. Extensive Coverage and Historical Data – S&P’s RatingsDirect covers thousands of issuers and tens of thousands of securities worldwide, with deep historical archives or ratings and analyst commentaries. Access would enable trend analysis and risk monitoring over time, which is essential for the CWIFP team to understand long-term credit implications.

c. Risk Modeling - CWIFP uses S&P's default statistics for its credit subsidy modeling. A subscription to RatingsDirect would provide CWIFP access to comprehensive credit metrics and statistics.

d. Advanced Research Tools and Market Intelligence – RatingsDirect offers sector and macro research and customizable screening tools integrated into one platform, which will provide CWIFP with critical information needed throughout the loan life cycle from underwriting to loan monitoring. RatingsDirect is ideal for monitoring credit developments, comparing issuer risk profiles, and keeping up-to-date on the public-finance landscape.

e. Market Share and Prominence – Most Federal loan programs require their applicants to obtain ratings from Nationally Recognized Statistical Rating Organizations (NRSROs), and S&P is one of the most widely used and trusted. Having access to the analyst research that underpins prospective borrower ratings is essential for the program to underwrite and conduct due diligence for each loan.

6. Efforts to Obtain Competition: A Notice of Intent will be posted per FAR Subpart 5.2, and any bids or proposals shall be considered.

7. Actions to Increase Competition: CWIFP will continue to evaluate products from other vendors in the market to determine whether a comparable product is produced in the future, prior to any award. At the current time, no other products will meet program requirements as described in Section 5.

8. Market Research: The CWIFP team reached out to counterparts at the EPA’s WIFIA loan program and the Office of Strategic Capital’s (OSC’s) loan program to find out if they have subscriptions to any rating agencies. EPA advised that they had subscription contracts with S&P, Fitch, and Moody’s. OSC has a sole source contract with S&P for a much more extensive data and analytics package than what CWIFP requires. OSC also has a contract with Moody’s. CWIFP received presentations from Fitch and S&P on their potential offerings and received informal pricing information from S&P, Fitch, and Moody’s. The CWIFP team will continue strategic market research efforts and will evaluate other solutions if identified through the Notice of Intent.

9. Interested Sources: To date, S&P, Fitch, and Moody’s have all expressed interest. Any proposals received shall be reviewed and evaluated.

10. Other Facts: CWIFP requires borrowers to submit a preliminary rating opinion letter from a NRSRO, and prior to loan execution, the borrower must submit at least one final rating opinion letter. These ratings assess the borrower’s overall creditworthiness and indicate the level of risk to the government for entering into a loan agreement with the borrower. Ten agencies are currently registered as NRSROs. S&P, Moody’s and Fitch are considered the top three NRSROs, and they issue 55%, 34% and 10%, respectively, of the total credit ratings for government securities, which represents CWIFP’s primary applicant type of municipal borrowers. As part of the preliminary application, CWIFP’s prospective borrowers included copies of their prior credit ratings. Of the sixteen prospective applicants, ten (10) referenced prior ratings from S&P, which indicates a high probability that applicants will use S&P for their final rating letter required for closing their CWIFP loan.

11. Fair and Reasonable Cost Determination: I hereby determine that the anticipated price to the Government for this contract action will be fair and reasonable, based on market research and to an Independent Government Cost Estimate. Per FAR 15.403-1(b)(3), certified cost and pricing data is not required.

David A. Kaplan Procuring Contracting Officer Phone: 703-428-8487

12. Contracting Officer Certification: I certify that this justification is accurate and complete to the best of my knowledge and belief.

Procuring Contracting Officer

Approval

Based on the foregoing justification, I hereby approve an award of a firm fixed price contract to S&P in the amount of $xxx,xxx.xx on an other than full and open competition basis pursuant to the authority of FAR 13.106-1(b)(1)(i), subject to availability of funds, and provided that the services and property herein described have otherwise been authorized for acquisition.

Procuring Contracting Officer David.A.Kaplan@usace.army.mil

Prepared by:

Bart Dziadosz Contract Specialist Bartholomew.Dziadosz@usace.army.mil

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(Source Selection information - See FAR 2.101 and 3.104-4)