Attachment A - Performance Work Statement Actuarial Review Services (ARS).pdf

Performance Work Statement (PWS) ACTUARIAL REVIEW of the MUTUAL MORTGAGE INSURANCE FUND

7/8/2022 Version 2.1

Vision Statement 1 General Information

1.1 Introduction

1.2 Background

1.3 Constraints

1.4 Description of Services

1.5 Non-Personal Services

1.6 Period of Performance

1.7 Place of Performance

1.8 Hours of Operation

1.9 Special Qualifications

1.10 Post Award/Kickoff Conference

1.11 Status Meetings

1.12 Contractor Travel

1.13 Transition In

1.14 Transition Out

2 Definitions and Acronyms

2.1 Definitions

2.2 Acronyms

3 Government-Furnished Property and Services

3.1 Government Services

3.2 Facilities

3.3 Equipment

3.4 Materials

3.5 Quality Assurance (QA)

4 Contractor-Furnished Items and Services

4.1 Facilities

4.2 Equipment

4.3 Material

4.4 Contractor Responsibilities

4.5 Contractor Personnel

4.6 Identification of Contractor Employees

4.7 Quality Control

4.7.1 Quality Control Plan

5 Specific Tasks

5.1 Management Plan

5.2 Research Methodology Plan

5.3 Production of Actuarial Studies

5.4 Replication Package

6 Deliverables

6.1 Quality Control Plan ............................................ Error! Bookmark not defined.

6.2 Acceptance Criteria

7 Performance Requirements Summary 8 Related Documents

Performance Work Statement (PWS)

ACTUARIAL REVIEW of the MUTUAL MORTGAGE INSURANCE FUND

Vision Statement

To develop estimates of economic capital of the Single-Family Forward Mortgage and Home Equity Conversion Mortgage (HECM) portfolios, which requires that the Contractor develop as its core deliverables four primary modules for each of the two portfolios that together estimate the economic value of the FHA Mutual Mortgage Insurance Fund (MMIF).

1 General Information

1.1 Introduction

The Secretary of HUD has a statutory obligation to obtain an independent annual actuarial study (studies) of the MMIF and to report to Congress annually on the financial status of the MMIF.

This is described in 12 USC 1708 (a)(4):

The Secretary shall provide for an independent actuarial study of the Fund to be conducted annually, which shall analyze the financial position of the Fund. The Secretary shall submit a report annually to the Congress describing the results of such study and assessing the financial status of the Fund. The report shall recommend adjustments to underwriting standards, program participation, or premiums, if necessary, to ensure that the Fund remains financially sound. The report shall also include an evaluation of the quality control procedures and accuracy of information utilized in the process of underwriting loans guaranteed by the Fund. Such evaluation shall include a review of the risk characteristics of loans based not only on borrower information and performance, but on risks associated with loans originated or funded by various entities or financial institutions.

1.2 Background

The National Affordable Housing Act (NAHA) of 1990 established criteria for the actuarial soundness of the FHA Mutual Mortgage Insurance Fund (MMIF). Specifically, NAHA mandated that the Secretary of HUD retain capital to build a 2.0 percent minimum capital ratio by 2000 and maintain thereafter. The NAHA also required that the Secretary obtain an independent annual actuarial study of the MMIF, and to report to Congress annually on the financial status of the MMIF.

Since 2009, HUD has divided this requirement into two separately produced actuarial studies for the major risk categories in MMIF: The Single-Family Forward Mortgage ("Forward") and the Home Equity Conversion Mortgage ("HECM") insurance programs.

Each year HUD publishes the studies after the end of each Fiscal Year, in mid- November.

The primary focus of the studies is on the economic capital of the active insured portfolios as of the end of each fiscal year, as defined by 12 USC 1711 (f)(4)(C):

The term "economic net worth means the current cash available to the Fund, plus the net present value of all future cash inflows and outflows expected to result from the outstanding mortgages in the Fund.

1.3 Constraints

The services identified in this PWS will adhere to the rules, regulations, laws, standards, and conventions identified by HUD as well as within the Federal Government, in addition to the following constraints.

All valuation methods and techniques used in the Mutual Mortgage Insurance Fund (MMIF) actuarial studies shall comply with:

12 USC 1708(a) (4) 12 USC 1711(f) (4) 12 USC 1735(f) (16) The requirements of the Federal Credit Reform Act as implemented through OMB circulars A-11 and A-129 All applicable Actuarial Standards of Practice as promulgated by the U.S. Actuarial

Standards Board

In the event of conflict between the requirements and standards of Federal Credit Reform and the Actuarial Standards of Practice, the actuarial studies shall comply with the requirements and standards of the Federal Credit Reform Act as implemented.

In the event of conflict between the requirements and standards of Federal Credit Reform and 12 USC 1708 (a) (4), the actuarial studies shall comply with the requirements and standards of 12 USC 1708 (a) (4).

1.4 Description of Services

The Secretary of HUD has a statutory obligation to obtain an independent annual Actuarial Study (“Study” or “Studies”) of the FHA Mutual Mortgage Insurance Fund ("MMI”, “MMIF” or "Fund”), and to report to Congress annually on the financial status of the Fund. The project's primary focus is to produce the FY22 through FY26 Congressional mandated Actuarial Review that results from the annual independent actuarial study of the Mutual Mortgage Insurance Fund, and to provide associated analyses that use the actuarial model to answer a variety of policy questions on the economic net worth of the active insured portfolios as of the end of each fiscal year.

1.5 Non-Personal Services

The Government will neither supervise Contractor employees nor control the method by which the Contractor performs the required tasks. Under no circumstances shall the Government assign tasks to, or prepare work schedules for, individual Contractor employees. It shall be the responsibility of the Contractor to manage its employees and to guard against any actions that are of the nature of personal services or give the perception of personal services.

If the Contractor believes that any actions constitute, or are perceived to constitute personal services, it shall be the Contractor's responsibility to notify the Contracting Officer (CO) immediately. These services shall not be used to perform work of a policy, decision making, or management nature, i.e. inherently Government functions. All decisions relative to programs supported by the Contactor shall be the sole responsibility of the Government.

1.6 Period of Performance

The Period of Performance shall be for one 12-month base period and four 12-month option periods.

1.7 Place of Performance

The services shall be performed at the Contractor’s facility.

1.8 Hours of Operation

The Contractor is responsible for providing support services between the hours of 8:00 am to 5:00 pm EST, Monday thru Friday except for Federal holidays or when the Government facility is closed due to local or national emergencies, administrative closing, or similar Government directed facility closings. The Government reserves the right to change hours of operation or restrict contractor access. Government agencies will not be available during scheduled holidays, inclement weather, weekends, and after duty hours.

The Contractor shall, at all times, maintain an adequate workforce for the uninterrupted performance of all tasks defined within the contract when the Government facility is not closed for the above reasons. When hiring personnel, the Contractor shall keep in mind that the stability and continuity of the workforce is essential.

1.9 Special Qualifications

The Contractor’s staff shall possess professional knowledge of:

Project management Financial transactions

Federal government and Credit Program and private accounting, actuarial and auditing standards

Financial analysis, actuarial and business intelligence methods, practices, and software

Web-based applications Federal information technology security standards applicable to storage and handling of Federal Government data and creation and delivery of hardcopy and electronic deliverables

Mortgage lending to include borrower and loan characteristics, insurance endorsement, post-endorsement loan administration and servicing, forward and reverse mortgage cashflows, calculation and payment of mortgage insurance premiums, mortgage credit analysis, property analysis, loss-mitigation, forbearance, insurance claims including partial claims, assignment, and property disposition options

1.10 Post Award/Kickoff Conference

The Contractor shall attend any post award conference convened by the contracting activity or contract administration office in accordance with FAR Subpart 42.5. The Government intends to convene a Post Award Conference with the Contractor within ten business days after contract award. The Contracting Officer will notify the Contractor of the specific date, location, and agenda within five business days after contract award.

1.11 Status Meetings

The Contracting Officer, Contracting Officers Representative (COR) and other Government personnel, as appropriate may meet periodically with the Contractor to also review Contractor performance, requirement status, etc. At these meetings, the Contracting Officer will apprise the Contractor of how the Government views the Contractor's performance or progress of the requirement. The Contractor will apprise the Government of problems, if any, being experienced. Appropriate action shall be taken to resolve outstanding issues. These meetings shall be at no additional cost to the Government. Post Award Conference and subsequent meetings may be held via teleconference.

1.12 Contractor Travel

Prior to travel, the Contractor shall coordinate with and receive Government authorization from the COR for all travel. Reimbursement of travel costs will be in accordance with the Federal Travel Regulation and in accordance with FAR 31.205-46.

The Contractor shall travel using the lowest cost mode transportation commensurate with the mission requirements. When necessary to use air travel, the Contractor shall use the tourist class, economy class or similar lodging accommodations to the extent they are available and commensurate with the mission requirements. HUD will not reimburse Contractor's local travel. Local travel is defined as travel within fifty (50) miles of Washington, DC. All other travel will be reimbursed on a cost reimbursable basis; no profit or fee will be paid.

1.13 Transition In

N/A

1.14 Transition Out

N/A

2 Definitions and Acronyms

2.1 Definitions

Business/Work Days - Every official work day of the week which are days between and including Monday to Friday. This does not include public holidays and weekends.

Calendar Day - Any day of the week.

Contractor - A supplier or vendor awarded a contract to provide specific supplies or service to the Government. The term used in this contract refers to the prime.

Contracting Officer (CO) - A person with authority to enter into, administer, and/or terminate contracts and make related determinations and findings on behalf of the Government. Note: the only individual who can legally bind the Government.

Contracting Officer's Representative (COR) - An employee of the U.S. Government appointed by the Contracting Officer to perform contract administration activities in regard to technical issues. This individual has authority to provide technical direction to the Contractor as long as direction is within the scope of the contract, does not constitute a change and has no funding implications. This individual does NOT have authority to change the terms and conditions of the contract.

Defective Service - A service output that does not meet the standard of performance associated with the Performance Work Statement.

Deliverable Anything that can be physically or electronically delivered but may include non-manufactured things such as meeting minutes or reports.

Government Furnished Property (GFP) - Government-furnished property means property in the possession of, or directly acquired by, the Government and subsequently furnished to the Contractor for performance of a contract. Government-furnished property includes, but is not limited to, spares and property furnished for repair, maintenance, overhaul, or modification. Government-furnished property also includes contractor-acquired property if the contractor-acquired property is a deliverable under a cost contract when accepted by the Government for continued use under the contract.

Performance Requirements Summary (PRS) - A listing of the performance requirements under the contract that are to be evaluated by the Government on a regular basis, performance indicators for these requirements, performance standards for these requirement and surveillance methods to be used to determine if performance standards are met.

Performance Standard - The Contractor's performance level required by the Government.

Performance Work Statement (PWS) - A statement of work for performance based acquisitions that describe the required results in clear, specific and objective terms with measurable outcomes.

Physical Security - Actions that prevent the loss or damage of Government property.

Quality Assurance (QA) - Policies and procedures adopted by the Government to ensure that supplies and services acquired under Government contracts conform to the contracts quality requirements.

Quality Assurance Surveillance Plan (QASP) - A plan describing how the agency will survey, observe, test, sample, evaluate and document the Contractor's performance in meeting critical performance standards identified in the contract.

Quality Control (QC) - All necessary measures taken by the Contractor to assure that the quality of an end product of service shall meet contract requirements.

Service Contract - A contract that directly engages the time and effort of a Contractor whose primary purpose is to perform an identifiable task rather than to furnish an end item of supply.

Subcontractor - Any person, other than the prime Contractor, who offers to furnish or furnishes any supplies, material, equipment, or services of any kind under a prime contract or a subcontract entered into in connection with such prime contract, and any person who offers to furnish or furnishes general supplies to the prime contractor or a higher tier subcontractor. The Government does not have privity of contract with a subcontractor.

Work Week - Monday through Friday, unless specified otherwise.

2.2 Acronyms

AQL - Acceptable Quality Level ARAMS - Automated Renewal and Amendment System BAA - Business Area Analysis Study CBT - Computer-Based Training CCB - Change Control Board CCMB - Configuration Change Management Board CMMI - Capability Maturity Model Integration CFO or OCFO - Office of the Chief Financial Officer of HUD CFR - Code of Federal Regulations CIO or OCIO - Office of the Chief Information Officer of HUD CO - Contracting Officer COR - Contracting Officer's Representative COR - Contracting Officer Representative COTS - Commercial Off-the-Shelf CPO - Office of the Chief Procurement Officer of HUD EST - Eastern Standard Time (U.S.)

ETC - Estimate to Completion GAO - U.S. General Accounting Office HUD - U.S. Department of Housing and Urban Development

HUDAR - HUD Acquisition Regulation HUD/ISG - Internet Services Group within the Telecom Processing Division HUD Web - HUD’s Intranet Web Site and related WEB pages.

IG or OIG - Inspector General (Office of) IT - Information Technology IV&V - Independent Validation and Verification LOOCS - Line of Credit Control System OCPO - Office of the Chief Procurement Officer OIG - Office of Inspector General OMB - Office of Management and Budget PL - Public Law PM - Project Manager POC - Point of Contact PPM - Project Planning and Management QA - Quality Assurance QASP - Quality Assurance Surveillance Plan QCP - Quality Control Plan SF - Standard Form TBD - To be determined U.S.C - United States Code

3 Government-Furnished Property and Services

The Contractor shall furnish, all facilities, equipment, and supplies required to perform the work under this contract that are not listed under Government-Furnished Property and Services.

3.1 Government Services

No Government Services will be provided.

3.2 Facilities

No Facilities will be provided by the Government.

3.3 Equipment

No Equipment will be provided by the Government.

3.4 Materials

Any materials provided to the Contractor may be provided in hard copy or soft copy. All materials will remain the property of the Government and will be returned to the COR upon request or at the end of the contract period.

The Government will furnish data and internal reports regarding loan and borrower characteristics, loan performance, Presidents Budget economic assumptions, etc., as needed for the Contractor to execute the requirements of this contract.

3.5 Quality Assurance (QA)

The Government will evaluate the Contractor's performance under this contract in accordance with the Quality Assurance Surveillance Plan. It defines how the performance standards will be applied, the frequency of surveillance, and the minimum acceptable quality level.

4 Contractor-Furnished Items and Services

The Contractor shall furnish all facilities, equipment, and supplies required to perform the work under this contract that are not listed under Government-Furnished Property and Services.

4.1 Facilities

The Contractor shall furnish all facilities required to perform the work under this contract.

4.2 Equipment

The Contractor shall furnish all equipment and supplies required to perform the work under this contract.

4.3 Material

The contractor shall furnish all material required to perform the work under this contract outlined within the PWS, with the exception of the Government-furnished data and reports listed in Section 3.

4.4 Contractor Responsibilities

The Contractor shall only conduct business with designated Government personnel listed as points of contact (POCs). Names of authorized personnel shall be provided to the Contractor by the Government, in writing, and updated as necessary throughout the contract period.

U.S. Government records, copies of original results and reports, verified original data, corrected data, and corrected supporting final reports which are maintained by the Contractor remain the property of the U.S. Government. These files/results shall be surrendered to the COR upon request.

4.5 Contractor Personnel

The Contractor shall provide a Project Manager who shall be responsible for the performance of work. An alternate shall also be designated to act in the absence of the Project Manager. These Contractor personnel (main point of contact and alternate point of contact) are considered Key Personnel by the Government and shall be listed as such in accordance with HUDAR 2452.237-70, "Key Personnel. The Project Manager and alternate shall have full authority to act on all contact matters relating to daily operations of this contract. Accordingly, at a minimum, the points of contact shall have the technical knowledge of the requirement and be in the position to receive assignment, guidance, and direction from the COR, PM and CO per HUDAR 2452.237- 73, "Conduct of Work and Technical Guidance" and shall be allocated enough hours to the requirement to ensure successful performance. These points of contact shall each be an employee of the Contractor. An employee of a subcontractor is not acceptable for either of these positions. The Project Manager or alternate shall be available between the hours of 8:00am to 5:00pm Monday through Friday EST, except Federal Holidays or when the Government facility is closed for administrative reasons.

4.6 Identification of Contractor Employees

All Contractor/subcontractor personnel shall wear company picture identification badges as to distinguish themselves from Government employees. When conversing with Government personnel during business meetings, over the telephone, or via electronic mail, Contractor /subcontractor personnel shall identify themselves as such to avoid situations arising where sensitive topics might be better discussed solely between Government employees.

Contractors/subcontractors shall identify themselves on any attendance sheet or any coordination documents they may review. Electronic mail signature blocks shall identify their company affiliation. Where practicable, Contractor/subcontractors occupying collocated space with their Government program customer shall identify their workspace area with their name and company affiliation, or at a minimum, "Contractor" after name.

4.7 Quality Control

The Contractor shall establish and maintain a complete quality control program that shall ensure services are performed in accordance with this contract. The Contractor shall develop and implement procedures to identify, prevent, and ensure non reoccurrence of defective services. The Contractor's quality control program is the means by which he assures himself that his work complies with the requirements of the contract. The Contractor shall provide the associated Quality Control Plan to the Government as directed.

4.7.1 Quality Control Plan

The Contractor shall develop, maintain, and enforce a Quality Control Plan (QCP) that will:

Ensure the Government receives the level of quality that is consistent with the requirements specified in this contract.

Be sufficiently detailed to provide the Contractor's methodology for identifying and recruiting qualified personnel.

Provide the Contractor's methodology for resolving problems identified by the

Government during reviews conducted in accordance with its Quality Assurance Surveillance Plan (QASP).

Provide the Contractor's methodology for establishing an internal feedback system for support personnel, and for resolving problems identified by that feedback system.

Demonstrate and validate that the services or deliverables to be provided under the contract are completed with a level of quality that meets the minimum performance threshold established in the Government's QASP.

Address Quality Management Approach, Quality Assurance, Quality Control and Quality Standards.

The Contractor's QCP shall be delivered to the COR within 30 days after contract award (or with the Contractor's proposal if it is an evaluation factor). The QCP shall be submitted to the COR within 10 business days when changes are made thereafter. After acceptance of the QCP, the Contractor shall receive the Contracting Officer's acceptance in writing of any proposed change to its quality control system.

5 Specific Tasks

5.1 Research Design and Research Management Plan

Starting at the beginning of the base period, the Contractor shall, in conjunction with the COR and other HUD staff, design and plan a multi-year research and development effort to build and enhance the models underlying the annual studies for the purpose of improving the estimates of MMIF economic capital, and near-term cash flows.

The Research Design and Research Management Plan shall address the various components and requirements of the studies, including obtaining data and milestones, and describes how the Contractor will manage the tasks.

The Contractor shall:

Work with the CO, COR, SME and other staff to understand the processes involved in conducting the required studies.

Gain a firm understanding of MMIF programs and their evolution over time, including policy changes.

Identify and prepare a list of items and information it needs from HUD and request the information via the COR.

Update the Research Design and Research Management Plan as necessary.

The initial Research Design shall include at least the following:

1. Identification of necessary start-up tasks.

2. Description of how the Contractor will gain expertise in the MMIF programs

(including their history and their operations related to origination, endorsement, servicing, and asset recovery disposition).

3. Formulation of an outline of the Studies: purpose, contents, requirements, and deliverables.

The initial Research Management Plan shall include at least the following:

1. Description of how the Contractor shall gain familiarity and facility with accessing and manipulating raw FHA single family data for Studies analyses.

2. Definition of standards for sound loan performance and cash flow models to promote reliability and accuracy in the execution of automated data routines and algorithms.

The COR will approve the Research Design and Research Management Plan prior to the Contractor conducting the analyses.

Performance Standards

a) Standard: The Contractor shall deliver the Draft Research Design and Research Management Plan no later than 21 days after contract award for the Base period of the contract and by January 2nd of each Option Year. The Contractor shall deliver the Final Research Design and Research Management Plan 10 days after receipt of comments.

AQL: 1 business day deviation from standard.

Deliverables A001 Research Design for current FY and tentative outline for following FY A002 Research Mgt Plan for current FY and tentative outline for following FY

5.2 Initial Research and Research Methodology Plans

The Department encourages the exploration of alternative and competing methodologies to ensure current best practices are followed each year in the pursuit of programmatic and underwriting insights, better statistical or theoretical validity, and improved forecasting ability.

To develop estimates of economic capital of the Single-Family Forward portfolio, the current framework uses four primary modules:

a) A claim-rate model to measure the sensitivity of insurance claims to loan characteristics and economic conditions.

b) A prepayment-rate model to do the same for non-claim terminations.

c) A loss-rate model to estimate the severity of net final losses from defaulted loans that result in insurance claims.

d) A cash flow model that calculates periodic cash inflows and outflows from insurance activities using the first three models and various program terms and then discounts those cash flows to arrive at net present value calculations.

To develop estimates of economic capital of the HECM portfolio the current framework uses four primary modules:

a) Loan termination modules that estimate the likelihood of a loan terminating due to borrower mortality, mobility, refinance, and tax and insurance default.

b) A recovery rate module that predicts the value net expenses of a loan or property at time of disposition.

c) A cash flow model that translates loan terminations, loan assignments, and recoveries into periodic cash inflows and outflows, and then discounts those cash flows to arrive at net present value calculations.

d) A cash draw-down predictive module that forecasts future rates at which borrowers access the equity in their homes over time.

The claim, termination, prepayment, loss-rate, and recovery modules generally use regression-based statistical equations fit to FHA’s historical loan performance data and economic experience. Historical tendencies and program assumptions are used when appropriate, according to existing precedent based on the last twenty years of Department-published actuarial Studies.

Upon completion of the initial design and planning meetings mentioned in Section 5.1 above, the Contractor shall produce a written Initial Research Plan that identifies major target dates for the base period and discusses additional research and development efforts that could be continued into the option periods if HUD exercises the options. The Initial Research Plan is due 21 days from contract award.

In developing the Research Methodology Plan, the Contractor shall:

a) Arrange discussions with HUD staff regarding the objectives for enhancing the models used in the studies and setting priorities for research.

b) Include sections that explain the Contractor’s plans to explore, redesign, and re-create specifications of model components for the purpose of improving both the long-run estimates of FHA’s economic capital and short-run predictions of FHA net claim costs and cash flows

c) Describe their proposed strategy for obtaining, combining, modelling, preparing, and presenting data in accordance with industry standards (MISMO, NIST, etc.)

d) Include documentation of research efforts, statistical equations and modeling approaches, and integration of model components

e) Provide outputs of claim, prepayment, and loss-severity rates for the forward loan portfolio in the MMIF and sub portfolios in specified formats, along with cash-flow summaries and other summary outputs

f) Provide outputs of termination, claims, and recovery rates for the HECM portfolio in the MMIF and sub portfolios in specified formats, along with cash-flow summaries and other summary outputs

g) Include all other model documentation developed

Performance Standards

a) Standard: The Contractor shall formulate an Initial Research Plan, within 21 days after award of the base period, for the initial plan of action (base period only) and completion of the studies.

AQL: 10 business days deviation from standard.

b) Standard: The Contractor shall provide a Draft Research Methodology Plan within 21 days after Contract Award for the Base period of the contract and by January 2nd for each Option Year. The Contractor shall deliver the Final Research Methodology Plan 10 days after receipt of comments.

AQL: 10 business days deviation from standard.

Deliverables A003 Initial Research Plan A004 Research Methodology Plan

5.3 Production of Actuarial Studies

The Contractor will produce Actuarial Studies for Single Family Forward and Reverse (HECM) mortgages. The exact schedule for each performance year will be developed by the Contractor and COR and will be based on the date the input data is received by the Contractor.

The Contractor shall:

Produce written independent actuarial studies both for Single-Family Forward and

HECM that provides actuarial central estimates of MMIF economic capital as of the end of the subject fiscal year and assesses HUD’s estimates of economic capital.

Draft copies of the Studies shall be made available to the COR for review and comments according to the following deadlines:

1. First draft: No later than October 1 (about six weeks before final)

2. Provisional final draft: No later than November 8th,

3. Final draft: No later than November 12th.

Ensure that comments and edits from HUD staff shall be incorporated into the final draft by the Contractor before final publication. The Studies shall follow the template specified by the COR, with any changes requested by or approved by the COR.

Ensure the Studies include:

1. Recommended adjustments to underwriting standards, program participation, or premiums.

2. An evaluation of the quality control procedures and accuracy of information utilized in the process of underwriting loan guarantees

3. A review of the risk characteristics of loans based not only on borrower information and performance, but on risks associated with loans originated or funded by various entities or financial institutions. These discussions may suggest topics and areas of FHA credit performance that warrant new research.

Apply the final Forward actuarial model to the existing portfolio to produce conditional (and cumulative) claim, prepayment, and loss-given-default rates at various levels of aggregation across loans, and for individual policy years and policy year-quarter. Cash-flow summaries shall also be provided for major categories (e.g., premium revenues, claim expenses and recoveries or net loss due to claim, with affected loan counts and balances). The outputs shall be presented in a format agreed to by the COR and per defined deliverable dates.

Apply the final actuarial HECM model to the HECM part of the MMIF portfolio to produce conditional termination rates, timing of assignment, and recovery rates and amounts, by policy year and budget/endorsement year cohort, and by sub-cohort levels defined by policy initiatives and other characteristics. The output deliverables shall be presented in formats specified by the COR and per defined deliverable dates.

Promote transparency of the Studies assessments, by ensuring the Studies identify methodological vulnerabilities that may occur in its actuarial models or in HUD’s analyses of economic capital. This discussion shall evaluate the scope and scale of such vulnerabilities in creating possible forecast risk and suggest possible lines of research in these areas. The Studies shall assess and comment upon HUD’s own models that estimate economic capital for methodological vulnerabilities and compare HUD’s methodologies with those in the Studies.

Include historical data on changes in program terms as well as relevant loan and borrower characteristics (e.g., credit scores, loan-to-value ratios) by cohort and other sub-populations. Loan performance data (claim rates, prepayment rates, severity and recovery rates) both historical and projected shall be presented in the "finger-table formats (arrayed by cohort and policy years for different loan products).

Use the most recent Presidents Budget economic assumptions as the baseline economic forecast for the Studies. However, in addition to the central single path economic forecast, the Studies shall test alternative economic forecasts for stress-testing and sensitivity analysis to estimate ranges of reasonableness.

Comply with Federal Credit Reform Act discounting assumptions and procedures, to provide comparability to HUD estimates of economic capital.

Use stochastic or Monte Carlo simulations of future economic conditions including for interest rates and house price appreciation. The objective of these requirements is to illustrate the sensitivity of forecasts to economic uncertainty and other forms of forecast error.

Provide econometric appendices to the Studies that include variable specifications and statistical output from all regressions in the Studies. Individual estimation equations may not be combined for reporting.

The Contractor shall also deliver a final Run-time version of the actuarial model when delivering the final Actuarial Studies package.

Performance Standards

a) Standard: Deliver Actuarial Studies to the COR according to the schedule developed with the COR, but no later than the dates listed below for each year of performance:

No later than July 31: Outlines of Draft Studies No later than October 1: First Draft of Studies using more recent available actual data No later than October 15: HUD comments provided No later than October 31: Second Draft Studies using September 30 data No later than November 6: HUD Comments Provided No later than November 8: Provisional Final Studies No later than November 11: FHA Comments Provided No later than November 12: Final Studies due (electronic copies) No later than November 20: 50 bound copies of Studies due No later than December 1: Replication Package due

AQL: No deviation from standard.

b) Standard: Deliver Final Run-time version of Actuarial Model along with the delivery of the Final Actuarial Studies.

AQL: No deviation from standard.

Deliverables A005 Actuarial Studies A006 Final Run-time version of actuarial model

5.4 Replication Package

The Contractor shall provide a replication package of the final models that includes:

Model documentation Model code Input data Data dictionaries that describe variables and their specifications including formulae and decimal format Econometric estimations output Output data Output reports, including summary statistics Verification of the Replication Package's accuracy and compliance with Agile, Scrum, SAS and/or similar methods by which the Contractor created the Replication Package

The Contractor shall provide verification of the Replication Package's accuracy and compliance with Agile, Scrum, SAS and/or similar methods by which the Contractor created the Replication Package with delivery of the Replication Package.

All data, information, modeling, analyses, and code shall execute on HUD's computing environment. The COR will provide specifications for the HUD environment.

Performance Standards

a) Standard: The Contractor shall provide the Actuarial Studies Replication Package that complies with the constraints listed in this PWS no later than December 1st of each year of performance.

AQL: No deviation from standard.

b) Standard: The Contractor shall provide verification of the Replication Package's accuracy and compliance with Agile, Scrum, SAS and/or similar methods by which the Contractor created the Replication Package with delivery of the Replication Package.

AQL: No deviation from standard.

Deliverables A007 Actuarial Studies Replication Package A008 Replication Package accuracy and compliance verification

6 Deliverables

The Contractor shall complete all work and submit all deliverables as specified herein.

The Government reserves the right to make changes to delivery dates.

Number Name Frequency Quantity

A001 Research Design for current FY and tentative outline for following FY

Once per FY. One

A002 Research Management Plan for current FY and tentative outline for following FY

Once per FY. One

A003 Initial Research Plan Once. One A004 Research Methodology Plan One draft and one final per year.

One

A005 Actuarial Studies According to agreed-upon schedule, based on input data receipt date.

One

A006 Final Run-time version of actuarial model Once per FY. One A007 Actuarial Studies Replication Package Once per FY. One A008 Replication Package accuracy and compliance verification Once per FY. One

A009 Quality Control Plan As needed. One

6.1 Acceptance Criteria

All deliverables shall be submitted in a draft format agreed upon by the Contractor and the Government. Acceptance of all deliverables shall be in writing from the COR.

7 Performance Requirements Summary

The Performance Requirements Summary (PRS) chart below lists the contract's primary requirements, the associated performance standards, the expected target performance, and the methods of surveillance. While some contract requirements may not be listed in the chart below, requirements not appearing on the PRS chart do not negate the Contractor's obligation to perform all requirements as specified in the contract.

Additionally, HUD reserves all rights and remedies under the provisions and clauses of the contract when performance of any contract requirement, whether or not listed below, is unacceptable.

Performance Requirement Summary (PRS)

Statements Standards/AQLs Incentive/Remedy

5.1 Research Design

and Research Management Plan

a) Standard: The Contractor shall deliver the Draft Research Design and Research Management Plan no later than 21 days after contract award for the Base period of the contract and by January 2nd of each Option Year. The Contractor shall deliver the Final Research Design and Research Management Plan 10 days after receipt of comments.

AQL: 1 business day deviation from standard.

The Contractors invoice would be deducted at 3% deduction from the associated monthly CLIN price. All errors shall be revised within the given deadlines at no additional cost to the Government.

Statements Standards/AQLs Incentive/Remedy

5.2 Initial Research

and Research Methodology Plans

a) Standard: The Contractor shall formulate an Initial Research Plan within 21 days after award of the base period for the initial plan of action (base period only) and completion of the studies.

AQL: 10 business days deviation from standard.

b) Standard: The Contractor shall provide a Draft Research Methodology Plan within 21 days after Contract Award for the Base period of the contract and by January 2nd for each Option Year. The Contractor shall deliver the Final Research Methodology Plan 10 days after

The Contractors invoice would be deducted at 3% deduction from the associated monthly CLIN price. All errors shall be revised within the given deadlines at no additional cost to the receipt of comments.

AQL: 10 business days deviation from standard.

Statements Standards/AQLs Incentive/Remedy

5.3 Actuarial Studies a) Standard: Deliver Actuarial

Studies to the COR per the agreed-upon schedule for each year of performance. The following outlines rough milestone dates each year:

No Later Than July 31: Outlines of Draft Studies No Later Than October 1: First Draft of Studies using more recent available actual data No Later Than October 15: HUD comments provided No Later Than October 31:

Second Draft Studies using September 30 data No Later Than November 6:

HUD Comments Provided No Later Than November 8:

Provisional Final Studies No Later Than November 11:

FHA Comments Provided No Later Than November 12:

Final Studies due (electronic copies) No Later Than November 20: 50 bound copies of Studies due No Later Than December 1:

Replication Package due AQL: No deviation from standard.

b) Standard: Deliver Final Run-time version of Actuarial Model along with the delivery of the Final Actuarial Studies.

AQL: No deviation from standard.

The Contractors invoice would be deducted at 3% deduction from the associated monthly CLIN price which will be assessed each day of non-compliance. All errors shall be revised within the given deadlines at no additional cost to the

Statements Standards/AQLs Incentive/Remedy

5.4 Replication

Package

a) Standard: The Contractor shall provide the Actuarial Studies Replication Package

The Contractors invoice would be deducted at 3% deduction from the that complies with the constraints listed in this PWS no later than December 1st of each year of performance.

AQL: No deviation from standard.

b) Standard: The Contractor shall provide verification of the Replication Package's accuracy and compliance with Agile, Scrum, SAS and/or similar methods by which the Contractor created the Replication Package with delivery of the Replication Package.

AQL: No deviation from standard.

associated monthly CLIN price. All errors shall be revised within the given deadlines at no additional cost to the

HUD will develop a Quality Assurance Surveillance Plan to be used to provide contract oversight. In conjunction with the Contractor's Quality Control Plan and various other methods of assessing performance, the COR and PM may perform on-site reviews and/or other types of verification to determine that the specified target performance requirements have been met.

The attached QASP (Attachment B) is just a sample that may be used to provide contract oversight. It is not a part of the Contract, nor is it intended to duplicate or replace the Contractor’s QCP. The Government has provided the Contractor an informational copy of the QASP as an attachment to the Solicitation to support the Contractor’s efforts in developing a QCP.

Regular review of Contractor performance is critical to the overall success of the contract. On a monthly basis, the COR will evaluate the quality of the product or services.

8 Related Documents

The Contractor shall abide by all applicable regulations, publications, manuals, policies, and procedures in the performance of this contract.