Attachment A Performance Work Statement (PWS)nb.doc

Performance Work Statement (PWS)

Risk Management & Capital Assessment Projections (RMCAP) Recompete 06/14/2022 (revised) Version 2.1 4Vision 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 Work, Data, Code and Method Plans

5.2 Modeling, Reporting and Performance Tracking

5.3 Records Management, Delivery and Review Support

5.4 Weekly Status Meetings

5.5 Transition Services

6 Deliverables

6.1 Acceptance Criteria

7 Performance Requirements Summary 8 Related Documents

Performance Work Statement (PWS) Risk Management & Capital Assessment Projections (RMCAP) Vision Statement

To achieve operational excellence through the development and execution of risk management models for the Federal Housing Administration (FHA) mission critical Single-Family Mortgage Insurance programs.

1 General Information

1.1 Introduction

The U.S. Department of Housing and Urban Development (HUD), Federal Housing Administration (FHA) provides risk management, budget accounting data, and budgetary impact analysis of policy decisions with respect to the Single-Family Mortgage Insurance program. FHA is responsible for the development, maintenance, and improvement of all program area Cash Flow Models (CFMs) used for Credit Subsidy Estimation and Re-estimation. Risk Management & Capital Assessment Projections’ (RMCAP) purpose is to ensure that the cash flows, net assets, and valuations arising from the mortgage insurance and financial transactions of the Single-Family Mortgage Insurance program and the level, direction, and implications of the risks to the Single-Family Mortgage Insurance program are made clear. Credit subsidy estimation is the net present value of a new book of business for the current budget year; and credit subsidy re-estimates are annual revisions to prior budget estimates.

1.2 Background

FHA has employed a variety of financial and statistical models to project its loan performance and cash flow transactions. These models have often used econometric or actuarial techniques and are referred to as Net Present Value (NPV), Return on Asset (ROA), and Credit Subsidy Re-estimate (CSR) models. The four main sets of data points produced for the Single-Family Mortgage Insurance program are:

1. Liability for Loan Guarantee (LLG) accounting data for the annual audited financial statements. The LLG is the present value of anticipated cash outflows such as claim payments (including partial claim payments), premium refunds, property expenses for FHA held properties, and sale expenses for sold properties, less anticipated cash inflows such as premium receipts, and proceeds from property sales on Secretary-held notes.

2. Net Present Values of the cashflows and capital position forecast estimates.

3. Current year budget estimates of the Federal credit subsidy cost.

4. Annual revisions to prior budget estimates of Federal credit subsidy costs.

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. Constraints include the following:

· Compliance with all applicable aspects of:

· OMB Circulars A-11, Preparation, Submission and Execution of the Budget (RMCAP requirements include support of these activities) - https://www.whitehouse.gov/omb/information-for-agencies/circulars/#procurement

· OMB Circular A-123, Managements Responsibility for Internal Control (RMCAP deliverables provide evidence of internal control functions) - https://www.whitehouse.gov/omb/information-for-agencies/circulars/#procurement

· OMB Circular A-129, Policies for Federal Credit Programs and Non-Tax Receivables - https://www.whitehouse.gov/omb/information-for-agencies/circulars/#procurement

· Federal Accounting and Audit Standards (Federal Accounting Standards Advisory Board (FASAB) Handbook) - https://fasab.gov/accounting-standards/

· Section 508 of the Rehabilitation Act of 1998 - https://www.govinfo.gov/content/pkg/PLAW-105publ220/pdf/PLAW-105publ220.pdf

· Model risk management in accordance with principles and standards established by the Federal Housing Finance Agency (AB-2013-07-model-Risk-Management-Guidance) et seq. and The Federal Reserve Board and The Comptroller of the Currency (Supervisory Guidance on model Risk Management) et seq.

· Ownership: Ownership and data rights of all the elements, structures and processes feeding into or produced by the databases or other automated tools developed under this contract will be the property of the government. FHA must have effective access, through a custodian designated at FHA’s discretion, to all versions of the RMCAP processes, databases, reports, data, and related documentation at the end of each business day. The Contractor is required to maintain and update the models, tools, and data in a HUD supplied secure location. As expiration of the contract approaches, the contractor shall prepare and deliver all RMCAP data and code to the government’s designee in a machine-readable format as agreed between the parties. The RMCAP data rights should include but not be limited to all versions of the RMCAP processes, databases, models, reports, data, and related documentation.

Compliance with IT Security Requirements - The Contractor shall maintain compliance with all current and future Federal IT security requirements for all data, databases, artifacts, processes, and procedures that the contractor manages, develops, modifies, enhances, releases, and/or upgrades. In order to do this, the Contractor shall:

· Maintain IT security and comply with all terms and conditions of the contract throughout the term of the contract with respect to all data and information technology requirements.

· Use, maintain, enhance, develop and upgrade all information technology software and system documentation under this Contract in accordance with Federal Laws, best practices, and regulations. This includes, but is not limited to:

1. Federal Information Security Management Act - https://www.dhs.gov/fisma

2. The Privacy Act - https://www.archives.gov/about/laws/privacy-act-1974.html

3. The E-Government Act - https://www.archives.gov/about/laws/egov-act-section-207.html

4. The Clinger-Cohen Act - https://www.fismacenter.com/Clinger%20Cohen.pdf

5. Government Paper Reduction Act - http://www.hhs.gov/ocio/policy/collection/

6. Office of Management and Budget Circulars A-130, and A-I23 - https://www.whitehouse.gov/omb/circulars_default

7. Office of Management and Budget Memorandum 17-12 https://obamawhitehouse.archives.gov/sites/default/files/omb/memoranda/2017/m-17-12_0.pdf

8. Department of Housing and Urban Development regulations, Handbooks and Policies - http://www.HUD.gov

9. GAO directives; and

10. Federal Financial Management Improvement Act (FFMIA).

· Maintain Security Assessment and Authorization (SA&A) standards in accordance with guidance published by NIST.

· Follow HUD’s Project Planning and Management (PPM) Life Cycle and industry best practices in the analysis, design, development, testing and implementation of proposed new systems and/or the enhancement to existing systems. This includes prohibiting live data from being used in any environment other than Production and Disaster Recovery (DR) environments. Specifically, no live data should be used in development, testing or staging environments.

· Ensure each financial or mixed financial system that the contractor manages, develops, modifies, enhances, releases and/or upgrades is in compliance with the Federal Information system Controls Audit Manual (FISCAM) methodology that include control families for both General Computer (Security Management, Access Controls, Configuration Management, Segregation of Duties, and Contingency Planning) and Business Process Application controls (Application Security, Business Process Controls, Interfaces, and Data Management).

· Ensure compliance with identified OMB A-123 Appendix A "Management's Responsibility for Internal Control" and Appendix D "Compliance with the Federal Financial Management Improvement Act of l996 key controls; and the Federal Information Security Management Act of 2002 (FISMA) to include:

1. National Institute of Standards and Technology (NIST) Special Publication (SP) 800-53, Security and Privacy Controls for Federal Information systems and Organizations, Revision 5 (NIST SP 800-53, Rev. 5);

2. NIST SP 800-18 Rev. 5 - Guide for Developing Security Plans for Federal Information systems;

3. NIST SP 800-23 - Guidelines to Federal Organizations on Security Assurance and Acquisition/Use of Tested/Evaluated Products;

4. NIST SP 800-30 Rev. 5 - Guide for Conducting Risk Assessments;

5. NIST SP 800-34 Rev. 5 - Contingency Planning Guide for Federal Information systems;

6. NIST SP 800-37 Rev. 5 - Guide for Applying the Risk Management Framework to Federal Information systems;

7. NIST SP 800-47 - Security Guide for Interconnecting Information Technology systems

8. NIST SP 800-53A Rev. 5 - Guide for Assessing the Security Controls in Federal Information systems and Organizations, Building Effective Security Assessment Plans;

9. NIST SP 800-59 - Guideline for Identifying an Information system as a National Security system;

10. NIST SP 800-60 Rev. 5 - Guide for Mapping Types of Information and Information systems to Security Categories;

11. NIST SP 800-84 - Guide to Test, Training, and Exercise Programs for IT Plans and Capabilities;

12. Federal Information Processing Standards (FIPS) 199/200 Security Categorization Analysis; and

13. FIPS 191 - Guideline for the Analysis of Local Area Network Security.

In addition, the Contractor shall:

· Ensure business services are able to function within the Federal government’s IT protocols and requirements.

· Employ standard network security practices that comply with HUD OCIO’s IT Security Policy Handbook 2400.25: https://www.hud.gov/program_offices/administration/hudclips/handbooks/cio/2400.25

· Employ Secured Socket Layer (SSL) transmission protocol.

· Comply with NIST and FISMA standards to safeguard CCAP data that is classified as having a Moderate information security baseline.

· Support dynamic registration.

· Provide HUD with the attribute/values they need in the assertion to map to the users contained in their user store.

· Provide managed, secure, and controlled access to its application for interfacing with HUD systems and users.

· Make every reasonable effort to deliver information technology products to HUD free of known computer viruses by examining all products prior to delivery to HUD using tools and processes capable of virus detection.

Failure by the Contractor to adhere to the above NIST requirements could result in penalties, to include a contract performance stop-work order until compliance can be demonstrated. Disregarding these NIST requirements could also lead to other criminal, civil, administrative, or contract penalties, including, but not limited to:

· Breach of Contract damages

· False Claims Act damages

· Liquidated Damages

· Termination for Default

· Termination for Convenience

· Poor Past Performance

· Suspension/debarment Compliance with Privacy Requirements - The Contractor shall maintain compliance with OMB Memorandum 17-12 (Preparing for and Responding to a Breach of Personally Identifiable Information), which requires contractors and sub-contractors (at any tier) to:

· Cooperate with and exchange information with agency officials, as determined necessary by the agency, in order to effectively report and manage a suspected or confirmed breach.

· Properly encrypt PII in accordance with OMB Circular A-130 and other applicable policies and to comply with any agency-specific policies for protecting PII;

· Provide and participate in mandatory training on how to identify and report a breach;

· Report a suspected or confirmed breach in any medium or form, including paper, oral, and electronic, as soon as possible and without unreasonable delay, consistent with the agency's incident management policy and US-CERT notification guidelines;

· Maintain capabilities to determine what Federal information was or could have been accessed and by whom, construct a timeline of user activity, determine methods and techniques used to access Federal information, and identify the initial attack vector;

· Allow for an inspection, investigation, forensic analysis, and any other action necessary to ensure compliance with OMB M 17-12, the agency's breach response plan, and to assist with responding to a breach;

· Identify roles and responsibilities, in accordance with OMB M 17-12 and the agency's breach response plan; and,

· Explain that a report of a breach shall not, by itself, be interpreted as evidence that the contractor or its subcontractor (at any tier) failed to provide adequate safeguards for PII.

Data Handling - The Contractor shall follow these rules when handling all data related to this requirement:

· The Contractor and its employees shall not divulge, or release data or information developed or obtained during performance of this contract without written approval of the Contracting Officer.

· Information contained in all source documents and other media provided by HUD is the sole property of HUD.

· Include the following statement on deliveries of hardware, software, and all data media made set forth in this contract: "This product has been scanned for known viruses using [name of virus-screening product, including version number, if any] and is certified to be free of known viruses at the time of delivery.

· Adhere to HUD’s policies for safeguarding sensitive electronically formatted information.

· As expiration of the contract approaches, the contractor shall prepare and deliver all CCAP data and code to the government’s designee in a machine-readable format. The CCAP data rights include but are not limited to all versions of the CCAP processes, databases, models, reports, data, and related documentation.

Additional Constraints include the following Acts that govern how the program funds receive their authority and/or are to be managed:

· The National Housing Act of 1934 (Section 203(b) authorizes MMIF

· The Housing and Community Development Act of 1987(authorized HECM)

· Cranston-Gonzalez National Affordable Housing Act of 1990 (capital ratio)

· Federal Credit Reform Act (FCRA) of 1990 (capture cost of credit programs on a budgetary basis)

· The Housing and Economic Recovery Act of 2008 (added HECM to MMIF)

1.4 Description of Services

The Contractor shall provide risk management statistical models, cash flows, and valuations arising from the mortgage insurance and financial transactions support services. These support services shall include:

1. Work, Data, Code and Method Plans

2. Modeling, Reporting, and Performance Tracking

3. Records Management, Delivery, and Review Support

4. Transition Services

Detailed descriptions of specific tasks are provided in Section 5 Specific Tasks and Deliverables.

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 (1) 12-month base period and four (4) 12-month option periods.

1.7 Place of Performance

The services to be performed under this contract shall be at the Contractor's facility.

1.8 Hours of Operation

The Contractor is responsible for providing 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. Work outside of these daily hours is prohibited without Contracting Officer approval. 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

N/A

1.10 Post Award/Kickoff Conference

The Contractor shall attend the 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 on specific date, time and location, and agenda within five business days after contract award. Due to COVID-19 the meeting may be held on Microsoft Teams.

1.11 Status Meetings

The Contracting Officer, Contracting Officer’s Representative (COR) and other Government personnel, as appropriate, may meet periodically with the Contractor to 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

No Contractor travel is anticipated during the performance period of this contract.

1.13 Transition In

The Contractor shall, upon the Contracting Officer's written notice, furnish Transition-In services as required. As a successor, the Contractor shall have sufficient personnel on board during the 90 days Transition-In period to ensure a smooth transition with the incumbent Contractor. The Contractor shall provide an orderly transition of work acceptance and accomplishment such that any impact to the program is minimized. During the Transition-In period, the Contractor shall become familiar with the requirements in order to commence full performance of services by the end of the contract Transition-In period. Transition-In is not required if the successor Contractor is the incumbent Contractor.

1.14 Transition Out

To minimize any decrease in productivity and to prevent possible negative impacts on additional services, the Contractor shall have sufficient personnel on board during the 90 days Transition -Out period. The incumbent Contractor shall ensure a smooth transition with the successor Contractor during the Transition-Out period, prior to completion of contractual performance. The incumbent Contractor shall aid the successor in the development of plans, procedures, and methods for the assumption of all on going work. The Contractor shall provide an orderly transition of work acceptance and accomplishment, such that full control by the successor Contractor is achieved by the end of the new contract Transition-In period.

2 Definitions and Acronyms

2.1 Definitions

Artifacts – Documents, Models, Databases, SAS Code, Job Scripts, Input and Output data, and all other items created, developed, or used in performance of this requirement.

Business/Workdays - Every official workday 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 Officers 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 a performance-based acquisition 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

CO - Contracting Officer

COR - Contracting Officer Representative

CSR - Credit Subsidy Rate

ETL - Extract, Transfer and Load

FHA Federal Housing Administration

HECM - Home Equity Conversion Mortgage

HERMIT - Home Equity Reverse Mortgage Information Technology

HUD - U.S. Department of Housing and Urban Development LLG - Liability for Loan Guarantee

MIP - Mortgage Insurance Premium

NPV - Net Present Value

OCPO - Office of the Chief Procurement Officer

PEA - Presidents Economic Assumptions

PM - Project Manager

POC - Point of Contact

QA - Quality Assurance

QASP - Quality Assurance Surveillance Plan

QCP - Quality Control Plan

RMCAP - Risk Management & Capital Assessment

ROA - Return on Assets SER - Single Effective Rate

SF - Single-Family

SFDW - Single Family Data Warehouse

T&I - Taxes and Insurance

UPB - Unpaid Principal Balance

3 Government-Furnished Property and Services

The Contractor shall ensure accurate control and accountability of all Government-Furnished Property (GFP) in accordance with the terms and conditions of this contract. The Government will furnish, at no cost to the Contractor, the GFP shown below.

3.1 Government Services

No Government Services will be provided.

3.2 Facilities

No Facilities will be provided by the Government.

3.3 Equipment

The Government will provide up to 5 laptops for Tasks herein. Laptops are assigned to individuals on the contract and shall be returned to the government within 5 days of the individual moving off the contract. All government furnished property shall be returned to the government upon expiration of this contract.

3.4 Materials

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

For each task in Section 5, the Government will provide, as applicable, all base datasets required for all models. This shall include the following sources of data from the Federal Housing Administration (FHA): Single Family Data Warehouse (SFDW); the Home Equity Reverse Mortgage Information Technology (HERMIT) System; the FHA Integrated Database (IDB); and other systems for all applicable cohorts of loans:

· Original underwriting information, current loan status (e.g., active, terminated, or claim), and termination date.

· Historical data on default and delinquency episodes.

· Status of active loans (e.g., current, 30 days delinquent, 60 days delinquent, number of missed payments, etc.).

· Historical data on claims, including outstanding unpaid principal balance (UPB), claim processing date, and loss mitigation data.

· Historical credit scores for loans insured prior to 2004 (for all loans for which it is available).

The Government will also provide projections of home prices, interest rates and unemployment rates available to FHA through commercial forecasts, and the President Economic Assumptions (PEAs).

3.5 Quality Assurance (QA)

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

4 Contractor-Furnished Items and Services

The Contractor shall furnish all items as described below to perform work under this contract.

4.1 Facilities

The contractor shall furnish the facilities to meet the requirements under the PWS.

4.2 Equipment

The contractor shall furnish all equipment necessary to perform the services stated within the PWS, with the exception of the Government-furnished equipment listed in Section 3.

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 materials listed in Section 3.

4.4 Contractor Responsibilities

The Contractor shall only conduct business with the designated Government personnel listed as points of contact (POCs). Names of the 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 or 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 actually receive assignment, guidance and direction from the COR 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, enforce, and document a Quality Control Plan (QCP) that ensures the Government receives the level of quality that is consistent with the requirements specified in this contract.

The QCP shall:

· 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 with the proposal.

5 Specific Tasks

The following section outlines the tasks and deliverables required to build and enhance RMCAP in order to answer relevant policy questions and meet the reporting needs of FHA. All artifacts are to be kept current as updates occur with source databases, ETL, model methods, code, and FHA program terms. These updates shall occur at least once, annually.

5.1 Work, Data, Code and Method Plans

The Contractor shall develop and maintain the following plans to be used in managing contract requirements:

· Management Work Plan (MWP)

· Input Data Architecture Plan

· Output Data Architecture Plan

· Code Architecture Plan

· Model Methodology Plan

Within two weeks of the kick-off meeting, the Contractor shall present a draft of each plan. Once FHA reviews the drafts and provides feedback, the Contractor shall make modifications as necessary. Updated plans will be delivered to the Government within five business days of receipt of client feedback. The Contractor shall submit a final initial version of each plan via email to the COR 90 days after contract award.

The Contractor shall update the plans each option year, in coordination with FHA, to incorporate changed information and submit the draft modified plan(s) for review and approval within two weeks of beginning of the option year. The final updated plan(s) are to be delivered to the COR 90 days after the beginning of each option year.

5.1.1 Management Work Plan

The Management Work Plan (MWP) establishes specific plans for analysis of the prior period’s model performance in each year of the contract to determine what changes need to be incorporated in the models for the upcoming performance year.

The MWP shall include the following information:

· A breakdown of the project into specific activities, indicating which tasks are dependent upon the completion of others

· A schedule indicating when each task shall begin, estimated time to completion, and who shall perform the task

· The actions necessary to achieve project goals, as well as associated risks and mitigation strategies to ensure that the project remains on schedule

· A specified analysis plan for each of the tasks

5.1.2 Input Data Architecture Plan

The Input Data Architecture Plan documents how the Contractor will perform the tasks needed to validate the input data being used under this contract.

The plan shall include the following components or features:

· A comprehensive dataset (full input dataset) of historical performance and loan characteristics. Its critical components include a mapping of mortgage life-cycle events and transactions to FHA data to create model variable specifications with explicit data rules, transformational calculations, justification for choice of variable, and transformations. Discretion may be used in the design of its data structures, modularity of statistical code, and evaluation of alternative specifications for their advantages, disadvantages, and trade-offs in meeting FHA/ORMRA/MAD objectives.

· Investigations of the available data sources that shall include:

1. Reviews of the data for missing or incomplete fields.

2. Resolution of conflicted, missing, or ambiguous data definitions among multiple sources.

3. Clarification of data-related questions with FHA.

4. Development of ETL protocols for each data source to automate access by modeling systems.

5. Identification of potential sources of data other than sources of proprietary subscription data already in use at FHA that could augment modeling.

6. Creation of efficient and readable naming conventions that shall also apply to global macro variables, intermediate processing variables, and output data.

7. Development of a detailed dictionary of all data elements proposed for use in modeling, including recommended data ETL protocols. This will include:

· An explanation of each variable’s content

· Its scale and precision (number of decimal places)

· Its importance to modeling

· Its source in FHA data systems

· Transformations performed for implementation in models and reports

· Quality issues (reporting lags that compromise modeling or reporting integrity) and the remediation of such issues.

5.1.3 Output Data Architecture Plan

The Output Data Architecture Plan documents how the Contractor will perform the tasks needed to validate the data output under this contract. The Output Data Architecture Plan shall explain or specify how it will ensure the following:

· Output data is structured to provide a high degree of usability and diagnostics confirming model validity and analysis.

· Standard reports accurately and completely summarize key information and illuminate trends in projected loan performance given differing scenarios in economic assumptions, model methods and program terms.

· Output data is used to diagnose possible flaws in model construction, for example by using alternative formulae to calculate output measures and show consistency with model assumptions and program terms, creating rich output such as cohort/policy year "finger tables” that show cumulative and conditional rates of performance and economic projections across the portfolio and by critical select sub-populations. Distributional analysis shall be used to identify outliers and questionable model results.

· Loan-level output data (the "Rich Output Dataset”) allows for rapid analysis using standard statistical software tools such as SQL, cross-tabulation, and percentile distributions as well as supporting covariance analysis to include various regression estimations.

All output data, including loan-level sets, will strive for a standard of "no knowledge loss” where any program-relevant data is present in the model output or can be easily generated using common data manipulations such as SQL and relational data structures.

5.1.4 Code Architecture Plan

The Code Architecture Plan documents how the Contractor will perform the tasks needed to validate the architecture of the code being used under this contract. The plan shall identify best practices and quantitative methods to locate the best code design to address a spectrum of objectives.

The Code Architecture Plan shall include the following:

· A strategy for using data structures to support efficiency of storage and processing times.

· A complete discussion of the advantages and disadvantages of using relational database techniques.

· Data structures allowing for the direct over-ride of any value affecting model results and code that shall enable "one command execution” to allow for rapid sensitivity testing and policy analysis.

· Cost-benefit consideration of how data structures help or hinder: processing times, flexibility to incorporate sensitivity testing and changes to program terms, modification of code modules, and utility of output data.

· A strategy for using parallel or scalable computing to minimize model execution run times.

· A code architecture that shall explain how the models are structured into modules. There are three major groupings of modules: initialization (global macro variable declaration, common utilities, and startup routines), method parameter estimation modules, and those comprising the cash flow engine.

1. The cash flow engine projects loan performance into the future. It shall include modules that correspond to mortgage transactions (origination, default, claims, prepayments, asset recovery) as well as utilities to calculate changes in mortgage data over time (e.g., amortization).

· Compelling evidence, including quantification, and references to data and code best practices, that their plans shall achieve high efficiency and effectiveness. Retention of processed data where it would facilitate subsequent model executions is desirable but may create processing trade-offs.

· Code modularity to support efficient processing of alternative data and program term scenarios. For example, using user-generated economics or changing the mortgage insurance premium structure to support FHA Policy.

5.1.5 Model Methodology Plan

The Model Methodology Plan documents how the Contractor will perform the tasks needed to validate the methodology of the models being used under this contract. The plan shall describe the suite of model components including forecast models ("Main Models”) for Forward mortgages, HECM, and other FHA single-family programs. The plan shall integrate these models into cash flow models that forecast flows into and out of the FHA insurance funds and their discounted present values.

The Model Methodology Plan shall:

· Include an overview of each econometric model and other estimation methods, including model specification, and a review of model assumptions and limitations, including how economic and finance theory informs the model, and any practical steps taken to address data availability and computing constraints.

· Provide for creation and execution of a stochastic module (including at least economic projections) for application to deterministic models. This module provides probable future net assets and cash flows from outstanding insurance-in-force for endorsements. On a quarterly basis, the module will reliably and appropriately inform FHA decision makers of future monthly undiscounted cash flows by probability (at a minimum, 1%, 5%, 10%, 25%, 50%, 75%, 90%, 95%, and 99%) for each cohort, and other appropriate aggregate, taking into analytic account the probable range of future economic environments and the probable loan-level deviations from contractual cash flows.

· Provide for creation and execution of alternative or challenger models to execute in parallel with the main ("champion”) model. At least one of these shall be a streamlined version of the champion methodology and one shall be a cohort/policy year-level construction.

The Model Methodology Plan shall also detail the development of a series of econometric and actuarial models for single-family loans that can provide projections of net assets, NPV, and loan performance in aggregate, and for each cohort of mortgages. This set of models shall be able to produce the following types of outputs for FHA and these outputs shall be updatable on a quarterly basis based on new data provided by FHA:

· The NPV and CSR models are the primary financial forecasting models used by FHA to project future cash flows and loan performance, and:

1. loan-level models shall include all relevant loan transactions and reflect the likelihood of different outcomes including the likely timing of such outcomes. The parameters of probabilities and timing should be easily manipulated through code that employs elegant and clear macro or universal variables, modularity and flexibility, and overrides of input or intermediate model output (e.g., probabilities of claim or prepayment, loss mitigation and loss severity assumptions, timing factors) through substitution of simple data files.

2. shall support an insurance-in-force valuation of future cash flows to provide output for calculating credit subsidy estimates and re-estimates for the President’s Budget, Liability for Loan Guarantee for the FHA Annual Financial Statements, and NPV for the FHA Annual Report to Congress on the Status of the Mutual Mortgage Insurance Fund.

· The models shall project the following:

1. Nominal cash flows by policy year, including but not limited to: upfront and annual MIP, note holding expenses and recoveries on assigned notes, and shortfall and assignment claims.

2. Unconditional termination rates – the number of terminations in a period divided by the total number of loans in that specific cohort at origination.

3. Conditional termination rates – the number of terminations in a period divided by the total number of loans that survived up to the start of that period in a specific cohort.

4. Cash draw projections – the percentage of initial principal limit withdrawn in current given period.

5. T&I default rates – the number of T&I defaults over the total number of active loans.

6. Payment plan type composition – the number of loans originated as a select payment plan divided by all the loans originated (count and dollar volume composition of Asset Disposition by type, cohort, and policy year).

· Loan volume forecasts shall:

1. provide a projection of demand for SF for the coming 5 fiscal years.

2. be fine-grained to include data on borrower and underwriting characteristics.

3. extract actual FHA endorsement volume and total market dollar volume as reported by a reputable source (e.g., the Mortgage Bankers Association) to calculate FHA’s historical share of the mortgage market separately for purchase and refinance mortgages. Volume forecasts for Forward and HECM loans are a key input in the estimation of credit subsidy and for use to support FHA in developing and updating the Volume Forecast Tool used to estimate the volume of originations for the U.S.A., the share of FHA endorsements, and the elasticity of volumes and shares with respect to some of the main factors that drive origination volume.

· Model component requirements are as follows:

1. Mortgage Performance – At the loan-level, this model estimates the probabilities of non-claim terminations, first-time 90-day delinquencies, and claims by development quarter.

2. Loss Mitigation – At the loan-level, this model estimates the likely loss mitigation activity for a loan based on the economic conditions outstanding at the time of the first-time 90-day delinquency episode. The model shall include detailed modeling of loss mitigation events that is consistent with FHA policies and industry practices and allow for easy manipulation of program terms to support policy analysis and periodic updating of the model methods to reflect changes in policy or practices.

3. Disaster and Emergency Modeling – These models shall include modules for calculating the effect of disasters and emergencies on loan performance, and parameters for varying the character of such scenarios (e.g., assumptions of forbearance and loss mitigation behavior and timing factors).

4. Loan Disposition and Severity – At the loan-level, models estimate the likelihood of a defaulted loan being disposed of via one of the FHA disposition alternatives, and loss severity for a given default while recognizing the differences in severity for different types of claims.

Performance Standards

a) Standard: Submit draft versions of the Management Work Plan (MWP), Input Data Architecture Plan, Output Data Architecture Plan, Code Architecture Plan, and Model Methodology Plan via email to the COR within two weeks of the kick-off meeting and a final version of each plan no later than 90 days after contract award. Submit draft updates to each of the plans, to incorporate changed information, each option year via email to the COR within two weeks of beginning of the option year and the final updated plan(s) are to be delivered to the COR 90 days after the beginning of each option year.

AQL: 2 business days deviation from standard.

Deliverables A001 Management Work Plan A002 Input Data Architecture Plan A003 Output Data Architecture Plan A004 Code Architecture Plan A005 Model Methodology Plan

5.2 Modeling, Reporting and Performance Tracking

The Contractor shall perform Modeling, Reporting, and Performance Tracking activities as described below and in accordance with the plans developed in Section 5.1 above. Attachment A is an example of the non-Ad Hoc reports produced throughout the year.

5.2.1 Model Validation

As each individual module is developed and module output is linked together to produce key estimates for cash flow calculations during the development phase, each step of the process shall be assessed to ensure that modules are stable, and outputs are reasonable. To ensure model appropriateness, the Contractor shall use a set of output metrics to determine each final module specification. These metrics shall be integral to the cash flow calculations, but also reflect policy questions of interest to FHA. Examples of potential metrics to examine include, but are not limited to:

· Timing and volume of serious delinquency rates

· Timing and volume of claims and prepayments

· Types of claim dispositions

· Level of severity rates for multiple claim dispositions

· Demographics of predicted cohorts

5.2.2 Model Performance Testing

After the model has been developed and finalized, the Contractor shall assess model performance by comparing the actual estimates produced from the model against historical data and the current performance of various books of business. The results of these tests will be used to determine whether the model predictions are within acceptable bounds, or if changes in the mortgage insurance market require new model specification.

Some analysis methods that could be used include, but are not limited to:

· Model fit assessment: Testing of model outputs by assessing model fit statistics in order to evaluate the predictive power of the model and monitor model consistency and relevancy (suitable model fit statistics will include adjusted R-square, the Gini coefficient, the size and direction of regression coefficients, and the Bayesian information criterion)

· Actual-to-Forecast comparisons:…