CA_Signed_-_FINAL_JOFOC_-_GNMA_ID11180099_(1).pdf

10/10/17 Page 1

General Services Administration (GSA)

National Capital Region (NCR)

JUSTIFICATION AND APPROVAL

JUSTIFICATION FOR OTHER THAN FULL AND OPEN COMPETITION

SOLICITATION (ID11180099)

TASK ORDER (ID11180099)

The General Services Administration (GSA) makes this Justification and Approval (J&A) for Other Than Full and Open Competition orders pursuant to Federal Acquisition Regulation (FAR) 6.302.

1) Identification of Agency and Contracting Activity:

Agency:

General Services Administration (GSA) National Capital Region (NCR) Federal Acquisition Service (FAS) Contracting Operations Division (COD) Acting in support of: Housing and Urban Development (HUD), Ginnie Mae (GNMA) Office of Enterprise Risk

Contracting Activity:

General Services Administration (GSA) National Capital Region (NCR) Federal Acquisition Service (FAS) Contracting Operations Division (COD) 301 7th Street, S.W. – Room 6100 Washington, D.C. 20407

2) Nature and/or Description of Action Being Approved:

The contemplated contract type will be a Firm-Fixed-Price contract with an Other Than Small Business Concern for a term of twelve (12)-month Base Period, and four(4), twelve (12)-month Option Periods. The acquisition will be a follow-on, open market procurement for a suite of comprehensive financial content covering: credit ratings and financial reviews of the global banks, residential and commercial mortgaged-backed securities research, several risk models (further elaborated on below), and an electronic ratings delivery service of corporate and structured credit ratings. This content is to be delivered on-line, available 24/7, as an electronic financial subscription service.

Estimated Value: $3,481,148.03 (includes 12 month Base Period, and 4 Options, if exercised).

10/10/17 Page 2

3) A Description of Supplies/Services Required to Meet Agency’s Need:

The services offered will provide access to a suite of comprehensive financial ratings data and information as listed below to support GNMA’s efforts to perform the following:

Financial Analysis, Risk Assessments, Economic Forecasting, Stock and Bond market research and Audit Remediation.

The subscriptions to be provided include:

• CreditView – reveals comprehensive overview of all financial and market information, corporate ratings, research analytics, ratings methodologies, and financial sector research, etc. Licenses for 10 GNMA Users will be supplied.

• Residential Mortgage-Backed Research - Provides issuer-level and thematic research related to more than 1,200 banks and financial institutions rated globally, comprehensive issuer research offerings, credit reviews, opinions, issuer comments, analysis, company profiles, and aggregated banking-sector statistics.

Licenses for 10 GNMA Users will be supplied.

• Commercial Mortgage-Backed Research – This is a leading source of credit ratings and research for all types of commercial mortgage-backed deals including single-asset and large loan transactions, conduits, credit tenant’s leases, and floaters. Licenses for 10 GNMA Users will be supplied.

• RiskCalc Model – This is the world’s largest and most comprehensive database of private firm financials and defaults. This financial model provides more superior accuracy, consistency and efficiency than any other models when evaluating privately-held firms. It produces a forward-looking default probability by combining financial statement and equity market information into a highly predictive measurement of stand-alone credit risk. It is the only model of its kind and contains 27 million financial statements on 5.6 million firms and over 500,000 private company defaults.

• CreditEdge Model - Is a dynamic analytical platform that bridges the equity, bond and credit derivative markets, enabling an in-depth understanding of their impact on credit risk, and is also used for early warning and risk monitoring, inputs to internal rating systems, benchmarking and calibrating risk rating systems, input to regulatory compliance models, input into economic capital calculations to arrive at fair value estimates.

• Automated Data Feeds for RiskCalc and CreditEdge Models – These electronic ratings delivery products support the integration of ratings and related information directly into proprietary applications to facilitate analysis and improve data integrity. This includes daily delivery of electronic ratings services and weekly delivery of historical ratings.

• Financial and Market Databases, Economic Reports and Forecasts – This is one of the largest repositories of economic, demographic and financial data from over 100 government and private sources. This data set coverage includes U.S. and regional data on residential real estate prices and construction

10/10/17 Page 3 activity, employment by industry, banking and finance, demographics, personal income, prices, leading indicators, industrial production, retail sales, labor market, energy, and financial markets.

• Current Expected Credit Losses (CECL) – This is a solution that enables users to generate forecasts of lifetime credit losses through custom econometric models under the CECL standard for “reasonable and supportable” economic scenarios.

4) Identification of the Statutory Authority Permitting Other Than Full and Open

Competition:

The authority under which this J&A is made is pursuant to FAR 6.302.

FAR 6.302-1, Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements.

This Sole Source Contract will be awarded pursuant to the authority of 41 United States Code (U.S.C.) 253(c)(1) as implemented by FAR 6.302-1.

5) Demonstration that the Proposed Contractor’s Unique Qualifications or the Nature of the Acquisition Requires Use of the Authority Cited

Moody’s Analytics, Inc. provides financial subscriptions and credit rating data that are unique and are only provided by their firm. Market Research with this company has revealed that they act as the sole distributors of the financial subscription services specified under para. 3, pages 2 and 3. They have no distributors or dealers that sell these subscription services. These subscription services are also proprietary and copyrighted by Moody’s Corporation and can only be purchased from their affiliates (Moody’s Analytics, Inc.) directly. As such, they deliver the highest market standard for financial analysis, risk assessments, economic forecasting, and stock market research to corporations, government agencies, investment banks, brokerage firms, and academic institutions. No other type of supplies or services will satisfy GNMA’s requirements.

These services are critical to GNMA’s risk operations and are essential for the continued viability of government housing programs. If these services are not acquired, there could be serious unforeseen financial consequences to GNMA, the Federal Housing Authority (FHA), the Department of Housing and Urban Development (HUD) and the United States Federal Government, such as, a large issuer default due to the inoperability of GNMA’s proprietary risk monitoring model, CorporateWatch, to function properly. This CorporateWatch system is valued at $6.2M and represents financial data analyses required for over $600B in housing investments across the United States. Therefore, GNMA cannot afford a lapse in Electronic Subscription Services of Financial Data supplied by this provider. CorporateWatch becomes ineffective without Electronic Subscription Services of Financial Data input provided by the Sole Proprietor, Moody’s Analytics, Inc. The impact would result in this multi-million dollar system and Housing Program suffering enormous financial losses should a lapse in service occur.

10/10/17 Page 4

6) Description of Efforts Made to Ensure that Offers are Solicited From as Many Potential Sources as Practicable On November 13, 2018, in accordance with FAR 5.201, the Government posted a Request for Information on FedBizOpps, as a Sources Sought Synopsis to identify other potential sources for these GNMA Electronic Subscription Services of Financial Data products. Vendors were to send a response on their capability to satisfy the Government’s needs.

Additional efforts were undertaken to review the Small Business Administration’s Dynamic Small Business Search (DSBS) Database. However, no small business sources were found who could satisfy the requirements. Additionally, the Securities and Exchange Commission’s website was reviewed and there were four(4) small businesses found who operate within this area of specialty. They are DBRS, Inc., Egan-Jones Ratings Co., Fitch Ratings, Inc., and Kroll Bond Rating Agency, Inc. However, only one of the small businesses (Fitch Ratings, Inc.) was found to have access to GNMA’s CorporateWatch database utilizing a very different set of subscription items that generate the desired results GNMA needs from Fitch and are in no way related or similar to the subscription items requested from Moody’s for this requirement. Therefore, Fitch Ratings, Inc. would not be able to fulfill the needs of GNMA Office of Enterprise Risk.

Searches were undertaken by accessing GSA Advantage!, GSA eLibrary, Wikipedia, SAM.GOV, The ICD, GSA Gateway, and various trade journals and publications.

(Please see Market Research Report.) The results were not favorable in finding 2 or more small businesses or another source that could fulfill the requirements.

7) A Determination by the Contracting Officer that the Anticipated Cost to the Government will be Fair and Reasonable Based on the data gathered, the Contracting Officer has determined that the anticipated cost to the Government will be fair and reasonable. The expectation of reaching a fair and reasonable price was determined through market research in order to determine best value for GNMA Office of Enterprise Risk. The total amount of funding required for the total estimated period of twelve (12)-month Base Year and four (4), twelve (12)-month Option Periods is approximately $3,481,148.03.

8) A Description of the Market Research Conducted and the Results or a Statement of the Reason Market Research was not Conducted The NCR CS performed Market research by contacting knowledgeable individuals in Government and industry regarding market capabilities to meet requirements; reviewing the results of recent market research undertaken to meet similar or identical requirements (August 1, 2018 conducted by Patrick Hall at GNMA); querying Government databases that provide information relevant to agency acquisitions; participating in interactive, on-line communication among industry, acquisition personnel, and customers; obtaining source lists of similar items from other contracting activities or agencies, trade associations or other sources, i.e, SEC filings of contractors operating in this market

10/10/17 Page 5 sector and their Wikipedia uploads were reviewed to determine if their capabilities and partnerships with 3rd party contractors in this realm of business were identified. It is noted that Moody’s SEC filing referenced that they receive some data from 3rd party contractors, i.e, S&P, Fitch, IHS Market, etc., but only relevant information unrelated to Moody’s proprietary models for CreditEdge, CreditView, and RiskCalc products.

Searched GSA Advantage!, GSA eLibrary (various Multiple Award Schedules, ie., GSA GWACS through the ICD, and Non-GSA GWACS/MACS. The results of which produced no other viable source(s) capable of fulfilling the specific requirements. Also, historical data and previously negotiated pricing were reviewed to understand the pricing structure for these requirements in the marketplace.

A Request for Information (RFI) was published on FBO.GOV on November 13, 2018, and closed on November 20, 2018. There were two capability responses received, one from Moody’s Analytics, Inc. and one from IHS Markit. A technical analysis was performed by the GNMA TPOC, Mr. Patrick A. Hall, who recited IHS Markit’s proposed items verbatim in his write-up. He found that the products proposed by IHS Markit were either ill-suited or highly dissimilar to those described in the RFI to meet the needs of the Government. Furthermore, items offered by IHS Markit were determined by GNMA technical personnel to be unsuitable for satisfying their basic needs. Therefore, it would place the Government in a very unfortunate position to consider the offer presented by IHS Markit, as discussions would be inappropriate and will not be undertaken. (Please see the attached Technical Analysis of IHS Markit, Inc. response to the RFI.)

A competitive follow-on order cannot be issued because the subscription services that are required are proprietary in nature and can only be fulfilled by Moody’s Analytics, Inc., who is currently producing the required subscription services to GNMA Office of Enterprise Risk, which expires on December 26, 2018. The fact that there is no other source than Moody’s Analytics, Inc. who can fulfill the specific requirements still makes this justification necessary.

9) Any Other Facts Supporting the Use of Other Than Full and Open Competition Upon release of the RFI, detailed purchase descriptions of the requirements were provided, which produced two responses from sources. The GNMA Office of Enterprise Risk technical personnel reviewed the response from IHS Markit and determined that the subscription services described in their response would not be capable of meeting GNMA’s basic needs for financial data analyses. Furthermore, the review of Moody’s Analytics, Inc. subscription services described in their response would be sufficient to fulfill GNMA’s specific needs.

10/10/17 Page 6

Based on the analysis conducted of responses received from the RFI and after analyzing the search results of the DSBS, SEC website, all other sources specified previously, the GNMA Electronic Subscription Services of Financial Data requirement will not be set aside for small business.

The estimated cost for the procurement was derived from existing historical pricing data in Option Year Four of the current contract that GNMA Office of Enterprise Risk has with Moody’s Analytics, Inc., with a 5% escalation applied to the Base Year and each successive option of a follow-on contract, which is provided as follows:

Base Year - $562,002.20 Option Year 1 - $590,102.31 Option Year 2 - $619,607.43 Option Year 3 - $650,587.80 Option Year 4 - $683,117.19 6 Month Option - $104,434.44 Base and All Options = $3,481,148.03

10) A Listing of the Sources, if any, That Expressed, In Writing, An Interest in the Acquisition Moody’s Analytics, Inc.

ATTN: David Dierking 7 World Trade Center 250 Greenwich Street New York, NY 10007

IHS Markit ATTN: Bryan Huyhn 450 West 33rd Street – 5th Floor New York, NY 10001

11) A Statement of the Actions, if Any, the Agency May Take to Remove or Overcome Any Barriers to Competition Before Any Subsequent Acquisition for the Supplies or Services Required A “Notice of Intent” will be posted to FBO.GOV stating GNMA’s intent to make award to Moody’s Analytics, Inc. on a sole source basis, under the authority of FAR 6.302-1.

Market Research has revealed that these electronic subscription services can only be acquired from Moody’s Analytics, Inc., as they are of a proprietary nature.

Nonetheless, there are future plans to consolidate these GNMA electronic subscription services by preparation of an IDIQ with multiple requirements and the possibility of multiple awards generated to foster competition among contractors.

10/10/17 Page 7

12) Certification by Technical or Requirements Personnel I hereby certify that the supporting data is accurate and complete.

Mark Willis Date Program Manager

GSA/NCR/FAS

Assisted Acquisition Services

13) Contracting Officer Certification that the Justification is Accurate and Complete to the Best of the Contracting Officer’s Knowledge and Belief I certify that this justification is accurate and complete to the best of my knowledge and belief, and determine on the basis of the findings above that other than full and open competition approach is in accordance with the requirements and is in the best interest of the Government.

Francine Hemphill Date Contracting Officer

GSA/NCR/FAS

Contracting Operations Division

Final Approval I certify that this justification is accurate and complete to the best of my knowledge and belief, and determine on the basis of the findings above that other than full and open competition approach is in accordance with the requirements and is in the best interest of the Government.

Stacy Williams Date Competition Advocate

GSA/NCR/FAS

Acquisition Oversight Division

MARK

WILLIS

Digitally signed by

MARK WILLIS

Date: 2018.12.11 07:19:14 -05'00'