J and A FINRA.pdf

USAID letterhead

JUSTIFICATION AND APPROVAL (J&A)

TO: Patrick E. Robison, Supervisory Contracting Officer

CC: Deborah Broderick, Agency Competition Advocate

FROM: Erol Mujanovic

DATE: December 27, 2020

RE: AID-168-C-17-00003 Financial Reform Agenda Activity (FINRA) in Bosnia-

Herzegovina

SUBJECT: Justification for Other than Full and Open Competition under the Expedited

Procedures Package (EPP) for Responding to Outbreaks of Contagious Infectious Diseases

We request approval of this justification for use of other than full and open competition pursuant to the authorities under the EPP for Responding to Outbreaks of Contagious Infectious Diseases (the “Expedited Procedures Package”), approved on March 24, 2020. Your approval of this J&A constitutes the justification for other than full and open competition as required by Tab 1 (Determination and Findings (D&F) Authorization for the Use of Other than Full-and-Open Competition in the Award or Modification of Contracts) of the EPP.

a. Nature and/or description of the action being approved.

The action being approved is increasing the TEC for the FINRA Activity in the amount of up to $2 million, raising the TEC from $5,999,136 to up to $7,999,136. The period of performance (five years) remains unchanged.

In June 2020, USAID/BiH conducted an assessment of Bosnia and Herzegovina’s (BiH) Financial Sector, focusing on the impact of COVID-19 on local small and medium enterprises (SMEs) and their ability to access finance. The assessment concluded that there are too few alternatives to bank credit. This is currently even more important given the COVID-19 crisis. As one of the most important economic COVID responses for BiH SMEs, there is an urgent need for the development of non-bank lending to assist SME’s in staying solvent during the ongoing crisis and in the recovery afterward. Non-bank lending has been an important and long-standing gap in the financial market, but the COVID-19 crisis has made this a very urgent financial need for local SMEs.

Sample J&A for COVID-19 noncompetitive actions under the EPP for Responding to Outbreaks of Contagious Infectious Diseases

To counter the harsh economic consequences of the COVID-19 economic crisis, the USAID FINRA activity has three interventions that would deepen its current activities and bring much needed assistance to the financial sector in BiH:

● It will conduct a detailed feasibility study to prepare for the development of a non-bank lending mechanism to support BiH SMEs.

● It will provide urgently needed additional technical assistance to local authorities that will prepare the groundwork for the creation of non-bank funds and help the authorities deal with the COVID economic crisis at the policy level.

● It will help relevant local authorities to better understand and implement International Monetary Fund (IMF) conditionalities, and upon their completion, the country will be able to receive IMF disbursements that are vital to BiH’s COVID recovery.

b. A description of the supplies or services required to meet USAID’s needs (including the estimated value).

Under Component 1- Banking Supervision and Insurance

Required activities will at a minimum include:

1. Activities that will lead to a detailed feasibility study for the investment fund or other mechanism that will increase access to finance for SMEs in BiH.

The contractor will explore details about costs and scope of all sub-activities that will lead to fund creation and will provide a very detailed feasibility study on the creation of an investment fund. This represents the most important response to the lack of access to finance for BiH companies, a problem that has been exacerbated by the COVID-19 crisis.

While non-bank lending can represent more than 60 percent of GDP in developed countries, it is nonexistent in BiH. The proposed investment fund will help in creating a capital market for private companies as well as other parts of that ecosystem. It is expected also that such a fund will stimulate the creation of several instruments/sources of funding for SMEs as well as the involvement of many other relevant actors in this process. The study will assess all relevant details needed for registration of such an instrument (fund) but also will provide analysis of both the offer and the demand side.

Several experts and a significant level of efforts is foreseen for this activity.

2. After the feasibility study, the contractor will provide additional Short Term Technical Assistance (STTA) to support government and non-government institutions in creating policies that are conducive to increasing non-bank financing. Legal and institutional frameworks will need to be strengthened and it is expected also that USAID FINRA provides recommendations on directions in which non-bank lending could further expand (investment funds, equity finance or some other mechanisms).

In addition, STTA to support key financial institutions in responding to the economic crisis caused by the COVID-19 pandemic. The assistance will be provided to various levels based on government needs and levels of expertise. It will work to harmonize existing practices and policies among the two entities (Federation of Bosnia and Herzegovina (FBiH) and the Republika Srpska (RS) ) and within the FBiH concerning measures, instruments, and policy responses to the COVID-19 economic crisis. All key FINRA partners and beneficiaries have been severely impacted by the COVID-19 crisis and they need more assistance than that which was foreseen in the award. This activity would be through an extension to the current level of effort and use of the existing pool of STTA

3. Implementing additional STTA to support key financial institutions in BiH in following through with the financial sector conditionalities of the upcoming IMF loan. The IMF loan and its conditionalities are critical to responding to the economic effects of the COVID-19 pandemic. The conditionalities have a very high importance. Their fulfillment will enable the country to keep receiving much needed financial resources from the IMF and will improve several crucial areas of the business environment including the financial and fiscal sectors.

Financial institutions in BiH will require considerable technical assistance in drafting of regulations and capacity-building to meet these conditionalities. These include some milestones and key achievements in the financial sector that will need to be not only created and adopted, but also implemented. Some examples are; creation of the financial stability fund, creation of a standing committee on Financial stability that also includes a strategy for resolving non performing loans, work on macroprudential policy, strengthening of reserve requirements, etc.

The estimated value of the modification is $2,000,000.

c. Identification of statutory authority permitting other than full and open competition.

AIDAR 706.302-70(b)(3) and 40 U.S.C. §113; See the “Expedited Procedures Package for Responding to Outbreaks of Contagious Infectious Diseases” approved March 24, 2020. The D&F is attached to this file in Tab 1. The EPP can only be used for an Infectious Disease Outbreak, as defined in paragraph 2 of the D&F (Tab 1). The COVID-19 outbreak was declared a Public Health Emergency of International Concern by the World Health Organization (WHO) on January 30, 2020 and therefore the class D&F applies to COVID-19 emergency response activities.

d. A discussion of the proposed contractor’s unique qualifications or the nature of the acquisition that requires use of the authority cited.

The FINRA Contract (Section C on page 19: Description/Specifications) includes three Components. Component 1 includes a provision for assistance in developing nonbank finance.

The Solicitation (SOL-168-17-000001) on page 23 and the Contract on pages 19-20 read: “If host country partners advance reforms and/or regulatory practices in the non banking financial area, there is budget availability and USAID/BIH provides approval for assistance in this area in the work plan, the contractor must provide assistance to regulators and relevant host country partners in this area, while advancing and/or maintaining compliance with the relevant IMF and IMF FSAP recommendations.”

The proposed contractor’s unique qualification lies primarily in the fact that it has already established and has ongoing operations in the precise area needed. More importantly, due to the urgent need for action, the contractor already has a full trust from local authorities and other key stakeholders. It means that the new proposed activities would be a natural expansion to existing contractor’s activities and the contractor would be able to start implementing them immediately.

Countering the negative consequences of the COVID-19 economic crisis requires swift engagement and the BiH government needs assistance immediately.

e. A description of efforts made to ensure that offers are solicited from as many potential sources as is practicable.

The contract with FMI for FINRA Activity was competitively sourced prior to award in 2017 as required by FAR Part 5.2 (AIDAR 705.002). Publication of a notice is not required per the determination at AIDAR §705.202(b). Given the urgency of this requirement in response to the COVID-19 crisis it is not feasible to select another contractor who is familiar with the breadth and scope of the work to be undertaken. Additionally the work to be completed must start as soon as feasible, which does not allow for sufficient time to bring in new partners through a competitive award process.

f. A determination by the Contracting Officer that the anticipated cost to the Government will be fair and reasonable.

The determination will be based on historical costs and on the IGCE for the proposed work.

g. A description of the market research conducted (see FAR Part 10) and the results or a statement of the reason(s) market research was not conducted.

Market research was not conducted. Given the urgency of this requirement in response to the COVID-19 crisis it is not feasible to select another contractor who is familiar with the breadth and scope of the work to be undertaken. Additionally, the work to be done must start as soon as feasible, which does not allow for sufficient time to bring in new partners through a competitive award process.

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

Publication of a notice is not required per the determination at AIDAR §705.202(b) and no sources submitted a written expression of interest in this acquisition.

i. A statement of the actions, if any, USAID may take to remove or overcome any barriers to competition before any subsequent acquisition of the supplies or services required.

This action will enable the expansion of FINRA’s work to support activities that would cover all parts of the access to finance ecosystem and lay groundwork for the creation of a new access to finance mechanism. EDO will work closely with the Contracting Officer and Resident Legal Officer to identify and mitigate any potential Organizational Conflict of Interest raised by USAID support for the activities that will include information and/or recommendations for a future activity design. Any new mechanism will be awarded through a full and open competition.

RECOMMENDATION

It is recommended that you approve this justification for use of other than full and open competition pursuant to the “Expedited Procedures Package for Responding to Outbreaks of Contagious Infectious Diseases”, approved on March 24, 2020. Your approval of this J&A constitutes the justification for other than full and open competition as required by Tab 1 (D&F for the Authorization of Less than Full and Open Competitive Procedures in the Modification or Award of Contracts) of the EPP.

Ecl. Tab 1- EPP D&F for the Authorization of Less than Full and Open Competitive Procedures in the Modification or Award of Contracts.

CERTIFICATION:

The requirement for technical certification at FAR 6.303-1(c) is fulfilled through:

a. The signature of the Technical Officer below certifying the specific supporting data for this J&A; and

b. The D&F Authorization for the Use of Other than Full-and-Open Competition in the Award or Modification of Contracts under the Expedited Procedures Package for Responding to Outbreaks of Contagious Infectious Diseases” approved on March 24, 2020. (attached in Tab 1).

The Contracting Officer is the Approving Official based on the authority given under the EPP.

However, a separate Contracting Officer certification is not required per AIDAR 706.302- 70(c)(1).

Technical Officer:

I hereby certify that the supporting data which form a basis for the justification are complete and accurate to the best of my knowledge and belief.

__Erol Mujanovic____________________ Technical Officer Date:

APPROVAL:

Contracting Officer Date:

CLEARANCE:

Cleared via e-mail by Rebecca Hammel 12/27/2020 RLO or GC/A&A Date:

Cleared via e-mail by Andrew Boegel 1/13/2021 EDO Office Director Date:

Cleared via e-mail by Savannah ThomasArrigo Date: 1/15/2021 PPO Office Director

[Resident Legal Officer (RLO) or General Counsel (GC)/A&A clearance is the only clearance that the EPP requires. Your Mission, Bureau, or Independent Office may require additional clearances.]

Erol Mujanovic

Digitally signed by Erol Mujanovic Date: 2021.01.19 11:42:36 +01'00'

Patrick Robison Digitally signed by Patrick Robison Date: 2021.01.19 11:53:51 +01'00'