JA Urgent and Compelling Sole Source-Guidehousev3 6.9.20v3.pdf

JUSTIFICATION AND APPROVAL (J&A)

OTHER THAN FULL AND OPEN COMPETITION

The Small Business Administration (SBA) Office of Capital Access (OCA)

Emergency Support for the CARES Act Loan Programs

Contract Number: 73351020D0002

1. Identification of the Agency and contracting Activity:

Requesting Office: Small Business Administration (SBA)

Office of Capital Access (OCA)

Contracting Activity: SBA Office of the Chief Financial Officer (OCFO), Acquisition Division

2. The nature and/or description of the action being approved:

Approval is requested to modify contract number 73351020D0002 to add the additional task described above and future related work it needed. The Competition in Contracting Act (CICA) generally requires “full and open competition” in government procurements as obtained through the use of competitive procedures. 41 U.S.C. § 3301. When an agency issues a modification that is considered outside the scope of the contract it requires a valid determination that the work is appropriate for procurement on a sole source basis. MCI Telecomms. Corp., B-411841, B-

276659.2, Sept. 29, 1997, 97-2 CPD ¶ 90 at 7. For this justification and approval (J&A), OCA requests a modification to contract 73351020D0002 (Contract) with Guidehouse LLP, to increase the Contract scope in order to respond to the COVID-19 pandemic. This Contract is an indefinite delivery, indefinite quantity (IDIQ) type contract with task orders issued against it.

Federal Acquisition Regulation (FAR) § 16.504(a) requires that for an IDIQ contract, the procuring agency must establish a maximum quantity of services to be ordered. The maximum may be established in dollar value terms.

The modification will raise the maximum quantity from $13 million to $65 million and anticipates issuing an order for services shortly after the modification is finalized. This modification is considered outside the scope of the Contract due to the significant increase in the amount of funds anticipated to be added through task order awards and the significant expansion in the related services that Guidehouse will perform. As a result, and consistent with CICA, it is necessary for SBA to complete this J&A for a sole source procurement.

The Government intends to modify the IDIQ Contract terms immediately and issue task orders with COVID-19 funds in response to the 2019 Novel Coronavirus (COVID-19) pandemic.

This action is necessary to facilitate the recovery efforts necessary to address the economic impact of the COVID-19 pandemic. It is prudent to have adequate flexibility to address this public health emergency. The U.S. Secretary of Health and Human Services (HHS) declared a public health emergency on January 31, 2020. On March 11, 2020, the World Health

Organization (WHO) declared the COVID-19 outbreak a global pandemic. On March 13, 2020, the President declared a National Emergency Concerning the Novel Coronavirus Disease

(COVID-19) Outbreak. Additionally, all fifty states and the District of Columbia have declared emergencies due to COVID-19.

This modification is essential to perform risk/exception review of Paycheck Protection Program

(PPP) loans of an amount more than $2 million as discussed in #39 of SBA’s Frequently Asked

Questions (FAQ) about the PPP. t. The initial period for submission of ‘Forgiveness

Applications’ by borrowers to lenders of 8 weeks after loan disbursement, has been extended as

SBA has not completed the processes of performing risk/exception reviews and the collection and processing the Forgiveness Applications. Lenders have 60 days from the date of a loan forgiveness application to provide an approval or denial of forgiveness. This decision is communicated SBA, which then has 90 days to remit a loan forgiveness payment after the lender has approved forgiveness. As a result, SBA must have a contractor in place immediately to assist and support with reviews of loan applications prior to receiving a large influx of loan forgiveness approvals.

Given the potential to receive over 4 million loan forgiveness approvals, a rapid and automated approach is necessary for borrower verification coupled with data driven risk/fraud detection scenarios to identify and prioritize borrowers of interest for further review and investigation.

Guidehouse has the resources and expertise to perform these functions under the scope of the

IDIQ.

3. Description of Supplies/Services:

• Management and Financial Consulting, and Business Program and Project Management

Services. Services include operating advice and assistance on administrative and management issues. Examples include: strategic and organizational planning; business process improvement; acquisition and grants management support; facilitation, surveys;

financial reporting and analysis; due diligence in validating an agency’s portfolio of assets and related support services; strategic financial planning; financial policy formulation and development; special cost studies; actuarial services; economic and regulatory analysis; benchmarking and program metrics; and business program and project management.

• Information Technology Professional Services. Services include API integration, developing XML and other file types, etc. and assisting lenders with technology integration with OCA systems.

• Financial Advising, Loan Servicing, and Asset Management Services.

• Risk Assessment and Mitigation Services. Services include breach mitigation and analysis/forensic services; the deployment of financial risk assessment and mitigation strategies and techniques; improvement of capabilities through the reduction, identification, and mitigation of risks; detailed risk statements, risk explanations and mitigation recommendations; design and development of new business applications, processes, and procedures in response to risk assessments; and ensuring compliance with governance and regulatory requirements. Guidehouse may also assist the OCA with preventive measures in protecting Personally Identifiable Information (PII) and Protected

Health Information (PHI) through the evaluation of threats and vulnerabilities to PII and

PHI type of information; training of Government personnel on how to prevent data breaches and identity theft; vulnerability assessments; privacy impact and policy assessments; review and creation of privacy and safeguarding policies; prioritization of threats; maintenance and demonstration of compliance; and evaluation and analysis of internal controls critical to the detection and elimination of weaknesses to the protection of PII and PHI type of information.

4. Authority Cited:

41 U.S.C. 3304(a)(2), Unusual and Compelling Urgency (FAR 6.302-2)

5. Reason for Authority Cited:

a. Urgent Need: On March 13, 2020, President Trump declared the ongoing Coronavirus

Disease 2019 (COVID-19) pandemic of sufficient severity and magnitude to warrant an emergency declaration for all States, territories, and the District of Columbia. With the COVID-

19 emergency, many small businesses nationwide are experiencing economic hardship as a direct result of the Federal, State, tribal, and local public health measures that are being taken to minimize the public’s exposure to the virus. These measures, some of which are government-mandated, are being implemented nationwide and include the closures of restaurants, bars, and gyms. In addition, based on the advice of public health officials, other measures, such as keeping a safe distance from others or even stay-at-home orders, are being implemented, resulting in a dramatic decrease in economic activity as the public avoids malls, retail stores, and other businesses.

On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security

Act (the CARES Act) (Pub. L. 116-136) to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. The

Small Business Administration (SBA) received funding and authority through the CARES Act to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID-19 emergency. Section 1102 of the CARES Act temporarily permits SBA to guarantee 100 percent of 7(a) loans under a new program titled the

“Paycheck Protection Program.” Section 1106 of the CARES Act provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the Paycheck Protection

Program and requires SBA to issue guidance and regulations implementing section 1106 within

30 days after the date of enactment of the CARES Act.

Given the intent of the Paycheck Protection Program to provide expeditious relief, broad accessibility, loan forgiveness, 100% guaranty and over $600 Billion potential loan amount, fraud, waste, and abuse becomes an inherent risk.

The need to quickly develop and implement the application of automated fraud detection scenarios, investigative protocols, and forensic audit review to determine whether Paycheck

Protection Program loan proceeds are legitimately originated, disbursed, and utilized is great to mitigate these inherent risks and to minimize the improper payment to protect tax payers interest.

The fraud detection services provided by this contract are essential for SBA to conduct the forensic audit review required by the CARES Act in a timely manner. This modification is urgently needed to perform mandatory fraud detection on qualifying CARES Act loans before the loan forgiveness can be granted.

The SBA’s Office of Financial Program Operations (OFPO) is responsible for overseeing all debt forgiveness claims and purchase requests are compliant with program rules and policies and validated and correctly processed through SBA’s systems. Given the surge of over four million existing PPP loan approvals, OFPO seeks Guidehouse to provide loan and forgiveness eligibility risks/exceptions support services. To support OFPO with loan and forgiveness eligibility risks/exceptions identification and mitigation, OFPO seeks a new Guidehouse task order to provide a risk/exception identification team to perform the following tasks:

A. Develop a methodology to rapidly populate eligibility risks/exceptions on all approved

PPP loans, as well as all debt forgiveness requests, using data exploration/AI technology;

B. Conduct reviews to determine the validity of populated eligibility risks/exceptions, with the corresponding manual review protocols tailored to each type of eligibility risk/exception and, where required due to OFPO pre-determined loan criteria, a review of supporting documents such as Economic Need Certification Forms;

C. Provide reporting and documentation of progress and results; and, D. Provide regulatory assistance.

The OCA requested risk/exception loan review should be complete before SBA can approve the loan ‘Forgiveness’. The initial period for submission of ‘Forgiveness Applications’ by borrowers has been extended as SBA has not completed the process of collecting and processing the requests. If loan forgiveness is not requested or is denied, repayment has been deferred for 6 months from the date of disbursement.

Section 1106(b) of the CARES Act provides for forgiveness of a PPP loan only if the borrower is an “eligible recipient.” SBA needs to secure support with loan application reviews to identify potential fraud to help ensure that “eligible recipients” benefit from loan forgiveness. This procurement is urgent because there is a limited timeframe between when a loan is disbursed and when forgiveness is requested, approved, and payment remitted by SBA. Currently, over 4 million PPP loans have been disbursed, starting on April 4th, and borrowers will start requesting forgiveness as early as 8 weeks after loan disbursement. SBA explained the need for these review services in a recent interim final rule addressing the loan forgiveness process:

SBA's review of borrower certifications and representations regarding the borrower's eligibility for a PPP loan and loan forgiveness, and the borrower's use of PPP loan proceeds, is essential to ensure that PPP loans are directed to the entities

Congress intended, and that PPP loan proceeds are used for the purposes Congress required, including the CARES Act's central purpose of keeping workers paid and employed.

85 Fed. Reg. 33010 (June 1, 2020). A lender has 60 days from when a loan forgiveness application is received to decide whether to approve, deny, or deny without prejudice due to a pending review of the loan application. SBA will remit the appropriate loan forgiveness amount to the lender within 90 days from the lender’s decision to approve loan forgiveness. This 90-day period is a critical time when SBA urgently requires contractor support in its reviews of certain loan applications. SBA’s recent interim final rule on the loan forgiveness process explains the importance of the loan file reviews:

Enabling SBA to use the statutory 90-day period to review the PPP loan and forgiveness documentation is an appropriate procedural protection to prevent fraud or misuse of PPP funds, ensure that recipients of PPP loans are within the scope of entities that the CARES Act is intended to assist, and confirm compliance with the

PPP requirements set forth in the statute, rules, and guidance. This protection is also important in light of the large number and diverse types of PPP lenders, many of which were not previously SBA participating lenders and which were approved rapidly in order to enable financial assistance to be provided as rapidly as feasible to millions of small businesses. SBA will use the 90-day period to help ensure that applicable legal requirements have been satisfied.

85 Fed. Reg. 33010 (June 1, 2020). SBA must increase the maximum amount on this IDIQ contract and award a sole source task order to procure assistance with its loan and forgiveness review process in order to help ensure that forgiveness is remitted in a timely manner to the entities that are actually eligible and intended to receive such benefits.

b. Explain Serious Injury: Receiving a timely loan forgiveness can make the difference between the survival of a small business and the business being unable to recover from the

COVID-19 disaster or a natural disaster. Small businesses are the lifeblood of the U.S.

economy: they create two-thirds of net new jobs and drive U.S. innovation and competitiveness.

A new report shows that they account for 44 percent of U.S. economic activity. Small businesses affect local, state and federal economies by providing jobs (income) and tax revenues. Many small businesses have minimal cash reserves and will not be able to survive if the SBA is not able to process and approve PPP loan forgiveness in a very short period of time causing serious injury to not only the business and its employees, but also to local, state and national economies.

If SBA delays the start of fraud identification until after a competitive procurement takes place, SBA will suffer harm because fraudulent loans may be approved for forgiveness and SBA may remit funds on loans to ineligible borrowers because the agency did not have sufficient support in place to timely identify fraud and review these files. The SBA would not be able to fulfill its mission and use its authority, as contemplated in the CARES Act and subsequent SBA regulations, thus negatively impacting millions of Americans, the SBA, and the economy as a whole.

c. Guidehouse LLP, an international financial services company, was awarded this contract on an emergency basis and is successfully performing the contract. It has all the processes, quality control measures and trained staff in place to continue performing the requirements.

Guidehouse will acquire Artificial Intelligence (AI) tools for the rapid review of PPP loans required to identify potential fraudulent cases. Guidehouse is experienced in the fraud detection process where other contractors would not be able to perform these services immediately for several reasons. Even with an expedited process, it would take time to solicit, evaluate, negotiate, select and award a contract to another vendor. After award, the contractor would require start-up time to integrate with the SBA’s IT systems and business processes and would also need to hire and train additional staff. The time needed for competitive award and start-up would adversely affect the SBA’s ability to timely and effectively provide PPP loan forgiveness payments to loan recipients that have undergone a review, thus increasing the likelihood that ineligible entities may benefit from loan forgiveness.

6. Efforts to Obtain Competition:

In accordance with FAR 5.202(a)(2), this action will not be synopsized. Because this is a sole source action, effective competition is not applicable as only one contractor can perform the work to meet the urgent and compelling requirements, therefore no other offers will be solicited.

The total period of performance for this Contract is from April 28, 2020 through April 27, 2021.

If services are required after the expiration of the IDIQ, SBA anticipates issuing a solicitation using competition procedures.

7. Actions to Increase Competition:

Competition will not be sought for this modification due to the urgent and compelling urgency to process the loan applications and because only one source can reasonably perform this work given the exceptional circumstances caused by the pandemic. The IDIQ contract was awarded on an emergency basis for a base year with 2, 6-month option periods to follow. As part of this modification, the 2, 6-month options will be removed. Competition is expected to be sought at the end of the contract if the services are still required.

8. Market Research:

Market research was not conducted for this modification due to the urgent nature of the requirement.

9. Interested Sources:

A few companies have shown interest in helping SBA with this work. Due to the urgency of this requirement, no other sources were sought or considered.

10. Other Facts:

a. Procurement History – Contract 73351020D0002 was issued to Guidehouse LLP on April

28, 2002. Task order 73351020F0141 was issued on 4/29/2020, in the amount of $13 million, which is the maximum quantity for the IDIQ.

b. Special Considerations: In accordance with FAR 6.302-2(d), the period of performance may not exceed one year, including all options, unless the head of the agency determines that exceptional circumstances apply.

c. Extent and Nature of Harm to the Government: A delay in awarding this modification to the IDIQ contract and the task orders against it would cause serious injury and harm to SBA because it would increase the likelihood that SBA will make loan forgiveness payments to loan recipients that are not eligible entities. SBA has a 90 day timeframe to remit loan forgiveness and if we do not secure a contractor immediately to support this effort, it is possible that because of the deadline for forgiveness, SBA may make payments to ineligible entities. The SBA cannot adequately perform its mission if this modification is not put into place and would suffer harm if required to compete and award this contract to any other vendor.

Authority:

41 U.S.C. 3304(a)(2), Unusual and Compelling Urgency (FAR 6.302-2)

Amount:

Contract modification to increase the ceiling amount to be awarded on the IDIQ contract from

$13 million to $65 million.

Program Office:

I certify that the supporting data under my cognizance which are included in the justification are accurate and complete to the best of my knowledge.

Contracting Officer Representative: __________________________________ ____________

Date Signed

Contracting Officer Certification:

I hereby determine that the anticipated cost or price to the Government for any subsequent orders issued as a result of this modification will be fair and reasonable. The maximum prices that the contractor can charge are established in the IDIQ contract and were deemed fair and reasonable at the time of the award based on price analysis. All orders issued against the IDIQ will be either at the approved rates or discounted. This modification will not change the prices in the IDIQ. I certify that this justification is accurate and complete to the best of my knowledge and belief.

Contracting Officer: ___________________________________________________

Cheryl Flanagan Date Signed

I have reviewed this justification and find it adequate to support other than full and open competition:

Acting

Senior Procurement Executive: _________________________________________________

Kip Sheppard Date Signed