JEFO Final_Redacted.pdf

DEPARTMENT OF TRANSPORTATION

FEDERAL HIGHWAY ADMINISTRATION

Justification for an Exception to Fair Opportunity

1. Identification of Agency and Contracting Activity:

Program Office:

Department of Transportation, Build America Bureau

Contracting Activity:

Federal Highway Administration (FHWA), Office of Acquisition and Grants Management, 1200 New Jersey Avenue, S.E., Washington, DC 20590.

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

This is a justification for an exception to fair opportunity to award a task order to Shearman Sterling LLP (“Shearman”) under Indefinite Delivery/Indefinite Quantity (ID/IQ) Contract No. 693JJ324D000003. The task order associated with this justification will provide legal advisory services to assist the U.S. Department of Transportation (“Department”) in a potential sale of its ownership of certain illiquid financial assets.

This justification is prepared in accordance with the content requirements in Federal Acquisition Regulation (FAR) 16.505(b)(2)(B).

3. Description of Supplies/Services and Estimated Value: :

The Build America Bureau (“Bureau”) administers the Transportation Infrastructure Finance and Innovation Act (“TIFIA”) program, which provides (secured) direct loans, loan guarantees, and standby lines of credit to borrowers seeking to develop major surface transportation infrastructure projects. The Department approves TIFIA loans to qualified borrowers and monitors the performance of the project, as well as project revenues pledged for the repayment of the loan until final loan maturity.

The Department previously approved a TIFIA loan for the SH 130 Segments 5&6 (“SH130”) project. The TIFIA borrower later became insolvent and requested bankruptcy protection from its creditors, including the Department. A bankruptcy court subsequently approved a reorganization plan whereby the Department received indirect proportional equity interests (the “Department’s SH130 Equity”) in SH 130 Concession Company, LLC (the “Restructured Company”) and subordinated debt interests in an affiliate of the Restructured Company (which has since been repaid) in exchange for its claims associated with the original TIFIA loan.

At present, the current majority shareholder of the Restructured Company (Strategic

Value Partners (“SVP”)) is undergoing a process of transitioning ownership of its equity interests in the Restructured Company from the fund through which it currently holds its interest to a new fund (the “Continuation Fund”), whose sole asset would be SVP’s current equity interests in the Restructured Company and through which SVP (and the Continuation Fund’s other investors) would be able to hold the assets for a longer time horizon. As part of this transfer, SVP is marketing partnership interests in the Continuation Fund, including to both existing investors and new investors. This process involves, among other things, receiving bids from third party investors for the purchase of interests in the Continuation Fund, whose value is determined by the value of the underlying asset, the Restructured Company’s equity. The Department would like to evaluate the prospect of potentially selling the Department’s equity interests to the Continuation Fund or directly to other interested third parties, either as part of the transition of SVP’s assets to the Continuation Fund or shortly thereafter.

Under the planned task order, the Contractor will provide legal advisory services to assist the Department in evaluating a potential sale of the Department’s SH 130 Equity and, if the Department determines to sell, assist the Department in the consummation of a sale.

The Contractor will assist the Department in its evaluation of the offer from SVP. If the Department decides to consummate a sale to the Continuation Fund or one of its investors, the Contractor would assist the Department in negotiating the terms and conditions of the sale and drafting and negotiating all documentation necessary to consummate the sale.

As the Continuation Fund process is anticipated to conclude within a few months, and potential anchor investors in the Continuation Fund have already agreed upon a price per share, it is vital that the Department onboards an advisor with existing knowledge of the Restructured Company and the Department’s SH130 Equity, so they are able to expediently perform work, and allow the Department sufficient time to potentially engage in a sale of its equity interests. Furthermore, a potential sale of the Department’s SH 130 Equity will continue to require specialized expertise to ensure the Department maximizes the total value received by the Government and consummating a sale on terms and conditions that adequately protect the Government.

This will be a new task order under Shearman’s ID/IQ Contract No. 693JJ324D000003., with an anticipated period of performance of six months. The estimated value of this task order is .

4. Identification of the Exception to Fair Opportunity and Rationale:

The exception to fair opportunity utilized for this proposed action is FAR 16.505 (b)(2)(i)(B)only one awardee is capable of providing the supplies or services at the required level of quality requires because the supplies or services ordered are unique or highly specialized.

Shearman was the Bureau’s legal services advisor on task order 693JJ322F000300N entitled “Build America Bureau Ad Hoc Legal Advisory Services” issued under Shearman’s ID/IQ contract 693JJ318D000008. The Bureau utilized Shearman’s services under that task order to provide legal advisory services in connection with preliminary discussions with SVP and preliminary advice to the Bureau on possible sale process structures and legal considerations therewith. As part of that work, Shearman engaged in extensive discussions with SVP regarding a potential sale and regarding the establishment of the Continuation Fund. In addition, Shearman has done significant due diligence on the terms of the equity agreements governing the Department’s SH 130 Equity and has become well-versed in the Department’s key rights and obligations thereunder.

Knowledge of these arrangements will be essential in the Department’s ability to negotiate a transaction with SVP and its Continuation Fund (or an investor therein).

Due to Shearman’s previous work under task order 693JJ322F000300N, the services performed under the proposed task order would rely upon the work previously performed by Shearman and its familiarity with the course of discussions with SVP thus far and the Department’s contractual rights and obligations. The work performed by Shearman under task order 693JJ322F000300N provides Shearman with prior expertise and knowledge of the Restructured Company’s equity and debt documentation and the discussions to date with SVP. This advantage would result in significant time savings in respect of due diligence hours as part of a potential sale of the Department’s SH130 Equity as well as in respect of developing a strategy for further negotiations. This expected time savings will result in a lower cost to the Department under the new task order and better position the Department to potentially sell the Department’s SH130 Equity to the aforementioned Continuation Fund or directly to other interested third parties before the Continuation Fund process concludes. The efficiencies gained by awarding to Shearman are necessary to meet the new task order’s intended period of performance.

Due to the unique circumstances and familiarity with the governing documents and negotiations to date, Shearman is the only capable source to meet the Government’s requirements.

5. Determination That the Anticipated Cost is Fair and Reasonable:

The task order will be issued as a labor hour task order. The order will be issued against

FHWA ID/IQ contract 693JJ324D000003, for which the labor rates and labor categories have previously been evaluated and determined to be fair and reasonable. The Government will review the proposal price to ensure the billing rates are consistent with the ID/IQ approved labor categories and rates, as well as if the price is complete and reasonable in relation to the task order requirements. The evaluated price determination of fair and reasonable is anticipated to be based on a comparison to the Independent Government Cost Estimate in accordance with FAR 15.404-1(b)(2)(v) and comparison with the ID/IQ rates in accordance with FAR 15.404-1(b)(2)(iv).

6. Other Facts Supporting the Use of Other Than Full and Open Competition:

Shearman’s in-depth understanding of the of the Restructured Company makes them uniquely capable of providing these services at the level of quality necessary to meet the Government’s requirement. A new contractor would require extensive time to become familiar with the Restructured Company and perform at the desired level of quality to satisfactorily complete the tasks. No other Contractor would be able to provide legal advisory services for this project with the same economy and efficiency as Shearman.

7. Statement of Actions:

The unique circumstances associated with this project require a sole source task order.

However, the Government will continue to award as many competitive task orders as possible under its ID/IQs for these services.

8. Certification and Approval:

The certify the evidence and any supporting data which form a basis for the justification is complete and accurate.

Date

Contracting Officer’s Representative Senior Attorney Advisor/Bureau Counsel Office of the General Counsel U.S. Department of Transportation

Date Contracting Officer Office of Acquisition and Grants Management Federal Highway Administration

6/27/24

6/27/24