2S_PEMCO_Limited_Sources_final.pdf

Exhibit 1 – Justification for Other than Full & Open Competition Asset Management (AM) Services for Bridge Contract Area 2S (California, Washington, Oregon, Alaska, Hawaii and Guam)

1. Identification of the agency and the contracting activity:

Agency: The U.S. Department of Housing & Urban Development, Washington, D.C., Program Office: Office of Single Family Housing, Division of Asset Management, Contracting Activity: Office of the Chief Procurement Officer, Southern Field Contracting Operations, Atlanta Operations Branch

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

The Federal Housing Administration (FHA), an organizational unit within HUD, administers the single-family mortgage insurance program. FHA insures approved lenders against the risk of loss on loans they finance for the purchase or rehabilitation. In the event of a default on an FHA insured loan, the lender acquires title to the property by foreclosure, a deed-in-lieu of foreclosure, or other acquisition method, files a claim for insurance benefits and conveys the property to HUD. As a result of acquisitions through the mortgage insurance program and other programs, HUD has a need to manage and sell a sizable inventory of single-family homes in a manner that promotes home ownership, preserves communities, and maximizes return to the FHA insurance funds.

HUD is the largest single seller of real estate in the United States.

PEMCO is an existing M&M III Asset Manager providing vital marketing and resale services in the 2S area covering California, Washington, Oregon, Alaska, Hawaii and Guam. The original Task Order C-OPC-23648/OPC-T0001 was awarded under the GSA schedule for PEMCO (GS-23F-0033V) 520 FABS FSS. Although the Task Order Period of Performance (POP) was originally awarded as a 12 month base period with 4-12 month options, drastic increases to existing volumes have caused the contractor’s Task Order ceiling to be met in less than 2 years of total performance. The Housing market also became progressively worse during this time prompting an overall rise in the number of foreclosures, which led to additional increases in HUD’s FHA foreclosure inventory. Due to the fact that the award made on the GSA schedule was a definitive task order, HUD started the re-procurement process once it was determined that the task order would not see the entire POP and before the contract ceiling was exhausted. The re-procurement of the affected areas, 1S and 2S was solicited under M&M 3.5 for AM services, solicitation R-ATL-02006, issued November 2, 2011.

In August 2012, a GAO pre-award protest, B-407214, was filed against open solicitation R-ATL-02006, which was intended to replace the existing contract C-OPC-23647. Delays in awarding Solicitation R-ATL-02006 associated with protest B-407214 prompted use of the extension authority identified at FAR 52.217-8, Option to Extend Services. The full 6 months of extension authority allowed under this clause will be exhausted on March 31, 2013. Although a settlement was reached on the original GAO protest in October 2012, the Government voluntarily agreed to re-establish the competitive range prior to entering into discussions and requesting Final Proposal Revisions. This process has now been completed. However, as a result, award of Solicitation R-ATL-02006 is not anticipated until the April 2013 timeframe. If, a sole source task order is not issued on or before March 31, 2013, there will be a break in service which would be extremely costly and disruptive to HUD and to the potential homebuyers in the affected area.

Therefore, HUD is requesting approval to award a short term follow-on GSA task order for a 2 month base period, with one or more option CLIN(s) for up to 4 additional months of service under the authority of FAR 52.217-9 in order to resolve any potential delays associated with the award of Solicitation R-ATL-02006 or stays of performance associated with post-award protests raised in response to the award of M&M 3.5.

Based on the identified schedule, Single Family Program staff will need to approve a Requisition to add funds to adequately support the current inventory of 1,745 properties and to fund approximately 533 new acquisitions per month for a base period of 2 months at estimate cost of $2891.00 per property. The cost of the services for the base period is $5,045,596.13. In addition we are requesting an option period for 4 months at an additional amount of $9,252,669.12 to fund an additional 3,200 acquisitions. The total amount requested for the 2 month base and an additional 4 month option period is $14,298,265.25.

A logical follow-on under the contractor’s existing GSA schedule for the same service is the only available means to receive the desired services on such a short term basis without experiencing a disruption to the current service delivery schedule. A transition of these services to a new contractor would be impractical due to the time and cost constraints associated with setting up a new office space within the existing HOC jurisdiction, receiving the necessary staffing PIV clearances, and the possibility of delayed closings or missed sales associated with a change in the Local Listing Brokers, since more than 75% of the impacted inventory will have already been listed by the current Asset Manager.

The Department’s ability to secure, maintain and effectively market its REO inventory through M&M contractors is vital to its mission. A failure to do so would result in serious financial injury to the Government.

Failure to market and sell HUD-owned properties would result in Government –owned property remaining in the inventory longer and significantly increase the likelihood of being damaged. It would further damage local housing markets by increasing the number of vacant, neglected properties in many neighborhoods and decreasing the value of surrounding homes. This failure would have ripple effects that could further destabilize larger housing markets and the national economy. Therefore, the need for these services is compelling.

3. A description of the supplies or services required to meet HUD’s needs (including the estimated value:

In accordance with FAR8.405-6 the following information is submitted to support a logical follow-on sole source Bridge Contract for Asset Management Services for 2S area. The period of performance is for a 2 month base period at a cost of $5,045,596.13 and one 4 month option period at a cost of $9,252,669.12. HUD requires a total of $14,298,265.25 in funding to fulfill services for both periods. This funding will allow HUD to continue Asset Management operations in the 2S area without a disruption in service until the award of M&M

3.5 and should there be any post award protest of M&M 3.5.

4. The statutory authority permitting other than full and open competition:

FAR Part 8.405-6 (C)---In the interest of economy and efficiency, the new work is a logical follow-on to an original Federal Supply Schedule order provided that the original order was placed in accordance with the applicable Federal Supply Schedule ordering procedures. The original order or BPA must not have been previously issued under sole-source or limited-sources procedures. The original order was competed.

5. Demonstration that the proposed contractor’s unique qualifications or the nature of the acquisition requires use of the authority cited:

The source identified, PEMCO, LTD., has been responsible for Marketing M&M REO inventory since 2010.

PEMCO, LTD is an M&M contractor who has been performing satisfactorily in this geographic area. They are fully staffed and operational. An immediate need exists for continuation of these services with PEMCO to ensure that the Department’s assets remain preserved and protected while it pursues award a new contract for this area.

6. A Determination by the Contracting Officer that the Anticipated Cost to the Government Will be Fair and Reasonable:

The original M&M III Task Orders for these services were procured through a competitive solicitation process.

Based on adequate price competition in each geographical area to be serviced, the prices were determined to be fair and reasonable at the time of contract award. The need for the increase is being driven solely by increased volumes, which were beyond the original estimates. The Contracting Officer will carefully review the existing pricing prior to award and make a determination that the anticipated additional costs to the Government will be fair and reasonable prior to award. Additionally, the GSA schedule prices were competed before a contractor was awarded a GSA schedule contract. Under, 8.405-4 – Price Reductions: Ordering activities may request a price reduction at any time before placing an order, establishing a BPA, or in conjunction with the annual BPA review. However, the ordering activity shall seek a price reduction when the order or BPA exceeds the simplified acquisition threshold. Schedule contractors are not required to pass on to all schedule users a price reduction extended only to an individual ordering activity for a specific order or BPA. Based on the contractor’s terms and condition of the maximum order, the estimated value will be above the maximum and therefore, the Government intends to seek price reduction based on the maximum order threshold (MOT).

In response to the pricing discussions with the identified contractor, PEMCO has proposed a 1.15% discount off of their current rates, which were previously determined to be fair and reasonable, and are already less than their approved GSA Schedule 520 Rates under the corresponding SIN. The Contracting Officer considers these prices to be fair and reasonable for the current effort based on previous price history, and the fact that the contractor is assuming some risk on a definitive task order with no established minimum guarantee.

7. A Description of the Market Research Conducted (see part 10) and the Results or a Statement of the Reason market Research was not conducted:

Additional market research was not conducted to support the actions addressed by this justification. Any transition in contractor performed services would require significant startup resources and time. No capable sources have been identified in the required geographic areas that would have existing capacity to service the entire area(s) without experiencing significant disruption and performance delays in services.

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

N/A

9. A List of the sources, if Any, that Expressed, in Writing, and Interest in the Acquisition:

No sources beyond the existing contractors were identified that could provide the required services without experiencing significant performance delays.

10. A Statement of the Actions, if Any, that the Agency May Take to Remove or Overcome Any Barriers to Competition Before Any Subsequent Acquisition of the Supplies or Services Required.

The only identified barrier to competition is the immediate need for continuation of services. The Government intends to award M&M 3.5 which was solicited in a competitive environment.