3-SOW-SBICExams-REVISED.pdf

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PERFORMANCE-BASED WORK STATEMENT (SOW) for

OUTSOURCING EXAMINATIONS of SBICs for

OFFICE OF SBIC EXAMINATIONS (OSE) in the

SBA OFFICE OF INVESTMENT AND INNOVATION (OII)

Award of Multiple-Award Indefinite-Delivery Indefinite-Quantity (IDIQ) Contracts with Task

Orders is expected.

1.0 PURPOSE

The Contractor(s) will conduct examinations of Small Business Investment Companies (SBICs or Licensee) to:

Determine whether Licensees are complying with the Small Business Investment

Company Act of 1958, as amended (Act), and its implementing regulations;

Assess the financial condition of Licensees and SBA’s financial vulnerability; and

Ensure the accuracy of information that Licensees submit to the U. S. Small Business

Administration (SBA).

The Contractor shall independently gather and report objective, factual information to SBA’s

Director of the Office of SBIC Examinations (OSE) or his/her designee. The Contractor shall plan, coordinate, and execute the complete examination process including, but not limited to, corresponding and meeting with SBIC managers, performing site visits, preparing all necessary documentation in appropriate work-papers, and drafting examination reports.

2.0 BACKGROUND

The Small Business Investment Company (SBIC) program was created by the Act and established to “stimulate the national economy in general and the small business segment in particular by establishing a program to stimulate and supplement the flow of private equity capital and long-term loan funds which small business concerns need for the sound financing of their business operations and for their growth, expansion, and modernization, and which are not available in adequate supply…” SBA accomplishes this mission by licensing teams of experienced private equity professionals who use privately raised capital, and possibly SBA-approved leverage, to make equity investments and long-term loans to small businesses.

The SBIC program is a public/private partnership. SBICs are privately owned and managed investment funds, licensed and regulated by SBA. SBICs may be organized as corporations, limited partnerships, and limited liability companies, but are most typically organized as limited partnerships. At present there are 316 funds in the SBIC program managing approximately $28 billion in investments in qualifying small businesses. For the past five years (FY 2012 – FY

2016), these funds have invested more than $24 billion in over 4,000 small businesses. In FY

2016, SBICs invested nearly $6 billion in roughly 1,200 small businesses. At present there are 89

Licensees identified as non-leveraged SBICs, many of which are bank-affiliated. Most bank-affiliated SBICs were originally created to enable banks to make equity investments which otherwise would be prohibited by the Glass Steagall Act.

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SBICs are located throughout the United States and may invest nationwide or in the regions identified in the SBIC’s business plan. Pursuant to the Act, with limited exceptions, SBICs must have a minimum of $5 million in private capital. The Act does not set a maximum amount of private capital that an SBIC may have, but SBA leverage is capped at a maximum of $150 million per SBIC, and is typically advanced at a 2-to-1 rate, Thus, SBICs do not usually raise more than $75 million in private capital. SBIC investments cover the spectrum of financing, from senior secured loans to pure equity investments such as common stock.

SBICs are required to comply with SBA regulations (13 CFR Sec. 107). The regulations govern the type of small businesses in which SBICs are permitted to invest and provide additional criteria intended to protect SBA’s position as creditor.

The SBIC program is administered by the Office of Investment and Innovation (OII) within

SBA. OII has offices with approximately 65 employees working on the program overall including:

Outreach: builds external awareness and handles initial inquiries about the program;

Licensing: reviews applications for SBIC licenses submitted by funds;

Business Operations: oversees data collection and funding of approved SBA leverage;

Operations: oversee and monitors the financial and regulatory performance of licenses funds;

Examinations: oversees and monitors regulatory compliance of licensed funds; and

Liquidation: maximizes recoveries from failing funds through liquidation.

3.0 OVERVIEW OF THE OFFICE OF SBIC EXAMINATIONS

The examination function is required by the Act and is one component of SBA’s regulatory oversight of the SBIC program. The Office of SBIC Examinations (OSE) is responsible for examining SBICs. In addition to the Director and a Senior Examiner located in Washington, DC, the Office of SBIC Examinations also has 15 examiners and 3 Examination Managers located throughout the country.

Under the Act, SBA is required, with certain exceptions, to examine Licensees at least every two years. During FY 216 the Office of SBIC Examinations performed 189 examinations. The current goal is to examine non-leveraged SBICs on an 18- month schedule and leveraged SBICs on a 12-month schedule.

As part of their examination reviews, examiners independently gather, analyze, and report factual information on the operations of Licensees so that OII can:

Determine whether Licensees are complying with the Act and implementing regulations;

Assess the financial condition of Licensees and SBA’s financial vulnerability; and

Ensure the accuracy of information that Licensees submit to SBA.

Contractor shall assist OSE in conducting examinations. This acquisition is intended to be for multiple-award indefinite-delivery indefinite-quantity (IDIQ) contracts. During the first year of the contract, SBA expects to assign approximately 30 non-leveraged examinations and approximately 20 limited activity or special purpose examinations through the award of task

SOW – SBA - SBIC Examinations Page 3 of 17 orders issued against the multiple IDIQ contracts. If the examinations by Contractor are determined to be of sufficiently high quality, the task orders may be expanded to between 30 and

50 non-leveraged examination per year, plus an additional 20 or more limited activity and special purpose examinations. These estimated numbers are totals and are to be divided among the several IDIQ contracts.

Award of multiple IDIQ contracts is contemplated. Fair opportunity in the award of task orders will be given to the awardees of the IDIQ contracts as possible. However, due to concerns about the appearance of independence, conflict of interest, and quality control, task orders may be placed against certain IDIQ contracts at SBA’s sole discretion. In addition, each IDIQ awardee will receive a task order to cover the minimum contract value. FAR (Federal Acquisition

Regulation) 16.505 will be followed.

The yearly number of examinations assigned to the Contractor will depend on SBA’s determination of:

Current and project workload requirements;

The quality of completed examinations previously conducted by the Contractor; and

Appearance of independence and conflict of interest issues.

Although the Contractor will draft examination reports and recommended findings based on y the results of its examinations, the OSE will be responsible for the final approval and issuance of all examination reports. If the Contractor delivers high quality products, the Contractor’s examinations may be broadened to include examinations of leveraged funds.

Statutory authority to conduct SBIC examinations: The Office of SBIC Examinations (OSE) is granted authority to conduct examinations of SBICs as defined in the Act, and in Title 13 CFR

Sec. 107.690.

Overview of process: SBA’s Director of OSE or his/her designee will review and comment upon the Contractor’s work. The Contractor’s general responsibilities include coordinating with the Director of OSE or his/her designee to carry out assigned examinations. The Contractor is also responsible for maintaining offices equipped with appropriate computers and communications equipment, including email, scanner, and laptops with software utilized by SBA examines (e.g. Microsoft Office, Adobe Pro DC, SharePoint).

Contractor’s per unit pricing shall include all Other Direct Costs (ODCs), including labor, fee or profit, subcontractor costs, and any travel. The Government will only pay the per unit price for examinations.

Three types of SBICs: SBA has three types of SBICs: non-leveraged Licensees, Licensees using debenture leverage, and Licensees using participating security leverage (no new participating securities Licensees have been licensed since 2004). The characteristics and distinctions between these three types of Licensees, as well as the required examination procedures for each type, are thoroughly explained in the following:

The Act;

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SBIC regulations in 13 CFR Sec. 107 and Sec. 121(see link to statute and regulations at https://www.sba.gov/sbic/sbic-resource-library/statute-and-regulations;

Standard Operating Procedures (SOP) for The Office of SBIC Examinations: The specific activities performed during an examination, including the major regulatory areas being examined, are described in this SOP (see attached link to SOP 10 09, SBIC Internal

Examinations Guidelines: https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedure-guidance/sbic-standard-operating-procedures ;

Policy documents such as Technotes, accounting guidelines, valuation guidelines, located in the SBIC online public resource library at https://www.sba.gov/sbic/sbic-resource-library; as well as

SBA forms and worksheets used as part of the examination process to verify compliance with the regulations. These forms and worksheets are not public documents and will be provided to contract awardees.

4.0 OBJECTIVES

Objective One: Contractor shall ensure SBICs are complying with the Act, and acting in accordance with the implementing regulations, included but not limited to, Title 13 CFR Sec.

107 and Sec. 121.

Objective Two: Contractor shall have an understanding of SBICs and all applicable regulations, policy directives, accounting guidelines, and valuation guidelines.

Objective Three: Contractor shall analyze complex financial transactions, financial statements, and private equity valuations in various industries. SBA prefers the offeror to have, within the past three years, experience performing audits, examinations and reviews under The American

Institute of Certified Public Accountants (AICPA) standards or experience examining financial institutions, e.g. with the FDIC (banks), SBA (SBICs) or other federal financial regulators.

Objective Four: Contractor shall be capable of utilizing a Virtual Data Room (VDR) solution for all tasks. Currently OII is seeking a technology modernization project which should allow the

Office of SBIC Examinations to provide a secure VDR for contract examiners, and may also include other future technological upgrades for the examination functions (e.g. audit/examination management software). In the meantime, all work-papers and documents shall be provided to

SBA electronically according to the file format similar to that provided in OSE’s SOP 10 09, SBIC Examination Guidelines, Appendix 2, or in alternative formats or platforms as mutually agreed upon by the Contractor and SBA. If the files are too large to be sent via email, they may be submitted by an alternative secure transfer process approved by SBA.

5.0 PERFORMANCE WORK STATEMENT TASKS

The time expended on each examination phase will depend on the characteristics of the specific

Licensee being examined, and must take into account;

Complexity of the Licensee’s organizational structure;

Amount of any outstanding SBA leverage;

Number, amount, and complexity of Licensee financings being reviewed; and https://www.sba.gov/sbic/sbic-resource-library/statute-and-regulations https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedure-guidance/sbic-standard-operating-procedures https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedure-guidance/sbic-standard-operating-procedures https://www.sba.gov/sbic/sbic-resource-library https://www.sba.gov/sbic/sbic-resource-library

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Potential irregularities that need to be explored to ensure program integrity.

Task 1 – Standard Non-Leveraged Examination: Contractor shall conduct an examination of a non-leveraged SBIC. The contract Examiner shall create accurate, complete, and self-explanatory work-papers and provide supporting documents organized in the form similar to

OSE’s 10 09, SBIC Examination Guidelines, Appendix 2 – Index of Work-papers

(https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedue-guidance/sbic-standard-operating-procedures ) as well as report similar to the example attached to this SOW, or as determined by Director of OSE or his/her designee. These work-papers shall support the findings, if any, in both the draft and final examination reports submitted by Contractor.

Currently these files are typically maintained in Microsoft Excel, Word, or PDF forms. OSE’s

SBIC Examination Guidelines, SOP 10 09, shall be followed unless directed otherwise in writing by the Director of OSE or his/her designee. In addition to current recommended findings, the

Contractor shall document all potential findings where questions of regulatory interpretation may exist; in doing so the Contractor may err on the side of caution and raise such issues to SBA’s attention for further consideration and guidance. Because SBA’s regulatory requirements for non-leveraged SBICs are more limited than those for leveraged SBICs, these examinations are of limited scope and, therefore, require less time to complete. It is anticipated that during the first year of the contract, the Contractor will conduct only examinations of non-leveraged Licensees, limited activity examinations, and special purpose reviews. If the Contractor delivers high quality products, then the contractor’s examinations may, at the sole discretion of the SBA, be broadened to include examinations of leveraged Licensees.

Deliverables: The Contractor shall provide a draft examination report using SBA’s prescribed format, along with a complete set of electronically documented work-papers within 30 calendar days of the on-site field work for reports without findings and within 60 calendar days for reports with findings.

The Contractor shall address any comments from SBA on the draft report, perform any additional work requested by SBA, and issue a final report to SBA within 15 calendar days of

SBA’s response on the draft.

Expected Level-of-Effort: Standard examinations of non-leveraged SBICs typically take approximately 80 - 100 hours in total to complete, including examination time and supervisory review time. The Contractor shall conduct high-quality examinations within these expected parameters.

Task 2 – Standard Leveraged SBIC Examination: Contractor shall conduct an examination of a leveraged SBIC. The contract examiner shall create accurate, complete, and self-explanatory work-papers and provide supporting documents organized in the format similar to SOC’s SOP

10 09, SBIC Examination Guidelines, Appendix 2 – Index of Work-papers

(https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedure-guidance/sbic-standard-operating-procedures ) as well as a report similar to the attached example, or as determined by

Director of OSE or his/her designee. These work-papers shall support the findings, if any, in both the draft and final examination reports. In addition to current recommended findings, the

Contractor shall document all potential findings where questions of regulatory interpretation may https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedue-guidance/sbic-standard-operating-procedures https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedue-guidance/sbic-standard-operating-procedures https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedure-guidance/sbic-standard-operating-procedures https://www.sba.gov/sbic/sbic-resource-library/sbic-policy-procedure-guidance/sbic-standard-operating-procedures

SOW – SBA - SBIC Examinations Page 6 of 17 exist; in doing so the Contractor shall err on the side of caution and raise such issues to SBA’s attention for further consideration and guidance. Currently many of these files are maintained in

Microsoft Excel, Word, or as PDF attachments. It is anticipated that during the first year of the contract, the Contractor will conduct only examinations of non-leveraged Licensees, limited activity examinations, and special purpose examinations. If the Contractor delivers high quality products, then the Contractor’s examinations may, at the sole discretion of the SBA, be broadened to include examinations of leveraged licensees.

Expected Level-of-Effort: Standard examinations of leveraged SBICs typically take approximately 120 - 140 hours in total to complete, including examination time and supervisory review time. The Contractor is expected to conduct high-quality examinations within these parameters.

Task 3 – Limited Activity Examination: Limited activity examinations are those which have been identified by the Director of OSE as dealing with an SBIC which reports limited activity, e.g. no more than two investments during the period to be examined and is not otherwise expected to involve substantial complexity. These examinations are often for non-leveraged

Licensees SBICs with modified surrender agreements with SBA or Earmarked Asset SBICs with limited activity. The level of effort for a Limited Activity Examination is estimated to be 20 - 40 hours of both Examiner and supervisory review time to complete.

Task 4 – Special Purpose Review: These reviews are typically requested by the Director of the

Office of SBIC Liquidation or the Director of SBIC Operations through the Director of OSE for specific purposes. They may relate to the contractor providing independent review and analysis of specific aspects of a Licensee’s operations (i.e., valuations of certain portfolio investments, review of securities agreements and related financing documents, determining whether an SBIC is following the terms and conditions of a Settlement Agreement, Wind-Down Plan, or other demonstrated need.) The level of effort for these reviews is expected not-to-exceed 40 hours in

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Reviews may also be assigned for additional work which is being required by SBA as part of

Task 2 Standard Leveraged examination, but which falls outside the scope of normal examination procedures. Such work must be pre-approved in writing by the Director of OSE or his or her designee during the Task 2 Standard Leveraged Examination. A new Task Order (TO) or TO modification will be required if additional funding is required. Examples may include, but are not limited to, reviewing a significantly higher number of financings than required by the

OSE’s SOP, or special work required by SBA for highly complex issues which would not normally be addressed as part of standard examination procedures.

Deliverables: As mutually agreed upon in writing by the parties prior to any work being performed.

Note: Task Orders for Task 4 will usually be based on hourly rates for a total not-to-exceed amount.

Task 5 – Special Purpose Training: This task is for training for examiners (SBA examiners and/or contract examiners) - usually by a Contractor who has expertise in a given area which may be valuable to SBA. The training may be provided by Contractor personnel or its subcontractor. The training may be provided in-person and/or online to SBA staff and/or

Contractor staff on specific topics (e.g. valuation of portfolio investments of SBICs, securities, and/or sales agreements related to these investments; corporate governance; tax matters; or other topics) as determined by the SBA.

Deliverables: Schedule, content, and price will be negotiated between the parties. A task order for training will usually be for a firm-fixed price.

6.0 DELIVERABLES

See deliverable information under respective SOW descriptions. See also SOW attachments.

Unless otherwise directed by the Contracting Officer (CO) or the Contracting Officer’s

Representative (COR), Contractor shall electronically upload all deliverable examination documents into a Virtual Data Room (VDR) with the identifying File Number and Name as noted in OSE’s SOP, Appendix 2. If a VDR is not available, documentation may be submitted by an alternative secure transfer process approved by SBA. The index of work-papers is provided in Appendix 2 of OSE’s SOP 10 09 at https://www,sba.gov/about-sba/sba-performance/policy-regulations/stand-operating-procedures/sbic-internal-examinations-guidelines .

7.0 TRAVEL

Travel shall be included in all task order pricing and shall not be separately invoiced or reimbursed – unless specifically stated in a Task Order.

https://www,sba.gov/about-sba/sba-performance/policy-regulations/stand-operating-procedures/sbic-internal-examinations-guidelines https://www,sba.gov/about-sba/sba-performance/policy-regulations/stand-operating-procedures/sbic-internal-examinations-guidelines https://www,sba.gov/about-sba/sba-performance/policy-regulations/stand-operating-procedures/sbic-internal-examinations-guidelines

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8.0 CONTRACTOR’S OVERSIGHT AND MANAGEMENT

Before submitting an examination report, the Contractor shall review and approve all work-papers provided in support of the work accomplished and recommended findings. These work-papers will then be used by the Director of SBIC Examinations or his/her designee to determine the adequacy of examination performed, sufficiency of information included in the work-papers, and whether the contract examiner’s recommended findings are supported by sufficient evidence.

Identify Project Manager: The Contractor shall identify a project manager who will be responsible for overall management of the contract and coordination with the Director of OSE or his/her designee to ensure successful performance. The Contractor shall cover the cost of the project management. The project manager shall be responsible for having staff to complete the examinations according to the schedule specified by SBA.

Develop a Roster of Qualified Staff: The Contractor shall provide a staff of examiners, who are now, or will become, competent in SBA’s regulatory requirements for SBICs and are able to operate independently in the field. In addition to staff examiners, the Contractor’s staff shall also include an identified expert examiner. The Contractor shall ensure that its examiners have sufficient suitable education and background such that they will not require substantial training beyond that which relates to SBA’s specific examination process (e.g. standard operating procedures, work-papers and examination reporting standards). SBA anticipates providing examination process-related training, including examiner “shadowing” opportunities for contract examination staff.

All contract examiners should, at a minimum, possess the following qualifications; however, SBA may consider other substantially equivalent qualifications, as appropriate. The minimum qualifications for contract examiner are:

Formal education in subjects such as business, finance, accounting, auditing as stated in

Section 9.0, Personnel, of this SOW.

A minimum of 3 years of experience as an SBIC examiner, an FDIC (Federal Deposit

Insurance Corporation) examiner, Comptroller of the Currency examiner, SBIC financial analyst, audit experience as a CPA, or other relevant experience. At least one year of the experience must have been within the last five year;

Availability to perform examinations for at least one year;

Availability to complete at least four examinations within any contract year; and

Lack conflict of interest as defined in this SOW and its attachments.

Due to the technical and mission-related nature of this work, the Director of OSE or his/her designate will review the resumes of all prospective contract examiners and expert examiners, to ensure that they meet SBA’s requirements. While the Contractor will have control of all its hiring, this minimum step of SBA review must be undertaken prior to a Contractor employee performing work pursuant to this contract.

Prepare Schedule of Work: Within 30 days of task order award and receipt of the schedule of examinations, the Contractor shall identify staff to complete each scheduled examination for the next 3-month period, on a rolling basis. This schedule and all changes must be approved by the

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Director of OSE or his/her designee. If additional examinations are requested, Contractor shall schedule and begin additional examinations within six to eight weeks of the task order award.

9.0 PERSONNEL

It is the intent of SBA that most task orders issued pursuant to this IDIQ will be for a firm-fixed price. However, Contractor shall provide fully loaded labor rates for the following labor categories, which may be used to negotiate related work:

Project Manager with these qualifications;

1. At least five years of previous experience as a project manager in financial services, audit, examination, review, or related areas; and

2. At least one year of that experience must have been within the last five years.

Expert Examiner with these qualifications:

1. MBA, CPA or BS/BA in business administration with a minimum of 24 credit hours in business, including 12 credit hours in accounting. A CPA designation is desirable;

2. A minimum of ten years of relevant experience as an SBIC examiner, FDIC examiner, Comptroller of the Currency examiner, SBIC financial analyst; public accountant or auditor, or other similar experience. At least one year of that experience must have been within the last five years;

3. Extensive experience in analyzing complex financial transactions, determining compliance with regulations pertaining to banking, investment or other financial institution, reviewing complex organizational and capital structures, operating procedures and policies, evaluating the adequacy of internal controls over large investment portfolios, including the reasonable of values assigned to portfolio assets;

4. Experience as a team leader in designing audits, examination tests, procedures, and methods to use during financial or regulatory compliance examinations;

5. Experience as a team leader in reviewing the analytical work, computations , and evaluations of other team members during a financial or compliance examination;

6. Extensive experience in applying accounting or auditing principles, practices, and techniques that involve financial transactions and guiding others in applying these during complex reviews of a business enterprise;

7. Experience in writing examination reports as an examiner of SBICs, or for the FDIC, the Comptroller of the Currency, the Federal Reserve, or other U. S. Government regulators of financial institutions, or other equivalent experience; and

8. Knowledge of SBA and the SBIC regulations and program (highly preferred).

Examiner with the qualifications:

1. MBA, CPA or BS/BA in business administration with at least 24 credit hours in business, including 12, credit hours in accounting. A CPA designation is desirable;

2. A minimum of three years of relevant work experience as an SBIC examiner, FDIC examiner, Comptroller of the Currency examiner; SBIC financial analyst; public accountant or auditor; or other similar experience. At least one year of that experience must have been within the last five years;

3. Experience in analyzing complex financial transactions, determining compliance with regulations pertaining to banking, investment, or other financial institutions, reviewing organizational and capital structures, operating procures and policies, and

SOW – SBA - SBIC Examinations Page 10 of 17 evaluating the adequacy of internal controls over large investment portfolios, including the reasonableness of values assigned to portfolio assets;

4. Experience in implementing examination tests, procedures, and methods to use during financial or regulatory compliance examinations;

5. Experience in applying accounting or auditing principles, practices, and techniques that involve financial transactions and in applying these during complex reviews of a business enterprise;

6. Experience in writing examination reports as an examiner of SBICs or for the FDIC, Comptroller of the Currency, Federal Reserve, other U. S. Government regulator of financial institutions, or other equivalent experience; and

7. Knowledge of regulations governing the SBA’s SBIC program will be advantageous.

Subject Matter Expert – demonstrated expertise in a given subject matter area (e.g. business development companies, private equity securities agreements, corporate governance, secondary sales of private equities, and other specific industries). The necessary qualifications will be determined by the parties at the time of the task order.

10.0 PERFORMANCE STANDARDS

All written reports shall be timely, well-written, and of a high analytical quality. SBA reserves the right to terminate a Contractor for cause if Contractor fails to comply with any aspect of the contract, including compliance with all quality and performance standards - such as timely delivery of all services and deliverables.

Before submitting an examination report, the Contractor shall review and approve all work-papers, clearly documenting the work accomplished and any findings recommended to SBA.

All work-papers and reports shall demonstrate a comprehensive understanding of both the examination requirements and the SBIC under examination. The standard of comprehensive understanding shall be that of a professional exercising appropriate and reasonable, care, diligence, and skill. All reports shall be structured in a format consistent with the Examinations

SOP, or as otherwise approved in writing by the Director of OSE or her/his designee. All final work-papers and reports shall be substantially accurate and free from material error.

In addition to current recommended findings, the Contractor shall document all potential findings where questions of regulatory interpretation may exist; in doing so, the Contractor shall err on the side of caution and raise such issues to SBA’s attention for further consideration and guidance.

If the Contractor fails to meet the quality and performance standards under this contract, SBA has the right to discontinue making further assignments of examinations to the Contractor.

Although not an exhaustive list, the following are examples of failure to meet the quality and performance standards:

Work-papers or reports contain significant errors, such as incorrect data or factually incorrect information;

Work-papers or reports are incomplete and/or fail to cover all required examination activities;

Work-papers or reports fail to document or disclose instances of regulatory non-compliance;

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Draft or final reports are delivered after the deadline; and

SBA feedback on a draft report is not addressed or incorporated into the final report.

The following table identifies the most important aspects of the examination processes and provides acceptable performance thresholds.

Performance Standard Acceptable Quality

Level (AQL)

Performance Threshold / Method of

Monitoring

Identify and retain qualified personnel – whether employees or subcontractors – in a timely manner. Obtain appropriate security clearance for contractor employees by working with the Government technical point-of-contact

(POC).

See SOW provisions. Need to meet the minimum requirements outlined in the SOW /

Direct SBA contact through the COR and/or POC assigned to this contract.

The POC will required the Contractor to obtain completed security forms from contractor-employees in a timely manner throughout the contract Period of Performance (POP).

Ensure all personnel and subcontractors are trained in existing and future examination guidelines and process in a timely manner.

See SOW provisions. Prior to commencing an examinations, all assigned Contractor examiners will be trained on SBIC regulations and

OSE’s processes / Direct SBA contact through the COR and/or POC assigned to this contract.

Timeliness of contractor scheduling and completing examinations.

See SOW provisions. The Contractor’s performance will be judged on the ability to schedule, start, and complete assigned examinations on time / Direct SBA contact through the

COR and/or POC assigned to this contract.

Adequacy of examination coverage and sufficiency of information in the working papers.

See SOW provisions. All information in work-papers and reports shall be substantially accurate and free from material error, which means at least 98% accurate and complete information / Direct SBA contact through the COR and/or POC assigned to this contract.

Raises and documents questions of regulatory interpretation when potential findings may exist.

See SOW standards Consistently raises questions and documents questionable activity;

Demonstrates an understanding of different interpretations of the regulations.

Draft quality Examination

Reports and Special Purpose

Reviews.

See SOW standards. Draft examination reports, along with supporting work-papers, are reviewed by Contractor’s expert examiner, and are complete and accurate prior to the draft report being submitted to the SBA

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/ Direct SBA contact through the COR and/or POC assigned to this contract.

Quality of Final Examination

Reports, and other or Special

Purpose Reviews.

See SOW standards. Final examination reports, along with support work-papers, are reviewed by

Contractor’s expert examiner, and are accurate and complete (including addressing SBA responses to draft report) prior to the final submittal to

SBA for review / Direct SBA contact through the COR and/or POC assigned to this contract.

Results of customer (SBIC) and SBA performance ratings.

See SOW standards. Standards outside those specifically identified in the SOW that were provided to Contractor are fully complied with / Direct SBA contact through the COR and/or POC assigned to this contract.

Delivery of quality and relevant Special Purpose

Training.

See SOW standards. The agreed-upon topics are addressed in a clear and concise way. A slide deck or agenda is provided to SBA prior to the training. Training material provided will address the topic and concerns of the training subject matter /

Direct SBA contact through the COR and/or POC assigned to this contract.

Results of Examination

Follow-up.

See SOW standards. All follow-up issues are addressed on a timely basis / Direct SBA contact through the COR and/or POC assigned to this contract.

Quality of Contract Support. See SOW standards. Invoices are submitted in a timely fashion, and are clear and accurate. The form 1034 is used for invoicing, and invoice includes the requisition and contract number / Direct SBA contact through the COR and/or POC assigned to this contract.

Minimal turnover of personnel and/or subcontractors.

See SOW standards. Quality and timeliness of examinations and reports are not affected by personnel turnover / Direct SBA contact through the COR and/or POC assigned to this contract.

Cost conscious management See SOW standards. Invoices are accurate and conform to task order details / Direct SBA contact through the COR and/or POC assigned to this contract.

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Each task order will have periodic evaluations by SBA’s COR to monitor customer satisfaction as to Contractor’s overall performance and business relations, and the quality and timeliness of its examinations.

11.0 CONFIDENTIALITY AND NON-DISCLOSURE REQUIREMENTS

All information obtained by the Contractor from SBA and Licensees shall be disclosed by

Contractor only to SBA’s OII personnel, and shall not be used for any other reason by the

Contractor, its employees, and/or its subcontractors.

All work-papers, notes, photocopies, and other materials produced and received by the

Contractor in the course of conducting examinations and preparing examination reports shall be given to SBA and shall become the property of SBA.

All data provided by SBA, the SBIC, any portfolio investment of the SBIC, and all data, documents, and reports developed in the performance of this contract, are privileged and confidential, and considered “Confidential Information.” Any of this information that is shared with the Contractor or any of its subcontractors is for its confidential use only. All information and data provided to the Contractor and its employees or subcontractors by any individual, entity, or agency, under this contract is presumed “Confidential Information” unless notated as public in writing by SBA. Confidential Information may include some information which is proprietary to other contractors and for which SBA may have only limited rights.

The Contractor shall not take any of the following actions without the prior written approval of

SBA:

Disclose Confidential Information in full or in part in any manner outside of Government employees assigned to the SBIC work, and Contract employees or subcontractors that have a legitimate need to know under this contract;

Make any representation regarding Confidential Information to any third party; or

Use Confidential Information for any purpose other than in connection with this contract and its task orders.

The Contractor shall safeguard all Confidential Information during the performance of this contract. At the end of the contract, Contractor shall either return Confidential Information to

SBA or certify its destruction at the conclusion of this contract and its task orders.

The Contractor, its employees, any subcontractor, and any subcontractor employee shall sign the attached non-disclosure agreement before commencing work. A copy of the signed non-disclosure agreement shall be provided to the COR.

12.0 CONFLICTS OF INTEREST

Potential Organization Conflicts of Interest

Contractor shall provide a signed statement which describes concisely all relevant facts concerning any past, present, or planned interest (i.e. financial, contractual, organization, or

SOW – SBA - SBIC Examinations Page 14 of 17 otherwise relating to the work to be performed under this IDIQ contract). Possible organization or personal conflict of interest may be related to:

Being unable to render impartial, technically sound, and objective assistance or advice;

Being aware of information that could lead to an unfair competitive advantage; or

Otherwise engaging in actions that are contrary to SBA’s interests.

Contractor may also provide relevant facts that show how its organization structure and/or management systems limit its knowledge of information that could lead to possible conflicts of interest relating to other divisions or sections or work of Contractor, as well as how Contractor’s structure or systems avoid or mitigate organizational conflict.

Upon receiving a task order, Contractor shall alert SBA if there is a potential or real conflict of interest in writing to the COR. No task order shall be awarded until any potential conflict of interest is neutralized or mitigated to the satisfaction of the COR.

Refusal to disclose potential conflicts of interest or any misrepresentation of underlying facts may disqualify the Contractor from receiving future task orders.

If the COR determines that a potential conflict can be avoided, effectively mitigated or otherwise resolved, the COR shall document those facts in writing before proceeding further with the task order.

Before engaging in any tasks under a task order issued pursuant to this contract, a Contractor employee or subcontractor employee shall sign a conflict of interest agreement, and Contractor’s project manager shall provide a signed copy to the COR.

Further Conflict of Interest Information

The Contractor may not:

(1) possess a direct or indirect ownership interest in the SBIC which is the subject of an examination by the Contractor (the subject SBIC);

(2) perform an examination if such examination would include reviewing documents of the subject SBIC that were prepared, drafted, or commented on by the Contractor (including, but not limited to, work-papers, SBA forms, regulatory filings, or other documents) or reviewing actions of the subject SBIC taken upon any advice rendered by the Contractor in connection with any prior employment by the subject SBIC;

(3) advise or provide any professional services to the subject SBIC during the term of examination and for a period of one year following the report date of the examination of such

SBIC pursuant to this contract; and/or

(4) in the case of any Leveraged SBIC, be employed by, offer or negotiate employment with, or seek to be retained for professional services by the subject SBIC for one year following the report date of the examination of such SBIC pursuant to the contract.

Each of the foregoing shall constitute a conflict of interest.

Notice of any of the foregoing conflicts of interest shall be provided to SBA in writing as promptly as practicable, and in no event later than 48 hours of Contractor first learning of the conflict.

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After examining an SBIC pursuant to this contract, Contractor is prohibited from voluntarily advising, consulting with, or testifying on behalf of the subject SBIC or in any legal action taken by SBA against the subject SBIC.

Upon award, Contractor shall provide to SBA a list of its SBIC contacts, clients, and customers for any audits, professional services or any other work done for such parties within the last five years. The list shall include relevant dates, details, and names. The list shall include relevant dates, names, and details, and shall include contacts by Contractor’s employees and subcontractors. The Contractor shall also provide an updated list every quarter while the contract is in effect, and for two years after the last TO is completed pursuant to this contract.

13.0 OTHER DIRECT COSTS (ODCs)

Contractor shall not charge for any and all ODCs on a task order issued pursuant to this contract unless the task order specifically itemizes the ODCs and the associated price.

14.0 GOVERNMENT FURNISHED PROPERTY AND SERVICES

Contractor shall provide physical offices, hardware, and software for its employees. SBA may provide a secure Virtual Data Room (VDR) for purposes of document management, and will notify Contractor of the details and uses of the VDR when or if it becomes available. If VDR is made available by SBA, Contractor shall use the VDR for all its documentation, unless otherwise directed by the Director of the OSE or his/her designees.

14.0 LINKS TO INFORMATION

The following are important links to critical information:

Direct link to OSE’s SOP SBIC Internal Examinations Guidelines 10 09:

https://www.sba.gov/about-sba/sba-performance/policy-regulations/standard-operating-procedures/sbic-internal-examinations-guidelines ;

SBIC’s Resource Library:

https://www.sba.gov/sbic/sbic-resource-library ;

Links to the Statute and Relations – 13 CFR Sec.107 and Sec. 121:

https://www.sba.gov/sbic/sbic-resource-library/statue-and-regulation ;

Accounting & Valuation Standards;

https://www.sba.gov/sbic/sbic-resource-library/accounting-valuation-standards ; and

Operating an SBIC, includes general information to the SBIC regarding Examinations and the SBIC library;

https://www.sba.gov/sbic/sbic-resource-library/accounting-valuaton-standards .

15.0 PLACE OF PERFORMANCE

The majority of the examination work will be done at Contractor’s offices.

https://www.sba.gov/about-sba/sba-performance/policy-regulations/standard-operating-procedures/sbic-internal-examinations-guidelines https://www.sba.gov/about-sba/sba-performance/policy-regulations/standard-operating-procedures/sbic-internal-examinations-guidelines https://www.sba.gov/sbic/sbic-resource-library https://www.sba.gov/sbic/sbic-resource-library/statue-and-regulation https://www.sba.gov/sbic/sbic-resource-library/accounting-valuation-standards https://www.sba.gov/sbic/sbic-resource-library/accounting-valuaton-standards

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An examination will generally include a site visit to the subject Licensee. However, at SBA’s discretion, SBA may direct the Contractor in writing that certain examinations may be done as

“desk examinations” – that is, without physical travel to the Licensee’s office

Special purpose training will be provided at a mutually agreed upon location.

16.0 TYPE OF CONTRACT AND PERIOD OF PERFORMANCE (POP)

The SBA intends this IDIQ contract to be a multiple award. Task orders will be issued against this IDIQ contract following the rules of Fair Opportunity as possible. Using Fair Opportunity, SBA will evaluate quality of approach and price to make an award that is a best value to the

Government. Exceptions to Fair Opportunity may occur at SBA’s sole discretion when ethical and quality concerns arise, in accordance with FAR 16.505.

The POP for this IDIQ contract is a base year and four option years.

17.0 INVOICING

As each examination is begun, Contractor may invoice 1/3 of the unit price. Upon submission of the draft examination report, Contractor may invoice an additional 1/3 of the unit price.

Contractor may invoice the final 1/3 of the unit price when either SBA accepts the final examination report in writing (by email from the POC) or 60 business days have passed since the

Contractor submitted the final examination report to SBA.

If the task order is not for an examination, the task order will state how invoicing shall proceed.

If there is no statement on invoicing, then Contract may invoice one services are complete.

If the task order contains invoice instructions which appear to conflict with this SOW, the task order instructions will control.

All invoices shall use SF1034 and include:

The requisition number found on the SF-1449 which obligates the task order;

A unique invoice number for each invoice, such as “SBAHQ-17-R-0009 – No.1”; and

Other required information on the form, including the task order number.

18.0 INSURANCE AND INDEMNIFICATION REQUIREMENT

Contractor shall carry at least $1,000,000 of Errors and Omissions insurance, or be self-insured.

If self-insured, Contractor shall maintain a net worth of at least $1,000,000.

Contractor shall indemnify SBA for any losses due to any breach of duty by Contractor pursuant to this contract.

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19.0 CERTIFICATION

Because of the financial and fiduciary nature of this work, Contractor shall submit a completed responsibility form with its Technical Proposal, which shall become a part of the IDIQ contract.

The form is found in FAR 52.209-5 Certification Regarding Responsibility Matters (OCT 2015).

20.0 NON-PERSONAL SERVICES CONTRACT

Contractor personnel rendering the services are not subject, either by the contract's terms or by the manner of its administration, to the supervision and control usually prevailing in relationships between the Government and its employees.

21.0 ATTACHMENTS

The following documents are attached to and a part of this SOW:

Cover Sheet for Reports – format;

Report form for SBIC Examinations – format; and

Conflict of Interest and Non-Disclosure (Confidentiality) Statement – form

22.0 SECURITY CLEARANCE FOR CONTRACTOR-EMPLOYEES

The SBA will require appropriate security clearance for contractor’s employees. All security clearances must be completed before contractor’s employees can commence work. This requirement will be enforced throughout the life of the contract.

The SBA POC will provide the required forms to the Contractor. The Contractor will be responsible for having its employees accurately complete the forms in a timely manner. The

Contractor shall provide completed security forms to the SBA POC. The SBA POC will process the security clearances. The SBA is responsible for security clearance costs.