Sound Transit DRLE SS Justification FE.pdf

DEPARTMENT OF TRANSPORTATION

FEDERAL HIGHWAY ADMINISTRATION

Justification for an Exception to Fair Opportunity

1. Identification of the agency and the 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 the 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. 693JJ318D000008. The task order associated with this justification will provide legal advisory services in connection with the Downtown Redmond Link Extension Project (the “DRLE Project”), the refinancing of the East Link Extension Project TIFIA Loan, and replacement of the four Master Credit Agreement TIFIA Loans.

3. Description of the supplies or services required to meet the agency’s needs (including the estimated value).

The Build America Bureau (“Bureau”) administers the TIFIA program, which provides (secured) direct loans, loan guarantees, and standby lines of credit to borrowers seeking to develop major surface transportation infrastructure projects. For each credit assistance request, the Bureau retains external legal counsel to provide support in the areas of: general due diligence; loan drafting and negotiation; advising on collateral packages; and closing of credit transactions. This task order will support the Bureau’s work in association with a new TIFIA loan (the “New TIFIA Loan”) to the Central Puget Sound Regional Transit Authority (“Sound Transit” or the “Borrower”) for the DRLE Project, and the refinancing or replacement of the five existing TIFIA loans previously provided by the Bureau to Sound Transit (the “Existing Loans”) with the New TIFIA Loan.

As part of its discussion with the Bureau regarding a TIFIA loan for the DRLE Project, Sound Transit has requested replacing the Existing Loans with tranches under the new loan, each at a lower interest rate than that of the related Existing Loan. The Bureau desires to provide this interest rate relief to Sound Transit and seeks to accommodate its request through the New TIFIA Loan.

Under this task order, the Contractor will prepare a new TIFIA loan agreement, which will be based on the existing TIFIA loan agreements, with only such changes as are necessary to reflect the lower interest rate, the increased principal amount, and the DRLE Project.

The terms and conditions of the Existing Loans will otherwise remain unchanged. In addition, the Contractor will review the other existing financing documents to determine which documents need to be modified for the purpose of terminating the Existing Loans and executing the New TIFIA Loan, and prepare either amendments to such documents or amended versions of such documents. The Contractor will also review the project documents associated with the DRLE Project and perform a high-level analysis of the tax revenues pledged to repay the New TIFIA Loan, which are the same revenue source currently pledged to repay the Existing Loans.

This will be a new task order under Shearman’s ID/IQ Contract No. 693JJ318D000008, with an anticipated period of performance of eleven months. The estimated value of this task order is $560,650. The value, however, does not represent the actual price/cost to be paid by the Government, but instead the estimated cost to the Borrower seeking financing from DOT. The Borrower will pay all documented fees and expenses of the Contractor.

See Section 5 for additional information.

4. Identification of the exception to fair opportunity (see 16.505(b)(2)) and the supporting 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 required at the level of quality required because the supplies or services ordered are unique or highly specialized.

Shearman previously provided legal services in connection with four of the Existing Loans under the previous TIFIA IDIQ contract (Contract No. DTFH6112D00025) and task order 0210. The due diligence tasks performed for the Existing Loans provide Shearman with significant knowledge of the structure of the transaction, in particular, the bond indenture supporting the Existing Loans, and which will support the New TIFIA Loan. In addition, Shearman’s work documenting the four most recent Existing Loans gives them detailed knowledge of the terms and conditions that will serve as the baseline for the New TIFIA Loan. As such, Shearman has extensive knowledge of the structure and documentation supporting the four most recent Existing Loans, which would result in significant time savings in respect of both due diligence and negotiation hours. This time savings would result in lower costs under the new task order.

A critical feature of the Bureau’s loan reset initiative is expedited service. As such, time is of the essence to close the New TIFIA Loan. Shearman’s familiarity with the documentation, negotiating history, and parties involved is, therefore, essential to meeting the timeline presented and the Government’s goals in establishing an expedited process for these borrowers. A firm without the knowledge of the documentation would require significant time to read the documentation and identify what, if any, related documentation needs to be amended in connection with the New TIFIA Loan, at significant additional cost. The Borrower would have to significantly delay closing to accommodate any such review, and the Borrower would be financially responsible for the significant cost associated with this review process. Shearman’s previous involvement in the negotiation and documentation of the four most recent Existing Loans would therefore facilitate significant savings in terms of time and money.

Further, Shearman’s experience with the Existing Loans will reduce the time necessary to document the New TIFIA Loan and to identify what, if any, related documentation needs to be amended in connection with the New TIFIA Loan agreement. The documentation for the New TIFIA Loan will be substantially similar to the documents Shearman negotiated as part of its work on the four most recent Existing Loans.

Sherman’s in-depth understanding of the circumstances surrounding the negotiation of the four most recent Existing Loans makes them the only capable firm to provide these services. A new contractor would not have the requisite background and knowledge to efficiently complete the work under the new order. A new contractor would require extensive time to perform at the desired level of quality. No other contractor could enter at this point in the process and be able to provide the services at the level of quality necessary to ensure the Government’s best interests and that the loan is secured. Due to the unique circumstances and similarities to prior work, Shearman is the only capable source to meet the Government’s requirements.

5. Determination by the Contracting Officer that the anticipated cost to the Government will be fair and reasonable.

The planned action will result in a Time and Material/Labor Hour task order against an existing FHWA ID/IQ contract, for which the labor rates and labor categories have previously been evaluated and determined to be fair and reasonable. The Government will evaluate the labor hour cost estimate to ensure the billing rates are consistent with the ID/IQ-approved labor categories and rates, as well as if the cost is complete and reasonable in relation to the task order requirements. The evaluated cost will be based on multiplying the fully burdened hourly rate for each labor category/staff by the estimated hours. The Government will also evaluate the cost against historical costs for similar services to ensure the amount is fair and reasonable.

The total evaluated cost, however, does not represent the actual costs to be paid by the Government. This is a No-Cost task order, and the Borrower will pay all documented fees and expenses of the Contractor. Under a No-Cost Task Order, the Contractor will serve as transactional counsel for the financing of the project, and will represent DOT and the Bureau in connection with the transaction and related matters. The applicant for credit assistance (or its affiliate) will directly make payment to the Contractor for services rendered under this No Cost Task Order in accordance with the terms of a sponsor payment letter/agreement executed by the applicant (or its affiliate) and the Contractor. The Government has no obligation to, and will not, pay any of the Contractor’s fees, costs and expenses incurred under this Task Order.

6. Other facts supporting the use justification.

Due to timing constraints presented by the DRLE Project and Sound Transit’s desired refinancing of the Existing Loans, it is essential that the Government quickly engage with the Borrower and avoid unnecessary additional time “getting up to speed.” Shearman’s familiarity with the documentation, negotiating history, and parties involved is essential to meeting an expedited timeline. A firm without the knowledge of the documentation would require significant time to read the documentation, understand the new structure, and identify the issues, at significant additional cost.

7. Statement of the actions, if any, the agency may take to remove or overcome any barriers that led to the exception to fair opportunity before any subsequent acquisition for the supplies or services is made.

To ensure that industry is made aware of all future information related to this acquisition, the justification will be posted and made available to the public via the Government port of entry, www.beta.SAM.gov. However, because some of the information and material are subject to attorney/client privilege, as well as other protections associated with sensitive information, there is no immediate known action that the Government can take to remove or overcome the barrier that led to the exception to fair opportunity.

8. Certification

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

2 February 2021 Bernadette Brennan Date Attorney Advisor/Bureau Counsel Office of the General Counsel U.S. Department of Transportation

Approvals

Based upon the preceding information, I hereby approve this Justification for an Exception to Fair Opportunity to award a task order to Shearman & Sterling LLP for legal advisory services in connection with the Downtown Redmond Link Extension Project (the “DRLE Project”), the refinancing of the East Link Extension Project TIFIA Loan, and replacement of the four Master Credit Agreement TIFIA Loans under the TIFIA Program.

Hector R. Santamaria Date Contracting Officer Office of Acquisition and Grants Management Federal Highway Administration http://www.beta.sam.gov/