ATTACHMENT_E_QASP.docx

ATTACHMENT E: U.S. DEPARTMENT OF VETERANS AFFAIRS (VA) LOAN GUARANTY SERVICE (LGY) REAL ESTATE OWNED PORTFOLIO SERVICING CONTRACT (RPSC) VA119-17-R-0010

ATTACHMENT E

U.S. DEPARTMENT OF VETERANS AFFAIRS (VA) LOAN GUARANTY SERVICE (LGY)

REAL ESTATE OWNED PORTFOLIO SERVICING CONTRACT (RPSC)

For: Department of Veterans Affairs (VA) Loan Guaranty Services (LGY) Real Estate Owned and Portfolio Servicing Contract (RPSC) Description The Department of Veterans Affairs (VA) Loan Guaranty Services’ (LGY) Real Estate Owned and Portfolio Servicing Contract (RPSC) is the contract vehicle that enables the servicing of loans (approximately 6,000 loans) and to manage Real-Estate Owned (REO) property (approximately 7,000 properties). This contract covers all fifty (50) States, territories and possessions, the District of Columbia, the Commonwealth of Puerto Rico and the Commonwealth of the Northern Mariana Islands.

Purpose This Quality Assurance Surveillance Plan (QASP) provides a systematic method to monitor Contractor performance. This QASP describes:

1. What performance measures will be monitored;

2. How monitoring will be conducted;

3. Who will conduct the monitoring; and

4. How monitoring efforts and results will be documented.

This QASP is a “living document” and the Government may review and revise it on a regular basis; however, the Government shall notify the Contractor of any changes. Copies of the original QASP and revisions will be provided to the Contractor and Government officials responsible for surveillance activities.

Performance Management Approach The Performance Work Statement (PWS) sets forth “what” service or quality level is required, as opposed to “how” the Contractor should perform the work (i.e., results, not compliance). This QASP will define the performance management approach taken by VA to monitor the Contractor’s performance to ensure the expected outcomes or performance objectives communicated in the PWS are achieved. Performance management rests on developing a capability to review and analyze information generated through performance assessment. The ability to make decisions based on the analysis of performance data is the cornerstone of performance management. This analysis yields information that indicates whether or not expected outcomes for the project are being achieved by the Contractor.

Performance management represents a significant shift from the more traditional Quality Assurance (QA) concepts in several ways. Performance management focuses on assessing whether outcomes are being achieved and to what extent. This approach migrates away from scrutiny of compliance with the processes and practices used to achieve the outcome. A performance-based approach enables the Contractor to play a large role in how the work is performed, as long as the proposed processes are within the stated constraints. Required processes are those required by law (Federal, state, and local) and compelling business situations, such as safety and health. A “results” focus provides the Contractor flexibility to continuously improve and innovate over the course of the order as long as the critical outcomes expected are being achieved and/or the desired performance levels are being met.

Performance Management Strategy The Contractor shall be responsible for the quality of all work performed. The Contractor measures that quality through the Contractor’s own Quality Control Plan (QCP). QCP shall describe work output, and therefore includes all work performed under this order regardless of whether the work is performed by Contractor employees or by subcontractors. The Contractor’s QCP shall set forth the procedures for self-inspecting the quality, timeliness, responsiveness, customer satisfaction and other performance requirements in the PWS. The Contractor shall implement a performance management system with processes to assess and report its performance to the designated Government representative.

The Government representative(s) will monitor performance by the Contractor to determine how the Contractor is performing against communicated performance objectives. The Contractor shall be responsible for making required changes in processes and practices to ensure performance is managed effectively.

Government Roles and Responsibilities The following personnel will oversee and coordinate surveillance activities. Contracting Officer (CO): The CO shall ensure performance of all necessary actions for effective contracting, ensure compliance with the order terms and shall safeguard the interests of the United States in the contractual relationship. The CO shall also ensure that the Contractor receives impartial, fair, and equitable treatment under this order. The CO is ultimately responsible for the final determination of the adequacy of the Contractor’s performance. Contracting Officer’s Technical Representative (COR): The COR is responsible for technical administration of the order and shall ensure proper Government surveillance of the Contractor’s performance. The COR will keep a Quality Assurance (QA) file. The COR is not empowered to make any contractual commitments or to authorize any contractual changes on the Government’s behalf. Assigned CORs:

· Sharon Hill

· R. Colin Deaso

· Scott Hiatt Contractor Representatives Program Manager: To be identified at award Other Contractor Personnel: To be identified at award; if any (name and title) Performance Standards Performance standards define acceptable performance. The Government performs surveillance to determine if the Contractor exceeds, meets, or does not meet these standards.

The Performance Metrics for Deliverables and Performance Measures are outlined in PWS Section 5. The schedule of deliverables is outlined in PWS Attachment C. The Government shall utilize QASP Attachment 1, Performance Requirements Summary Table (PRST), in monitoring Contractor performance and shall compare Contractor performance to the Acceptable Quality Level (AQL).

Methods of QA Surveillance Various methods exist to monitor performance. The COR or Authorized Designee will use the surveillance methods listed in Attachment 1, PRST, for the administration of this QASP.

Acceptable Quality Levels Metrics and methods are designed to determine if performance exceeds, meets, or does not meet a given standard and AQL.

The AQLs for Contractor performance are included in Attachment 1, PRST, and are structured to allow the Contractor to manage how the work is performed.

Incentives Given the mission-critical nature of this project, Contractor performance under this contract is being incentivized. Attachment 1, PRST, presents the performance and incentive/disincentive criteria for this contract. These criteria will be used by the Government to determine Contractor incentive/disincentive eligibility for the assessment period. Incentive/disincentive eligibility will be evaluated quarterly and will be based on findings discussed during the Monthly Performance Assessment Meetings including Unacceptable Performance situations, if any.

Performance

a. Monthly Performance Assessment Meetings The COR or Authorized Designee will meet with the Contractor monthly to assess performance and to support determination of Contractor incentive eligibility. These assessments will be based on findings documented by the Government on Quality Assurance Monitoring Forms (Attachment 2) and evaluation of/Contractor responses to Unacceptable Performance situations, if any.

b. Acceptable Performance The Government will document acceptable performance on the Quality Assurance Monitoring Form, Attachment 2. Any report may become a part of the supporting documentation for any contractual action. The Government will prepare, at a minimum, one (1) Quality Assurance Monitoring Form per month for each task shown in Attachment 1, PRST.

c. Unacceptable Performance When unacceptable performance occurs, the COR or Authorized Designee will inform the Contractor. This will always be in writing although when circumstances necessitate immediate verbal communication, that communication will be followed in writing. The COR or Authorized Designee will document the discussion and place it in the COR file. When the COR or Authorized Designee determines formal written communication is required, the COR will prepare a Contract Discrepancy Report (CDR) and present it to the Contractor’s Program Manager.

The Contractor shall acknowledge receipt of the CDR in writing. The CDR will state how long after receipt the Contractor has to take corrective action. The CDR will also specify if the Contractor is required to prepare a corrective action plan to document how the Contractor shall correct the unacceptable performance and avoid a recurrence. The Government will review the Contractor’s corrective action plan to determine acceptability. Any CDRs may become a part of the supporting documentation for any contractual action deemed necessary by the CO.

Frequency of Measurement During order performance, the COR or Authorized Designee will periodically analyze whether the negotiated frequency of surveillance, as presented in Attachment 1, PRST, is appropriate for the work being performed.

PERFORMANCE REQUIREMENTS SUMMARY TABLE

Annual incentives and disincentives are capped at:

Base Period: There will be no incentives, disincentives during the base period for REO or Portfolio Servicing. Option Period 1: $2.7 million for total contract, $1.6 million for REO and $1.1 million for Portfolio Servicing; Option Period 2: $2.9 million for total contract, $1.7 million for REO and $1.2 million for Portfolio Servicing; Option Period 3: $3.1 million for total contract, $1.8 million for REO and $1.3 million for Portfolio Servicing; Option Period 4: $3.3 million for total contract, $1.9 million for REO and $1.4 million for Portfolio Servicing; Option Period 5: $3.5 million for total contact, $2 million for REO and $1.5 for Portfolio Servicing; Option Period 6: $3.7 million for total contract, $2.1 million for REO and $1.6 million for Portfolio Servicing; Option Period 7: $3.9 million for total contract, $2.2 million for REO and $1.7 million for Portfolio Servicing; Option Period 8: $4.1 million for total contract, $2.3 million for REO and $1.8 for Portfolio Servicing; Option Period 9: $4.3 million for total contract, $2.4 for REO and $1.9 million for Portfolio Servicing; Option Period Option Period 10: $2.5 million for total contract, $1.4 for REO and $1.1 for Portfolio Servicing.

Incentive dollars are equally divided across quarters. Incentive dollars not earned in a quarter are no longer available. VA will reassess the incentive/disincentive measures annually and may adjust them based on performance data. VA will begin assessing performance for incentive and disincentives six (6) months after contract award.

For the performance criteria:

· Performance below the unsatisfactory levels will be subject to disincentives.

· Below expected performance will be documented in contract performance.

· Exceptional performance will be incentivized.

Performance Criteria

Incentive

Disincentive

5.1 Program & Project Management

5.1.1 Program Management

5.1.2 Project Management

100% inspection of plan and observance of execution

100% adherence to the PWS requirements

100% adherence to the PWS requirements

Performance Criteria

Disincentive

5.3 General

Requirements Random inspections and exception-based reporting

100% adherence to the PWS

5.4 REO Property Management & Marketing

5.4.1Obtaining&Securing Property 5.4.2 Acquiring Title Obtaining possession Marketing& Selling Property Random inspection

100%

5.5 Portfolio Loan Servicing

Servicing Standards Hierarchy

5.5.1 Boarding

Non-Default Servicing Default Servicing

5.5.2 Foreclosures Loan

Termination Random inspection

100%

Performance Criteria

Disincentive

5.5.7 LoanSale Assistance

5.5.8 Loan Accounting

100%

100%

100%

Performance Criteria

Disincentive

Decrease 60+ delinquency Rate Quarterly COR review

The expected performance for the Decrease the 60+ Delinquency Rate will be a 4% band that shall be reevaluated by VA on an annual basis, prior to the beginning of every option

Files are complete and accurate

Note: For the Base Period, this is assessed at the end of the Period of Performance, and quarterly Less than 50%of modifications or repayment plans have remained

Repayment plans

Performance Criteria

Disincentive

have remained current for 12 months

(ROS) =

Average Net Sales Proceeds for all properties in a quarter (/) Average Initial Listing Price set by the Contractor. Averaged over all properties sold within the quarter.

The average is not a cumulative average of the three (3) monthly averages ROS is 75 or less

quarterly incentive budget 30% of REO quarterly incentive budget

Performance Criteria

Disincentive

quarterly incentive budget 20% of REO

A Pass/ fail inspection, with any failure counted as an error for that property.

· Safety Hazards Errors: Missing steps;

· Collapsing decks, porches, railings, floors, and sub floors; and

· Unsecured pools and spas.

Risk of Immediate Deterioration Errors:

Standing water.

Performance Criteria

Disincentive

A Pass/ fail inspection, with any failure counted as an error for that property.

Maintain in clean, safe and sanitary condition:

-trash & debris

- yard maintenance

- environmental issues

- mold or mildew

- POC signs

quarterly incentive budget 20% of REO quarterly incentive budget

Aged Inventory = % of properties at the end of the quarter which have been in the VA inventory 9 months or more from date of Assignment to the original Contractor.

Inventory is over 270 days Less than 8% of REO inventory is over 270 days 10% of REO quarterly incentive budget 10% of REO quarterly incentive budget

For each property in the inventory, as of the end of the

VA REO

Property has been in inventory for 175 days or more

inventory for 165 days

VA REO

property has been in inventory for 106 days or less 10% of REO quarterly incentive budget 10% of REO

Performance Criteria

Disincentive

quarter calculate:

The number of days from date of assignment to the original Contractor (/) Total REO properties

(Properties under contract, properties in redemption periods etc. are included.)

Based on the percent of properties to which VA gains access

properties have unrestricted access for VA field inspections More than 93% of REO properties have unrestricted access for VA field inspections 10% of REO quarterly incentive budget 10% of REO

Performance Criteria

Disincentive

Material

Weakness

=$100,000

Per incident/

Per year

A Material Weakness is defined

Financial as a significant eficiency, or

Audit Report

Significant

Combination of significant

Related to

Deficiency deficiencies, that results in more contractor

= $50,000 than a remote likelihood that a performance

Per incident/

Material misstatement of the for LGY per

Per year

Financial statements, or other finding, per year.

significant financial reports, may

Note: Total occur and not be detected within penalties a timely period by employees in

For a clean the normal course of performing

Audit report their assigned functions.

Will be capped

At $250,000

A significant deficiency is a

Per year control deficiency, or combination

Of control deficiencies, that

Adversely affects the entity’s

Ability to initiate, authorize, record, process, or report

Financial data reliably in

Accordance with generally accepted accounting principles

(GAAP) such that there is more than a remote likelihood that a

Performance Criteria

Disincentive

Misstatement of the entity’s financial statements, that is more than inconsequential, will not be prevented or detected by the entity’s internal control.

Note: VA has received no material weaknesses and 2 significant deficiencies since 2000 (for functions included in this solicitation). Actual penalties may be reduced at VA's sole discretion.

Review of schedule and identify exceptions

$25,000 per quarter