Actuarial Review Services

SOURCES SOUGHT Actuarial Review Services THIS IS A SOURCES SOUGHT NOTICE ONLY. This is not a request for offers, quotes or proposals. This notice does not represent a commitment by the Government to issue a solicitation or award a contract. This is a market research tool only to determine the capability of potential sources. The Department of Housing and Urban Development (HUD) is issuing this sources sought synopsis as a means of conducting market research to identify parties having an interest in and the resources to support this requirement for Actuarial Review Services. The result of this market research will contribute to determining the method of procurement. The applicable North American Industry Classification System (NAICS) code assigned to this procurement is 524298 - All Other Insurance Related Activities and the Small Business Standard is $16.5 million. The Product Service Code (PSC) is R704 Auditing Services. There is no solicitation at this time. This request for capability information does not constitute a request for proposals; submission of any information in response to this market survey is purely voluntary; the government assumes no financial responsibility for any costs incurred. If your organization has the potential capacity to perform these contract services, please provide the following information: 1) organization name, address, email address, website address, telephone number, and size and type of ownership for the organization; 2) tailored capability statements addressing the particulars of this effort, with appropriate documentation supporting claims of organizational and staff capability; and 3) any GSA Schedule, Governmentwide Acquisition Contracts (GWAC), Multiple Award Contract (MAC) or Federal Supply Schedule (FSS) information the services may be perform. If significant subcontracting or teaming is anticipated in order to deliver technical capability, organizations should address the administrative and management structure of such arrangements. The government will evaluate market information to ascertain potential market capacity to 1) provide services consistent in scope and scale with those described in this notice and otherwise anticipated; 2) secure and apply the full range of corporate financial, human capital, and technical resources required to successfully perform similar requirements; 3) implement a successful project management plan that includes: compliance with program schedules; cost containment; meeting and tracking performance; hiring and retention of personnel and risk mitigation; and 4) provide services under a performance based service acquisition contract. Based on the responses to this sources sought notice/market research, this requirement may be set-aside for small businesses or procured through full and open competition, and multiple awards may be made. Telephone inquiries will not be accepted or acknowledged, and no feedback or evaluations will be provided to companies regarding their submissions. Background: The Secretary of HUD has a statutory obligation to obtain an independent annual actuarial study (studies) of the MMIF and to report to Congress annually on the financial status of the MMIF. The National Affordable Housing Act (NAHA) of 1990 established criteria for the actuarial soundness of the FHA Mutual Mortgage Insurance Fund (MMIF). Specifically, NAHA mandated that the Secretary of HUD retain capital to build a 2.0 percent minimum capital ratio by 2000 and maintain thereafter. The NAHA also required that the Secretary obtain an independent annual actuarial study of the MMIF, and to report to Congress annually on the financial status of the MMIF. Since 2009, HUD has divided this requirement into two separately produced actuarial studies for the major risk categories in MMIF: The Single-Family Forward Mortgage ("Forward") and the Home Equity Conversion Mortgage ("HECM") insurance programs. Each year HUD publishes the studies after the end of each Fiscal Year, in mid-November. The primary focus of the studies is on the economic capital of the active insured portfolios as of the end of each fiscal year, as defined by 12 USC 1711 (f)(4)(C): The term "economic net worth means the current cash available to the Fund, plus the net present value of all future cash inflows and outflows expected to result from the outstanding mortgages in the Fund. General Description of Work: The requirement's primary focus is to produce the FY22 thru FY26 Congressionally mandated Actuarial Review that results from the annual independent actuarial study of the Mutual Mortgage Insurance Fund, and to provide associated analyses that use the actuarial model to answer a variety of policy questions on the economic net worth of the active insured portfolios as of the end of each fiscal year, as defined by 12 USC 1711 (f)(4)(c): - the current cash available to the Fund, plus the net present value of all future cash inflows and outflows expected to result from the outstanding mortgages in the Fund. This requirement is for actuarial studies that should be analytical and independent from any influences by HUD or others that could distort or direct the results of these studies. The studies produced should be unbiased and accurate results on model development and execution of outputs. Specific Tasks 5.1 Research Design, Research Management Plan and Quality Control Plan Starting at the beginning of the base year, the Contractor shall, in conjunction with the COR and other HUD staff, design and plan a multi-year research and development effort to build and enhance the models underlying the annual studies for the purpose of improving the estimates of MMIF economic capital, and near-term cash flows. The Research Design and Research Management Plan shall address the various components and requirements of the studies, including obtaining data and milestones, and describes how the Contractor will manage the tasks. The Contractor shall: Work with the CO, COR, SME and other staff to understand the processes involved in conducting the required studies. Gain a firm understanding of MMIF programs and their evolution over time, including policy changes. Identify and prepare a list of items and information it needs from HUD and request the information via the COR. Update the Research Design and Research Management Plan as necessary. The initial Research Design shall include at least the following: Identification of necessary start-up tasks. Description of how the Contractor will gain expertise in the MMIF programs (including their history and their operations related to origination, endorsement, servicing, and asset recovery disposition). Formulation of an outline of the Studies: purpose, contents, requirements, and deliverables. The initial Research Management Plan shall include at least the following: Description of how the Contractor shall gain familiarity and facility with accessing and manipulating raw FHA single family data for Studies analyses. Definition of standards for sound loan performance and cash flow models to promote reliability and accuracy in the execution of automated data routines and algorithms. The Contractor shall develop a QCP that will: Ensure the Government receives the level of quality that is consistent with the requirements specified in this contract. Be sufficiently detailed to provide the Contractor's methodology for identifying and recruiting qualified personnel. Provide the Contractor's methodology for resolving problems identified by the Government during reviews conducted in accordance with its Quality Assurance Surveillance Plan (QASP). Provide the Contractor's methodology for establishing an internal feedback system for support personnel, and for resolving problems identified by that feedback system. Demonstrate and validate that the services or deliverables to be provided under the contract are completed with a level of quality that meets the minimum performance threshold established in the Government's QASP. Address Quality Management Approach, Quality Assurance, Quality Control and Quality Standards. 5.2 Initial Research and Research Methodology Plans The Department encourages the exploration of alternative and competing methodologies to ensure current best practices are followed each year in the pursuit of programmatic and underwriting insights, better statistical or theoretical validity, and improved forecasting ability. To develop estimates of economic capital of the Single-Family Forward portfolio, the current framework uses four primary modules: A claim-rate model to measure the sensitivity of insurance claims to loan characteristics and economic conditions. A prepayment-rate model to do the same for non-claim terminations. A loss-rate model to estimate the severity of net final losses from defaulted loans that result in insurance claims. A cash flow model that calculates periodic cash inflows and outflows from insurance activities using the first three models and various program terms and then discounts those cash flows to arrive at net present value calculations. To develop estimates of economic capital of the HECM portfolio the current framework uses four primary modules: Loan termination modules that estimate the likelihood of a loan terminating due to borrower mortality, mobility, refinance, and tax and insurance default. A recovery rate module that predicts the value net expenses of a loan or property at time of disposition. A cash flow model that translates loan terminations, loan assignments, and recoveries into periodic cash inflows and outflows, and then discounts those cash flows to arrive at net present value calculations. A cash draw-down predictive module. The claim, termination, prepayment, loss-rate, and recovery modules generally use regression-based statistical equations fit to FHA's historical loan performance data and economic experience. Historical tendencies and program assumptions are used when appropriate, according to existing precedent based on the last twenty years of Department-published actuarial Studies. Upon completion of the initial meetings, the Contractor shall produce a final, written Initial Research Plan which identifies major target dates for the base period and discusses additional research and development efforts that could be continued into the option periods if HUD exercises the options. In developing the Research Methodology Plan, the Contractor shall: Arrange discussions with HUD staff regarding the objectives for enhancing the models used in the studies and setting priorities for research. Include sections in their Research Plan that explain the Contractors plans to explore, redesign, and re-create specifications of model components for the purpose of improving both the long-run estimates of FHA's economic capital and short-run predictions of FHA net claim costs and cash flows Describe their proposed strategy for obtaining, combining, modelling, preparing, and presenting data in accordance with industry standards (MISMO, NIST, etc.) Include documentation of research efforts, statistical equations and modeling approaches, and integration of model components Provide outputs of claim, prepayment, and loss-severity rates for the forward loan portfolio in the MMIF and sub portfolios in specified formats, along with cash-flow summaries and other summary outputs Provide outputs of termination, claims, and recovery rates for the HECM portfolio in the MMIF and sub portfolios in specified formats, along with cash-flow summaries and other summary outputs Include all other model documentation developed 5.3 Production of Actuarial Studies The Contractor will produce Actuarial Studies for Single Family Forward and Reverse (HECM) mortgages. The Contractor shall: Produce written independent actuarial studies both for Single-Family Forward and HECM that provides actuarial central estimates of MMIF economic capital as of the end of the subject fiscal year and assesses HUD's estimates of economic capital. Draft copies of the Studies shall be made available to the COR for review and comments according to the following sample deadlines: First draft: October 1 (about six weeks before final) Provisional final draft: November 8th, Final draft on November 12th. Ensure that comments and edits from HUD staff shall be incorporated into the final draft by the Contractor before final publication. The Studies shall follow the template specified by the COR, with any changes requested by or approved by the COR. Ensure the Studies include: 1. Recommended adjustments to underwriting standards, program participation, or premiums. An evaluation of the quality control procedures and accuracy of information utilized in the process of underwriting loan guarantees A review of the risk characteristics of loans based not only on borrower information and performance, but on risks associated with loans originated or funded by various entities or financial institutions. These discussions may suggest topics and areas of FHA credit performance that warrant new research. Apply the final Forward actuarial model to the existing portfolio to produce conditional (and cumulative) claim, prepayment, and loss-given-default rates at various levels of aggregation across loans, and for individual policy years and policy year-quarter. Cash-flow summaries shall also be provided for major categories (e.g., premium revenues, claim expenses and recoveries or net loss due to claim, with affected loan counts and balances). The outputs shall be presented in a format agreed to by the COR and per defined deliverable dates. Apply the final actuarial HECM model to the HECM part of the MMIF portfolio to produce conditional termination rates, timing of assignment, and recovery rates and amounts, by policy year and budget/endorsement year cohort, and by sub-cohort levels defined by policy initiatives and other characteristics. The output deliverables shall be presented in formats specified by the COR and per defined deliverable dates. Promote transparency of the Studies assessments, by ensuring the Studies identify methodological vulnerabilities that may occur in its actuarial models or in HUD's analyses of economic capital. This discussion shall evaluate the scope and scale of such vulnerabilities in creating possible forecast risk and suggest possible lines of research in these areas. The Studies shall assess and comment upon HUD's own models that estimate economic capital for methodological vulnerabilities and compare HUD's methodologies with those in the Studies. Include historical data on changes in program terms as well as relevant loan and borrower characteristics (e.g., credit scores, loan-to-value ratios) by cohort and other sub-populations. Loan performance data (claim rates, prepayment rates, severity and recovery rates) both historical and projected shall be presented in the "finger-table formats (arrayed by cohort and policy years for different loan products). Use the most recent Presidents Budget economic assumptions as the baseline economic forecast for the Studies. However, in addition to the central single path economic forecast, the Studies shall test alternative economic forecasts for stress-testing and sensitivity analysis to estimate ranges of reasonableness. Comply with Federal Credit Reform Act discounting assumptions and procedures, to provide comparability to HUD estimates of economic capital. Use stochastic or Monte Carlo simulations of future economic conditions including for interest rates and house price appreciation. The objective of these requirements is to illustrate the sensitivity of forecasts to economic uncertainty and other forms of forecast error. Provide econometric appendices to the Studies that include variable specifications and statistical output from all regressions in the Studies. Individual estimation equations may not be combined for reporting. The Contractor shall also deliver a final Run-time version of the actuarial model when delivering the final Actuarial Studies package. 5.4 Replication Package The Contractor shall provide a replication package of the final models that includes: Model documentation Model code Input data Data dictionaries that describe variables and their specifications including formulae and decimal format Econometric estimations output Output data Output reports, including summary statistics Verification of the Replication Package's accuracy and compliance with Agile, Scrum, SAS and/or similar methods by which the Contractor created the Replication Package All data, information, modeling, analyses, and code must execute on HUD's computing environment. The COR will provide specifications for the HUD environment. Below are the characteristics of the (insert short description) requirements: Demonstrable knowledge in diverse areas of statistical and economic analysis of housing and mortgage market issues, healthcare care (private, Medicare, and Medicaid) insurance rates, developing sample design schemes, Federal credit analysis, such as; 1. Project management Financial transactions Federal government and Credit Program and private accounting, actuarial and auditing standards Financial analysis, actuarial and business intelligence methods, practices, and software Web-based applications Federal information technology security standards Mortgage lending to include borrower and loan characteristics, insurance endorsement, post-endorsement loan administration and servicing, forward and reverse mortgage cashflows, calculation and payment of mortgage insurance premiums, mortgage credit analysis, property analysis, loss-mitigation, forbearance, insurance claims including partial claims, assignment, and property disposition options Previous experience in reverse mortgages, partial, payments, pre-payments, loan modifications, forbearances, work-outs, foreclosure modeling, mortgage risk analysis. Working knowledge of all in the first two bullets. Ability to facilitate meetings in a "lead" capacity for groups of various sizes and scientific expertise. Skills in oral and written communication. Organized and deadline driven The tasks require a set of skill categories based on the following approximate breakdown: Account Executive Project Consultant Lead Senior Consultant Actuarial Analysis Reviewer Administrative Assistant Contemplated performance metrics: Performance Requirement Summary (PRS Statements Standards/AQLs Incentive/Remedy 5.1 Research Design, Standard: The Contractor shall The Contractors invoice Research deliver the Draft Research Design would be deducted at 3% Management Plan and Research Management Plan no deduction from the and Quality Control later than 21 days after contract associated monthly CLIN Plan award for the Base Year of the price. All errors shall be contract and by January 2nd of each revised within the given Option Year. The Contractor shall deadlines at no additional deliver the Final Research Design and Research Management Plan 10 days after receipt of comments. cost to the Government. AQL: 1 business day deviation from standard. Standard: The Contractor shall provide a Quality Control Plan (QCP) within 30 days of contract award and modifications, as needed, within 10 days of identified changes. AQL: 5 business days deviation from standard. Statements Standards/AQLs Incentive/Remedy 5.2 Initial Research and Standard: The Contractor shall The Contractors invoice Research formulate an Initial Research Plan would be deducted at 3% Methodology Plans within 21 days after award of the deduction from the base year for the initial plan of associated monthly CLIN action (base year only) and price. All errors shall be completion of the studies. revised within the given AQL: 10 business days deadlines at no additional deviation from standard. Standard: The Contractor shall provide a Draft Research cost to the Government. Methodology Plan within 21 days after Contract Award for the Base Year of the contract and by January 2nd for each Option Year. The Contractor shall deliver the Final Research Methodology Plan 10 days after receipt of comments. AQL: 10 business days deviation from standard. Statements Standards/AQLs Incentive/Remedy 5.3 Actuarial Studies a) Standard: Deliver Actuarial The Contractors invoice Studies to the COR per the agreed- would be deducted at 3% upon schedule for each year of deduction from the performance. The following associated monthly CLIN outlines rough milestone dates price which will be each year: assessed each day of non- No Later Than July 31: Outlines of compliance. All errors Draft Studies shall be revised within No Later Than October 1: First the given deadlines at no Draft of Studies using more recent additional cost to the available actual data Government. No Later Than October 15: HUD comments provided No Later Than October 31: Second Draft Studies using September 30 data No Later Than November 6: HUD Comments Provided No Later Than November 8: Provisional Final Studies No Later Than November 11: FHA Comments Provided No Later Than November 12: Final Studies due (electronic copies) No Later Than November 20: 50 bound copies of Studies due No Later Than December 1: Replication Package due Some of these dates can fluctuate depending on outside factors such as delays in delivery of data needed from a third party. If that occurs, the affected delivery dates for that performance year will be negotiated accordingly. AQL: No deviation from standard. b) Standard: Deliver Final Runtime version of Actuarial Model along with the delivery of the Final Actuarial Studies. AQL: No deviation from standard. Statements Standards/AQLs Incentive/Remedy 5.4 Replication Package Standard: The Contractor shall The Contractors invoice provide the Actuarial Studies would be deducted at 3% Replication Package that complies deduction from the with the constraints listed in this associated monthly CLIN PWS no later than December 1st of price. All errors shall be each year of performance. revised within the given AQL: No deviation from deadlines at no additional standard. Standard: The Contractor shall provide verification of the cost to the Government. Replication Package's accuracy and compliance with Agile, Scrum, SAS and/or similar methods by which the Contractor created the Replication Package with delivery of the Replication Package. AQL: No deviation from 10 standard. Contemplated report requirements: See Specific Tasks and Performance Requirement Summary above. Contemplated place of performance: This service will be performed at the Contractor's facility. Contract Type - The Government anticipates awarding a Firm Fixed Price contract. Contractual History - Below is the contractual history for the requirement. Contract Number Contract Type & Type of Competition Company Period of Performance Total Contract Value DU100R-12-C-09 FFP - Competitive 8a Award IFE 09/2012 - 01/2015 $12,556,929.30 DU100R-13-C-01 FFP - 8a Direct Award Summit Consulting, LLC 01/2015 - 01/2016 $999,900.00 DU100R-16-C-01 FFP - 8a Direct Award Summit Consulting, LLC 02-2016 - 06/2016 $650,962.35 HHSP233201750044A FFP - IAA - Direct Award Pinnacle Actuarial Resources 04/2017- 02/2018 $1,474,190.00 HHSP233201850046A FFP - IAA - Direct Award Pinnacle Actuarial Resources 05/2018 - 03/2019 $1,601,765.00 86615719C000003 FFP - Sole Source Award Pinnacle Actuarial Resources 08/2019 - 08/2020 $1,676,810.00 86615720C000004 FFP - Sole Source Award Pinnacle Actuarial Resources 06/2020 - 04/2021 $1,717,750.00 86615721C00006 FFP-Sole Source Award Pinnacle Actuarial Resources 04/2021 - 12/2021 $1,828,412.73 Submission Instructions: Interested parties who consider themselves qualified to perform the above-listed services are invited to submit a response to this Sources Sought Notice by January 21, 2022. All responses under this Sources Sought Notice must be emailed to Gabriel Wright at Gabriel.G.Wright@hud.gov. Additional information on the required services is listed below. If you have any questions concerning this opportunity, please contact: Gabriel Wright at Gabriel.G.Wright@hud.gov.