D -- Modification of the Credit Risk Assessment Framework & Support for the Railroad Rehabilitation and Improvement Financing (RRIF) Program

BACKGROUND: The Transportation Equity Act for the 21st Century established a new program of credit assistance, the Railroad Rehabilitation and Improvement Financing (RRIF) Program. Under this Program, loans and loan guarantees are available to acquire, improve or rehabilitate intermodal or rail equipment or facilities, including track, components of track, bridges, yards, buildings and shops, to refinance existing debt incurred for the previous purposes, and to develop or establish new intermodal or railroad facilities. Eligible applicants include states, local governments, government sponsored authorities, and corporations, Amtrak and freight railroads. There is a statutory maximum amount of outstanding unpaid principal at any point in time of $35 billion. Of this, $7 billion is reserved for projects primarily benefiting shortline and regional railroads. The Credit Reform Act of 1990 requires that funds be available to cover the subsidy cost before a direct loan or loan guarantee can be approved by any Federal agency under any program. Generally, these costs are covered by appropriations from Congress. However, unlike other federal credit programs, the RRIF program's enabling legislation provides that such subsidy cost can be paid from appropriations, a - credit risk premium paid by the borrow (CRP) or any combination of the two. Since the RRIF program has not had any appropriations, all the loans previously approved and all that will be approved in the foreseeable future have required, and will require, the payment of a CRP. The calculation of the CRP depends on many factors, including the financial condition of the applicant, the amount of collateral offered to secure the loan and the financial strength of the applicant. In order to calculate the CRP for each loan application, the Federal Railroad Administration (FRA) has previously developed, through a contractor, a Credit Risk Assessment Framework (CRAF). The CRAF, which has been approved by OMB, relies on the latest default experience available for corporations in the private sector. Thus, the CRAF must be updated on a yearly basis. The CRAF is also used to comply with OMB's requirement to reestimate subsidy costs for each loan on a yearly basis. The CRAF model has been used primarily to calculate the credit risk premium of corporate applicants from the private sector. REQUIREMENT: The purpose of this acquisition is to procure services to maintain the CRAF and modify it as necessary, to assist FRA in generating yearly reestimates of subsidy costs for each outstanding loan in the portfolio, and to provide support for the FRA's RRIF Program in connection with the CRAF model. The specific requirements are to (1) annually analyze the historical default experience of at least 1000 companies with credit ratings from nationally recognized statistical rating agencies; apply various statistical methods, such as logistic regression analysis, to explain differences in the ratings of the 1,000 companies analyzed; update the CRAF based on the results of the analysis of the historical default analysis and FRA's own default experience for loans in the RRIF portfolio; and calculate reestimates of loans that have been made and provide supporting spreadsheets showing the calculations, and annual summary memorandum explaining the re-estimate methodology; (2) assure that the CRAF is consistent with the Credit Subsidy Calculator required to be used by the Office of Management and Budget (OMB), recommend procedures for calculating subsidy reestimates required by OMB and modify the CRAF to calculate the reestimates, assure the error-free operation of the updated CRAF; modify the CRAF to run on new versions of Excel as needed, revise the supporting documentation to explain the modifications and update the User's Guide to be consistent with the modifications and to incorporate the subsidy reestimates procedures, and work with RRIF and FRA IT staff to resolve any CRAF technical issues and make any changes to the CRAF model as requested or as necessary; (3) modify the CRAF to accommodate public sector applicants whose financial qualifications vary significantly from private corporations; explore the possibility of incorporating FRA's historical default experience into the CRAF default data base to more accurately reflect the default potential for RRIF applicants and provide a recommendation to the FRA, and explore the possibility of converting the CRAF model into a secure, Internet-based application enabling designated users to access the system using a browser, login ID and password and provide a recommendation to the FRA; and (4) Develop and provide training to the FRA on an as needed basis during the life of the contract. The FRA anticipates that training may be required for up to 10 new and existing FRA staff when significant updates and enhancements are made to the CRAF. Training shall be provided at the FRA's site in Washington, D.C. The successful offeror shall have a minimum of five (5) years experience in implementing requirements of the Federal Credit Reform Act of 1990. This includes calculating subsidy estimates and reestimates in accordance with OMB requirements, including the current OMB Credit Subsidy Calculator. The FRA intends to award a 5-year firm-fixed-priced contract, consisting of a base year and four 1-year option periods. This acquisition is being conducted in accordance with FAR Part 12.6 - Streamlined Procedures for Evaluation and Solication for Commercial Items, and FAR Part 5.203(a) and (b). The FRA intends to post the solicitation for this requirement by July 21, 2006 on FedBizOps.