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

BACKGROUND: The Railroad Rehabilitation and Improvement Financing (RRIF) Program was established by the Transportation Equity Act for the 21st Century (TEA-21), and amended by the Safe Accountable, Flexible and Efficient Transportation Equity Act a Legacy for Users (SAFETEA-LU). Under this program the FRA Administrator is authorized to provide direct loans and loan guarantees up to $35.0 billion. Up to $7.0 billion is reserved for projects benefiting freight railroads other than Class l carriers. Eligible applicants include railroads, state and local governments, government-sponsored authorities and corporations, joint ventures that include at least one railroad and limited option freight shippers who intend to construct a new rail connection. The funding may be used to: acquire, improve or rehabilitate intermodal or rail equipment or facilities, including track, components of track, bridges, yards, buildings and shops; refinance outstanding debt incurred for these purposes listed; and develop or establish new intermodal or railroad facilities. All federal financial assistance programs must pay for the cost to the government of providing the financial assistance. In most cases this is done with appropriations from Congress. Since the RRIF Program does not currently have an appropriation, this cost must be borne by the applicant, or another entity on behalf of the applicant, through the payment of the Credit Risk Premium (CRP) that must be paid for each loan before it can be disbursed. The calculation of the CRP depends on many factors, including the financial condition (future and projected) of the applicant and the amount of collateral offered to secure the loan. In order to calculate the CRP for each loan application, the Federal Railroad Administration (FRA) has previously developed, through a contractor, the Railroad Credit Risk Assessment (RCRA) System. The RCRA, which has been approved by the Office of Management and Budget (OMB), relies on the latest default credit rating experience available for corporations in the private sector. Thus, the RCRA must be updated on an annual basis. The RCRA is also used to comply with OMB's requirement to re-estimate subsidy costs for each loan on a yearly basis. REQUIREMENT: The purpose of this acquisition is to procure services to maintain the RCRA System and modify it as necessary, to assist FRA in generating yearly re-estimates of subsidy costs for each outstanding loan in the portfolio, and to provide support for the FRA's RRIF Program in connection with the RCRA System. The specific requirements are to: (1)(a) On an annual basis analyze the historical default experience of at least 1000 companies with credit ratings from nationally recognized statistical rating agencies. (b) Apply various statistical methods, such as logistic regression analysis, to explain differences in the ratings of the 1,000 companies analyzed. (c) Update the RCRA based on the results of the historical default analysis and FRA's own default experience for loans in the RRIF portfolio. (d) Calculate re-estimates of loans that have been made and provide supporting spreadsheets showing the calculations. (e) Provide a summary memorandum explaining the re-estimate methodology. (f) Assure that the RCRA is consistent with the Credit Subsidy Calculator required to be used by the Office of Management and Budget (OMB). (g) Recommend procedures for calculating subsidy re-estimates required by OMB and modify the RCRA to calculate the re-estimates. (2)(a) Assure the error-free operation of the updated RCRA. (3)(a) Modify the RCRA to run on new versions of Excel as needed. (b) 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 re-estimates procedures. (4)(a) Work with the RRIF and FRA IT staff to resolve any RCRA technical issues and make any changes to the RCRA model as requested or as necessary. (5)(a) Recommend ways to modify/update/recreate the RCRA to accommodate public sector applicants whose financial qualifications vary significantly from private corporations. (6) 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 6 new and existing FRA staff when significant updates and enhancements are made to the RCRA. Training shall be provided at the FRA's site in Washington, D.C. (7) Provide ongoing support for deal specific calculations outside of the model as needed. This support could include sophisticated modeling analysis, participation on internal government calls with FRA, OST and OMB and overall documentation of specific transaction modeling efforts. 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 re-estimates 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 Solicitation for Commercial Items, and FAR Part 5.203(a) and (b). The FRA intends to post the solicitation for this requirement by June 13, 2011 on FedBizOps.