Statistical Sampling and Extrapolation for Single Family Post Claim Review

THIS IS AN UPDATE TO FIX THE SIZE STANDARD AND RESPONSE DATE. 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. This is a SOURCES SOUGHT NOTICE to determine the availability and capability of qualified small businesses including certified 8(a), Small Disadvantaged, HUB Zone firms; Veteran and Service-disabled Veteran-owned Small Businesses, Women-owned Small Businesses and Economically Disadvantaged Women-owned Small Business (EDWOSB) to develop the statistical sampling methodology used to perform post claim reviews by selecting the sample cases, and to extrapolate the sample results to the populations to determine the dollar amount of claims paid which were not documented to FHA standards. The NAICS Code(s) are: 541211--Offices of Certified Public Accountants, business and 541219 --Other Accounting Services, and the Small Business Standard is $20.5 Million based on NAICS code 541211 and $20.5 Million based on NAICS code 541219, PSC Code R704 -Auditing Services, for Statistical Sampling and Extrapolation for Single Family Post Claim Review. The Department of Housing and Urban Development (HUD) provides mortgage insurance protection to HUD-approved lending institutions (mortgagees). Under the terms of the contract of insurance between HUD and the mortgagee, the mortgagee may act to terminate the agreement upon the mortgagor's default of the mortgage loan contract. When all requirements of the National Housing Act, Code of Federal Regulations, and applicable instructions (Mortgagee Letters, Handbooks, Single Family Claims instructions, etc.) required by the contract of insurance have been performed, the mortgagee is entitled to receive single family mortgage insurance benefits from HUD. These insurance benefits are obtained by the mortgagee's submission of a claim application, Single Family Application for Insurance Benefits, Form HUD-27011, to the Departments Single Family Claims Branch. The SFPID requires support to select the audit sample using the commonly accepted sampling methodology, and extrapolate the sample results to calculate to the population of claims paid to determine the dollar number of claims paid which were not documented to FHAs standards. Develop and make available and maintain a statistically valid and generally accepted sampling methodology appropriate to its purpose and coded securely into Excel for efficient use by non-statisticians in a user-friendly manner. The purpose of the sampling methodology is to perform substantive audit tests of populations of claims paid by selected loan servicers and to extrapolate the sample results to the populations to determine the dollar number of claims paid which were not documented to FHA standards, and ultimately protect the FHA Insurance Fund. In addition, create, update and improve the data collection and reporting tool that holds the historical claim data and review findings to generate the risk level management reports. Perform trend analysis and risk analysis to assist the SFPID regarding current or proposed payment threshold Single Family Claims Payment System (A43C). BACKGROUND HUD pays claims based on the Form HUD-27011 submitted by mortgagees and the certification that the claims are true and correct. The instructions for preparing and submitting the Form HUD-27011 are included in Handbook 4330.4 REV-1, FHA Single Family Insurance Claims, and subsequent updates via Mortgagee Letters. Additional claim guidance can be found in Handbook 4000.1. Mortgagees are required to maintain a review file with complete records to support all claim submissions as noted in 24 CFR. The automated claims system, A43-C, is used by HUD to ensure that a claim submission passes the established control parameters and edits before generating a payment to the mortgagee. This process depends largely upon the accuracy and reliability of data submitted by FHA-approved mortgagees. In FY 2017, approximately 372, 267 claim transactions were paid, totaling over $17.5 billion. Most claims are processed and paid through A43-C without further intervention. However, if the claim does not pass the established control edits, the system will suspend the claim without generating a payment until the mortgagee corrects the claim data or provides supporting documentation. Certain mortgagee and/or data entry errors that the system cannot readily identify could result in incorrect claim payments. Since HUD pays claims automatically based on the mortgagee's certification, HUD reserves the right to perform post claim reviews on all claim files to ensure mortgagee integrity and accuracy, and to protect itself against over claimed amounts disbursed from the FHA Insurance Fund. Special Qualifications The tasks identified in this action require a high level of knowledge and expertise with statistical analysis, sample design, risk management, and litigation analytics. Senior Economist/Subject Matter Expert (SME) The SME must have an advanced degree in Economics and at a minimum of 5 years of experience in statistical sampling, extrapolation, risk assessment, and litigation analytics. Project Manager (PM) The PM must have a degree in Economics and at a minimum of 5 years of experience in statistical sampling, extrapolation, risk assessment, and litigation analytics. The PM shall be responsible for contract management, ensuring problem resolution, and client satisfaction. Specific Tasks Statistical Sampling and Extrapolation Adopt a commonly accepted statistical audit sampling methodology to perform substantive tests on the population of single family claims paid in the prior 3 years by selected servicers. The audit sampling methodology will estimate the proportion of claims which are not adequately documented to FHAs standards. The sampling methodology shall: (1) comply with all applicable regulations, Mortgagee Letters and other authoritative standards as may exist from time to time; (2) be well documented; (3) enable users to set sample design parameters at either 95% or 90% for reliability and 5% or 10% for precision; (4) select from each population a valid sample of claims to be tested; and (5) extrapolate sample results to the population of claims paid to determine the dollar amount of claims paid which were not documented to FHAs standards. Record and preserve all sample selections and extrapolation results on media acceptable to FHA. Demonstrate the proposed statistical sampling methodology to be used along with its reliability and precision. It is prudent that the calculation is beyond reproach before HUD employs it. The calculation must be retested on a regular basis to maintain the public trust. HUD reserves the right to verify any or all extrapolations. The Contractor shall assist HUD by providing explanation of the sampling methodology or extrapolation to the servicers upon requests on an on-going basis within the scope: 1) provide technical support by making recommendations for modifications to the current sampling methodology because of policy changes to the Single-Family Mortgage Insurance Program; and 2) assist HUD by providing information relating to questioned procedures regarding statistical sampling or extrapolation (e.g., administrative reviews, congressional inquiries, litigation, etc.). Perform the statistical sampling selection and extrapolation of sample results for post claim reviews for approximately 20 servicers annually. The actual number of servicers/reviews to be performed will be contingent on the number of claims filed and the number of appeals submitted by mortgagees. HUD cannot predict which companies will file claims, how many claims will be filed, or how many appeals will be submitted during any given period. Statistical Sampling Perform the statistical sampling selection for selected servicers provided by HUD. Provide the mortgagee audit report for each selected servicer to the Contractor prior to conducting the review. Provide the sample selection within 5 business days from receipt of such document. The sample selection is required for initial review only. The exceptions will be lenders where the findings amounts are above the maximum threshold HUD considers acceptable. In the case of exceptions, HUD reserves the right to require an expanded review by reviewing an expanded list of cases statistically selected for review. Recommend expansion of a post claim review if the analysis of the claims in the original sample shows that the findings of overclaimed amounts and compliance discrepancies exceeds HUDs threshold for tolerance or specified precision level based on average dollar amount per case or the frequency of review findings. The recommendation must include the additional samples that need to be reviewed to meet the acceptable precision level. Extrapolation of Sample Results Perform the extrapolation of sample results to the population of claims paid to determine the dollar number of claims paid which were not documented to FHAs standards for each selected servicer. The Cornwall provide the sample results to the Contractor for each review report. The Contractor shall provide the result of extrapolation within 5 business days from receipt of such documents. Most reviews consist of three reports: an initial review report, a follow-up review report, and a final review report. The expanded reviews consist of five reports: a preliminary report, an initial report, two follow-up reports and a final report. Data Collection and Reporting ToolCreate, update and improve the data collection and reporting tool that generates audit worksheets, creates audit reports, retains all audit findings, and generates management reports, such as trend and risk analysis reports. The reports should be generated without additional user inputs. Trend Analysis and Risk Analysis At a minimum, the following information shall be provided in the management reports. o Top 5 highest audit findings by dollar amount o Top 5 highest audit findings by frequency / occurrence o Average recovery rate by sample level and universe level o High risk servicers that exceed average recovery rate o Average dollar of audit finding error per case o Comparison of mortgagee performance against average dollar o Mortgagee performance progress from previous reviews o Mortgagee performance progress from previous reports o Improper payment detection through predictive review results o Recommendations on risk assessment and management Provide the recommendations, as appropriate, regarding current or proposed payment threshold for Single Family Claims Payment System (A43C) based on the recurring audit findings or high suspended edits on specific expenses prior to the claim payments. Provide a trend analysis of different type of expenses such as Items 110, 111, 112, 113 and 130 of Part B, Form HUD-27011 annually. Court Appeals Must be able to explain and defend its methodology to lenders audited and must be able to defend the extrapolated monetary findings in any report against legal challenges. Shall assist HUD by providing information or supporting documentation if a post claim review appeal results in a legal case. Must be able to perform Independent Verification and Validation (V&V) of third party's statistical designs and defend its methodology, as appropriate, in a legal case. Please describe your experience in litigation and the cases you were involved in referencing statistical sampling and extrapolation. The contractor must describe the technical capabilities, level of security clearances, other critical knowledge, skills, abilities and experiences of the key personnel. Within the capability statement, describe your understanding of the requirements by better defining the specific labor categories necessary to meet the desired requirement. Capability statements must address at least two prior contracts that reflect similar type and scope of work and the number of concurrent staff resources available. Contract place of performance may be performed at the contractor facility located in the Washington DC Metro area. The anticipated period of performance is a base period through 12 months plus 4 option periods. Interested small business offerors are encouraged to respond to this notice. However, be advised that generic capability statements are not sufficient for effective evaluation of respondents' capacity and capability to perform the specific work as required. Response must directly demonstrate the company's capability, experience, and/or ability to marshal resources to effectively and efficiently perform each of the tasks described above in sufficient level of detail to allow a definitive response; and evidence that the contractor can satisfy the minimum requirements listed above in compliance with FAR 52.219-14 ("Limitations of Subcontracting"). Failure to definitively address each of these tasks will result in a finding that respondent lacks capability to perform the work. Responses to this notice shall be limited to ten pages, and must include: 1. Company name, mailing address, e-mail address, telephone and FAX numbers, website address (if available), and the name, telephone number, and e-mail address of a point of contact having the authority and knowledge to clarify responses with Government representatives. 2. Name, title, telephone number, and e-mail addresses of individuals who can verify the demonstrated capabilities identified in the responses. 3. Business size for NAICS XXXX (size standard $ or number of employees) and status, if qualified as an 8(a) firm (must be certified by SBA), Small Disadvantaged Business (must be certified by SBA), Woman-Owned Small Business, HUB Zone firm (must be certified by SBA), and/or Service-Disabled Veteran-Owned Small Business (must be listed in the Verbize Vendor Information Pages). 4. DUNS number, CAGE Code, Tax Identification Number, and company structure (Corporation, LLC, partnership, joint venture, etc.). Companies also must be registered in the Central Contractor Registry (CCR, at www.ccr.gov) to be considered as potential sources. 5. Identification of the firm's GSA Schedule contract(s) by Schedule number and contract number and SINs that are applicable to this potential requirement are also requested. 6. If the company has a Government approved accounting system, please identify the agency that approved the system. Please submit copies of any documentation such as letters or certificates to indicate the firm's status (see item #3, above) Teaming arrangements are acceptable, and the information required above on the company responding to this announcement, should also be provided for each entity expected to be teammates of the respondent for performance of this work. To the maximum extent possible, please submit non-proprietary information. Any proprietary information submitted should be identified as such and will be properly protected from disclosure. This notice is for planning purposes only, and does not constitute an Invitation for Bids, a Request for Proposals, a Solicitation, and a Request for Quotes, or an indication the Government will contract for the items contained in this announcement. This request is not to be construed as a commitment on the part of the Government to award a contract, nor does the Government intend to pay for any information submitted because of this request. The Government will not reimburse respondents for any cost associated with submission of the information being requested or reimburse expenses incurred to interested parties for responses to this announcement. Responses to this announcement will not be returned, nor there any ensuing discussions or debriefings of any responses. However, information obtained because of this announcement may be reflected in the subsequent solicitation, and HUD, OCPO may contact one or more respondents for clarifications and to enhance the Government's understanding. This announcement is Government market research, and may result in revisions in both its requirements and its acquisition strategy based on industry responses. RESPONDENTS MUST SUBMIT CAPABILITY STATEMENT VIA E-MAIL to Rachel N Wilson at Rachel.N.Wilson@HUD.gov no later than February 6, 2018 at 12:00 PM Eastern Standard Time for consideration.