Sources Sought Notice – R– Budget & Insurance Model Internal Control
Notice Type: Sources Sought Notice
Posted Date:
Office Address:
Subject: R-- Budget & Insurance Model Internal Control
Classification Code: R - Professional, administrative, and management support services
Solicitation Number: VA101V17N0146
Contact:
Description:
REQUEST FOR INFORMATION (RFI)INTRODUCTION
THIS IS NOT A SOLICITATION. The
BACKGROUND
The Government has a requirement for a Contractor to provide model risk management tasks on the VBA mortgage loan budget models and associated documentation. The model risk tasks shall be consistent with risk management principles from applicable supervisory guidance and industry practice; for example, Federal Financial Accounting and Audit Technical Release (TR) 6. The Contractor shall the tasks to resolve audit findings by the
NAICS: 541611 -
QUESTIONS AND CRITICAL CONSIDERATIONS FOR INTERESTED CONTRACTORS
Responses are solely treated as information for the Government to consider. Direct or Indirect costs incurred in response to this
It is requested that all vendors interested in participating in this effort note their interest by responding to the areas identified in the Company Details", and "Capabilities Statement , sections below.
COMPANY DETAILS
The page limit for responses to this section is 1 page.
Provide company point(s) of contact information (name, email address, address, telephone, and fax numbers).
Identify if your company are any of the following business concern statuses (include all that apply): Small Business (SB);
Provide contracting vehicles your company holds, such as GSA schedules.
CAPABILITIES STATEMENT
The page limit for responses to this section is 5 pages.
Provide an overview of your firm s capabilities to fulfill the requirements of the SOW, to include organizational and staff capability and experience.
Provide a brief narrative summary of your technical approach to meet
Provide an examples of development and use of predictive and actuarial models; econometric analyses including maximum likelihood estimation, simulation modeling, database analysis.
Describe your experience in combining and assimilating multiple data sources, including
Provide up to two (2) contracts that your company has performed for the same or similar requirement and of comparable size, complexity and scope. Describe scope and similarities and differences as pertinent. Identify tools that were part of your solution, emphasizing econometric, actuarial, and simulation tools. Please be specific and provide a complete reference to include: contract number, contract title, description, period of performance, and award amount; as well as identify whether you performed as a prime contractor, sub-contractor, teaming partner, or as a project manager.------
RESPONSE SUBMISSION
Please submit responses via email to [email protected] by
**DRAFT ** STATEMENT OF WORK
GENERAL INFORMATION
Title of Project: Budget & Insurance Model Internal Control
Scope of Work: The Contractor shall provide all resources necessary to accomplish the deliverables described in the Statement of Work (SOW).
Housing
The Contractor shall perform model risk management tasks on
Insurance
The Contractor shall assess the amount of the
The Contractor, their personnel, and their subcontractors shall be subject to the Federal laws, regulations, standards, and VA Directives and Handbooks regarding information and information system security as delineated in this contract. The C&A requirements do not apply, and Security Accreditation Package is not required.
Background:
Housing
The contract work required is in response to the audit findings by the
1) Lack of a defined and documented process for engaging and involving senior leadership outside of the Budget office for critical decisions and oversight over various modeling activities, including; model development, risk assessment, assumption development and review, and model validation.
2) No evidence of management reviews of analysis of the model s assumptions and outputs to include an actual estimate analysis.
3) Models consistently show significant differences between the model forecasts and actual program performance that lead to concerns about the reliability of the model estimates.
VBA needs the contract work completed to resolve the audit findings by
The VBA budget models objective is calculating annual estimates of federal loan subsidies for VBA housing program mortgages. The estimates are prepared through a joint effort between the budget, finance, and program offices at VBA. The mortgage programs issue federal loan guarantees (private sector is the lender) and direct loans (government is the lender) for the
The housing loans rely on four loan budget financial models for subsidy estimation: Guaranteed Loans, Direct Vendee Loans, Direct Acquired Loans, and
Financial reporting-loan liabilities and subsidy allowances
Budgeting-federal subsidies
Legislative proposal scoring-costs and benefits
Financing account interest-
All the financial models are implemented as spreadsheet models with macros (Visual Basic for Applications, VBA, codes). The spreadsheet models consist of multiple linked spreadsheets that display their four components: an administrative component, which shows headings, purpose, and macros; an information input component, which delivers assumptions and data to the model; a processing component, which transforms inputs into estimates; and a reporting component, which translates the estimates into useful business information. The components are tightly integrated with the workings of the government present value calculator tool and 10-year financial plan spreadsheets or database (MAX). The calculator tool and MAX database are requirements that are maintained by the
Based on the above-mentioned VBA mortgage types, the financial model cash activities or categories are primarily as follows:
Loan default claims and property expenses
Property sales proceeds, funding fees
Loan disbursements
Loan unpaid principal balances
Borrower payments
Loan sales proceeds
Other transactions with the
The existing models and their user guides and program and finance documents provide detailed information on these activities. The models key input assumptions and data are VBA historical cash flows, various interest rates, home price growth rates, loan production, and loan age. The sources of the input data are VBA, OMB, and somewhat the
Moreover, the choice, testing and safekeeping of the mathematics, statistics, and computer code in the models have evolved over 25 years. Similarly, the choice of inputs, calibration of the model, and related documentation has evolved (as evidenced by a model change spreadsheet). These choices represent the intellectual labor and assumptions of a few key people (government employees and external consultants) to create the existing budget model internal control structure.
VBA external consultants performed an independent review of the models in 2012, and the government made subsequent model changes. The models were redesigned in 2007 with model audit in 2009 by independent consultants for risk management. Some related documents on model development, implementation, use, validation, governance and control are available. These documents and relevant supervisory guidance should be reviewed during model risk management work to improve model internal control structure.
Insurance
The VGLI Reserve acts as a mechanism to pre-fund future premium deficiencies. There are two major drivers of the VGLI reserve. First, when a conversion privilege such as VGLI exists, one can reasonably expect that a disproportionate number of those in poor health will exercise it. This adverse selection by insureds results in mortality experience that is higher than standard. Consequently, VGLI premiums are not completely sufficient to cover the cost of claims and expenses during the early years after issue. Second, the capping of VGLI premiums at the age 75 rate essentially changes the renewable term coverage to level premium term for life coverage. This premium rate will not completely cover the future cost of claims and expenses.
The VGLI Reserve is calculated as the present value of future claims and expenses less the present value of future premiums. This calculation is performed in an Excel spreadsheet model developed by Prudential and modified by VA Insurance Service Actuarial Staff. The reserve assumptions include historical mortality and lapse data for the ages and durations for which there is experience, combined with estimates for the ages and durations for which no or insufficient data exists. An interest rate assumption based on the expected long-term rate of return for program investments is utilized. SGLI/VGLI program reserves are invested in Prudential s
As of
4. Performance Period: Base year plus four (4) option years depending on the needs of the Government. Tasks will be completed within 120 days from date of award. The Government s standard workweek and hours of operation are Monday thru Friday,
5. Type of Contract: Firm Fixed Price.
6. Place of Performance: Work may be performed at the Contractor s office. At the Contractor s discretion and if deemed necessary to facilitate the progress of the project, time and material work may also be performed at the Government s site:
VA Regional Office &
B. CONTRACT AWARD MEETING
The Contractor shall not commence performance on the tasks in this SOW until the COR has conducted a post award conference at the VBA,
C. GENERAL REQUIREMENTS
1. For every task, the contractor shall identify in writing all necessary subtasks associated costs by task, and together with associated sub milestone dates. The contractor's subtask structure shall be reflected in the technical proposal and detailed Project Management Plan (PMP).
2. All written deliverables will be phrased in layperson language. Statistical and other technical terminology will not be used without providing a glossary of terms.
3. Where a written milestone deliverable is required in draft form, the VBA will complete their review of the draft deliverable within 10 calendar days from date of receipt. The contractor shall have 10 calendar days to deliver the final deliverable from date of receipt of the Government s comments.
D. SPECIFIC MANDATORY TASKS AND ASSOCIATED DELIVERABLES
Description of Tasks and Associated Deliverables: The contractor shall provide the specific deliverables described below within the performance period stated in Section A.4 of this SOW to resolve the audit findings.
Task One: The Contractor shall provide a detailed PMP and briefing for the VBA project team, which presents the contractor's plan for completing the tasks/contract work and resolving the audit findings. The contractor's plan shall be responsive to this SOW and describe, in further detail, the approach to be used for each aspect of the task order as defined in the technical proposal. At a minimum, the PMP shall include the risk, quality and technical management approach, work breakdown structure (WBS), detailed schedule, cost requirements, and proposed personnel. The Contractor shall keep the PMP up to date throughout the period of performance.
Deliverable One: A detailed PMP and briefing given at VBA to complete contract work and resolve the audit findings.
Task Two: The Contractor shall perform validation of VBA loan budget financial models and associated documentation based on applicable supervisory guidance and industry practice for model risk management; i.e.
Deliverable Two: The contractor shall produce a detailed model validation report with appropriate proposed changes that is commensurate with VBA s risk exposure, business activities, and complexity and extent of its model use, including total fixed-price costs and benefits of the model validation report and changes.
Task Three: The Contractor shall make appropriate and practical changes to the models to include any relevant new data and techniques and update the models user guides while retaining current model capability and simplicity as appropriate with automatic integration with the government calculator (CSC2) and 10-year financial planning tools. Any upgraded model documentation should include results from testing of the upgraded model adequacy to resolve the audit findings based on TR6.
Deliverable Three: The Contractor shall produce final upgraded models and user guides and files, with results from the model validation and audit findings and application of TR6, that are commensurate with VBA s risk exposure, business activities, and complexity and extent of its model use, including total fixed-price costs and benefits of the model and user guide updates. The deliverable should include validation of the adjusted model CSC2 inputs and output, resolution of the audit findings, and preservation of the model capabilities to support existing financial and budgetary reporting.
Task Four: The Contractor shall update existing or develop new documentation on model development, implementation, use, and validation based on applicable supervisory guidance, industry experience, and laws and regulations (e.g., OMB Circular No. A-123), and audit findings. The existing models, user guides, and supporting budgetary documents contain information on model development, implementation and use. The updated internal control documentation shall encourage effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations, and resolve the audit findings.
Deliverable Four: The contractor shall produce a final updated model internal control documentation, standard operating procedures (SOPs), based on Circular No. A-123 including total fixed-price costs and benefits of model development, implementation, use, and validation to resolve the audit findings.
Task Five: Insurance-The Contractor shall gain thorough knowledge and understanding of the financial operations of the SGLI/VGLI programs through the information and materials provided by VA Insurance Service Actuarial Staff. The Contractor shall become familiar with the current VGLI Reserve Model developed by Prudential and VA Insurance Service Actuarial Staff. In assessing the actuarial liability of the VGLI program, the Contractor should use this model or one that performs the same functions and provides comparable results.
Deliverable Five: Insurance-Written certification that the Contractor is fully knowledgeable regarding the SGLI/VGLI programs and the workings of the VGLI Reserve Model and ready to assess the amount of the VGLI Reserve in order to provide Deliverable Five.
Task Six: Insurance-The contractor shall perform an independent assessment of the amount of the VGLI Reserve as of
Deliverable Six: Insurance- The contractor shall deliver a detailed independent assessment report regarding the amount of the VGLI Reserve liability that addresses whether the amount of the VGLI Reserve can be lowered subject to the parameters and conditions specified in the Scope of Work.
Task Seven: The Contractor shall participate in appropriate agency meetings and discussions in 2017 at times to be determined to resolve the audit findings.
Deliverable Seven: Attend in person and/or by phone agency s meetings and discussions on model validation, development, implementation, use, governance, and control to ensure resolution of the audit findings.
E. SCHEDULE FOR DELIVERABLES
1. The Contractor shall complete the Delivery Date column in Attachment A for each deliverable specified.
2. Unless otherwise specified, the number of draft copies and the number of final copies shall be the same.
3. If for any reason the scheduled time for a deliverable cannot be met, the contractor is required to explain why (include the original deliverable due date) in writing to the Contracting Officer s Representative (COR), including a firm commitment of when the work shall be completed. This notice to the COR shall cite the reasons for the delay, and the impact on the overall project. The CO will then review the facts and issue a response in accordance with applicable regulations.
F. CHANGES TO STATEMENT OF WORK
Any changes to this SOW shall be authorized and approved only through written correspondence from the CO. A copy of each change will be kept in a project folder along with all other products of the project. Costs incurred by the contractor through the actions of parties other than the CO shall be borne by the contractor.
G. REPORTING REQUIREMENTS
1. The Contractor shall provide the COR with monthly written progress reports (original plus two copies). These are due to the COR by the second workday following the end of each calendar month throughout the project's duration.
2. The progress report shall cover all work completed during the preceding month and will present the work to be accomplished during the subsequent week. This report shall also identify any problems that arose and a statement explaining how the problem was resolved. This report will also identify any problems that have arisen but have not been completely resolved with an explanation.
H. GOVERNMENT PROVIDED EQUIPMENT/INFORMATION
The Government will provide access to the models, program documentation, and office space for two Contractor employees, including a telephone and computer.
I. CONTRACTOR EXPERIENCE REQUIREMENTS KEY PERSONNEL R-'sUM--
The Contractor shall provide experienced and relevant technical knowledge with financial modeling skills, audit and internal controls, risk management, Microsoft Excel with Visual Basic for Applications (VBA), Word and Access, standard computer (statistical) packages, all relating to budgeting and financial accounting for federal guaranteed and direct loan housing programs to ensure resolution of the audit findings. Minimum experience: A Certified Public Accountant (CPA) preferred with 10 years of experience. The Contractor shall provide qualified key personnel that are able to eliminate the audit findings. Familiarity is necessary with federal financial requirements and computer systems capabilities and development. The Contractor shall possess excellent writing skills to revise model documentation and a familiarity with applicable regulatory requirements and industry standards is desirable but not required. Independent consultant group or a Contractor for risk management or a certified public accountant auditor is preferred. The Contractor agrees that the key personnel shall not be removed, diverted, or replaced from work without approval of the COR.
Any personnel the contractor offers as substitutes shall have the ability and qualifications equal to or better than the key personnel that is being replaced. Requests to substitute personnel shall be approved by the COR. All requests for approval of substitutions in personnel shall be submitted to the COR within 30 calendar days prior to making any change in key personnel. The request shall be written and provide a detailed explanation of the circumstances necessitating the proposed substitution. The contractor shall submit a complete r-'sum-- for the proposed substitute, any changes to the rate specified in the order (as applicable) and any other information requested by the COR needed to approve or disapprove the proposed substitution. The COR will evaluate such requests and promptly notify the Contractor of approval or disapproval thereof in writing.
J. SCHEDULE OF DELIVERABLES
See Appendix A
K. SECURITY
Information System Security
The Contractor shall ensure adequate LAN/
Security Training
1. All Contractor and subcontractor personnel requiring access to
Sign and acknowledge understanding of and responsibilities for compliance with the National Rules of Behavior related to access to
Successfully complete VA Information Security Awareness training and annual refresher training as required.
Successfully complete VA Privacy Awareness training and annual refresher training as required.
Successfully complete any additional Information Security or Privacy training as required for
2. The Contractor shall provide to the COR a copy of the training certificates for each applicable employee within one week of the initiation of the contract and annually thereafter, as required. These online courses are located at www.tms.va.gov. To self-enroll, click the Create New User button on the red bar and complete the assigned training. The COR will provide the contractor with the appropriate information to complete self-enrollment. Technical issues with TMS should be directed to the TMS help desk at [email protected] or 1.866.496.0463.
3. Failure to complete this mandatory training within the timeframe required will be grounds for suspension or termination of all physical and/or electronic access privileges and removal from work on the contract until such time as the training is completed. All contractor employees and subcontractors under this contract or order are required to complete the
Due to the threat of data breach, compromise or loss of information that resides on either
Contractor Personnel Security
All Contractor employees who require access to the
The investigative history for contractor personnel working under this contract must be maintained in the databases of either the
1. Background Investigation
All Contractors, subcontractors, and third-party servicers and associates working with
Link/URL: https://www.fbo.gov/spg/VA/WDCVARO372/WDCVARO372/VA101V17N0146/listing.html
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