SOLICITATION NOTICE
R -- Evaluation of OTS's Net Portfolio Value (NPV) Model
- Notice Date
- 8/3/2005
- Notice Type
- Solicitation Notice
- NAICS
- 541611
— Administrative Management and General Management Consulting Services
- Contracting Office
- Department of the Treasury, Office of Thrift Supervision (OTS), Procurement and Administrative Services, 1700 G Street, N.W., 3rd Floor, Washington, DC, 20552
- ZIP Code
- 20552
- Solicitation Number
- NPV08200501
- Response Due
- 8/31/2005
- Archive Date
- 9/15/2005
- Description
- This is a combined synopsis/solicitation for commercial items prepared in accordance with FRA Subpart 12.6, as supplemented with additional information included in this notice. This announcement constitutes the only solicitation; proposals are being requested and a written solicitation WILL NOT be issued. This solicitation documents and incorporates provisions and clauses that are in effect through Federal Acquisition Circular 05-04. The NAICS Code is 541611. The small business size standard is $6,000,000. This is a Firm Fixed Price contract for a period of four (4) months from the date of contract award. INTRODUCTION: The Office of Thrift Supervision (OTS) is seeking to hire a Contractor to evaluate the valuation routines currently used in its Net Portfolio Value (NPV) Model for the following instruments: fixed-rate single-family, first mortgage loans and securities, adjustable-rate single-family, first mortgage loans and securities, mortgage loan servicing rights, mortgage servicing done by others, mortgage-related escrow deposits, and mortgage-related commitments (the ?subject instruments?.) The NPV Model is a comprehensive interest rate risk model that was developed by OTS in 1991 to monitor the interest rate exposures of thrift institutions. It was subsequently upgraded in 1993 to provide more precise valuations of selected financial instruments, including adjustable-rate mortgages and financial derivatives. The NPV Model consists of approximately 250 Fortran 77 programs and a small number of SAS programs that are run on an Alpha server. OTS is currently in the process of porting these programs to Fortran 90 and PC SAS for use in a Windows environment. The NPV Model uses two cash flow-based techniques to value financial instruments: a static discounted cash flow approach and an option-based pricing approach based on Monte Carlo simulation. In addition, a version of the Black-Scholes model (Black (1976)) is used to value certain financial derivatives, such as interest rate caps, floors, and swaptions. The NPV Model conducts a type of scenario analysis known as stress testing on a quarterly basis to measure the sensitivity of thrifts? balance sheets to different interest rate shocks. At the end of each quarter, approximately 850 thrift institutions are required to report to OTS the outstanding balances of assets, liabilities, and off-balance sheet contracts held in their portfolios. These data, along with the maturities, coupon rates, and re-pricing frequencies for the various financial instruments, are reported on Schedule CMR (Consolidated Maturity and Rate). In order to keep the reporting burden at a minimum, the data on Schedule CMR are reported at an aggregated level. The information reported on Schedule CMR is used to produce an institution-specific Interest Rate Risk Exposure Report. This report is made available to each institution on a confidential basis, and is also used by OTS to assess the overall quality and effectiveness of an institution?s interest rate risk management process. In its current configuration, the NPV Model consists of a ?front-end? and a ?back-end? process. The front-end is where the quarter-end market data are collected and processed for use by the back-end in producing Interest Rate Risk Exposure Reports for individual thrifts. One important set of outputs generated by the front-end are price tables that are used to value the subject instruments. SCOPE OF WORK: The Contractor will conduct a zero-based review of the current valuation methodology for the subject instruments. The deliverable product will be a comprehensive report that contains an overall assessment of OTS?s data collection and pricing process and includes specific findings and recommendations. A draft of the report shall be submitted to OTS for review and comments ten (10) days prior to submitting the final version. Among the issues that the report should address are: -valuation accuracy for the subject instruments due to the current level of aggregation for the data reported on Schedule CMR; - the inclusion of other data relating to fixed-rate and adjustable-rate single-family mortgage loans, securities, and other mortgage-related instruments that should be reported on Schedule CMR; - whether additional financial instruments should be reported on Schedule CMR and valued by the NPV Model, such as interest-only, jumbo and sub prime mortgages; - the optimal levels of data aggregation for Schedule CMR; - interest rate indices that should be added to the pricing routines for adjustable-rate mortgage loans and securities; - the appropriateness of the NPV Model?s current two-factor interest rate process, single-family mortgage prepayment models and Monte Carlo simulation routines; - the feasibility of using CUSIP numbers to value mortgage-related securities (such as Collateralized Mortgage Obligations, IOs, and POs) for approximately 850 OTS-regulated thrifts; and the feasibility of replacing the price-table approach with one that relies on dynamic or ?on-the-fly? calculations in the back-end of the NPV Model. As part of the report, the Contractor will be required to provide a prototype data collection form based on its recommendations. This form should be in a format acceptable to both the Contractor and OTS (e.g., Excel) and should focus on the data needed to value the subject financial instruments. It should be noted that this form is not intended to replace Schedule CMR. In making recommendations regarding a new data collection process for the subject instruments, the Contractor should be aware of OTS?s desire not to increase the reporting burden on the thrift industry. As such, OTS is willing to accept a certain degree of valuation difference in exchange for a simplified and non-burdensome data collection process. In connection with this project, OTS will provide the Contractor with an on-site demonstration of how the NPV Model currently works, and may, upon request, provide the Contractor access to NPV Model source code on an as needed basis. The recommendations in the Contractor?s report should address whether and by what means OTS should enhance or replace the current valuation process for the subject instruments. More specifically, the report should address whether the current in-house approach should be enhanced, or if a risk management platform (tool or system) should be purchased from a third-party. Approximate cost estimates for each approach should be provided in the report. A copy of the manual describing the NPV Model and reporting instructions for Schedule CMR may be accessed on the OTS web site at http://www.ots.treas.gov./ . The total time anticipated for this project is four (4) months from the award date. BIDDING INFORMATION: Prospective bidders should pay particular attention to Chapter Five of the NPV Model manual, which provides a detailed description of the approach used to produce the front-end price tables used in valuing the mortgage-related instruments discussed above. In addition, Bidders should also be familiar with Schedule CMR and the Electronic Filing Software (EFS) used by thrifts to file their CMR data to OTS. OTS expects the following of the successful Contractor: an in-depth understanding of the NPV Model and its process for valuing fixed-rate and adjustable-rate single-family mortgage loans, securities, and other mortgage-related instruments using the option-adjusted approach; an in-depth understanding of the residential mortgage market in the United States; a recognized industry leader in both financial modeling and residential mortgage prepayment modeling; and must have a demonstrated track record of working with U.S. regulated financial institutions. The anticipated maximum overall cost of this project will not exceed $100,000. The provisions of FAR 52.212-1, Instruction to Offerors-Commercial (Jan 2005), applies to this acquisition. FAR 52.212-2, Evaluation-Commercial Items (Jan 2005) also apply, with the evaluation based on Factor 1- Past Performance and References; Factor 2 ? Prior Experience; and Factor 3 ? Price. Award will be made to the offeror whose proposal represents the best overall value. FAR 212-3, Offeror Representation and Certifications ? Commercial Items (Jan 2005) shall be complied with through the on-line Reps & Certs process. FAR 212-4, Contract Terms and Conditions ? Commercial Items (Oct 2003), is also applicable. Plus FAR 52.212-5, Contract Terms and Conditions Required to Implement Statutes or Executive Orders ? Commercial Items (Jan 2005), applies. Offerors must comply with FAR 52.204-7, Central Contractor Registration. INSTRUCTIONS TO OFFERORS: Factor 1 ? Past Performance and References-provide at least three (3) clients and their point-of-contact, contract number, dollar value for similar project over the past three (3) years; Factor 2 ? Prior Experience-provide information/documentation to reflect the firm?s experience and ability to perform services in the above Scope of Work; and Factor 3 ? Price-you should submit your best price since contract award could be made based on initial proposals. Please submit four (4) copies of your proposal referencing solicitation NPV08200501, which should be separated into two parts ?1 Technical consisting of Factors 1 and 2 above, and, 2 Price with all applicable pricing information. Proposals are due by 3:00PM local time on August 29, 2005. Submit to the attention of Douglas Mason, Contracting Officer, Office of Thrift Supervision, Procurement Management, 1700 G Street, NW, Washington, DC 200552. NOTE: All questions must be submitted to the Contracting Officer not later than August 31, 2005. You can fax questions only to the attention of Mr. Mason at (202) 906-5648. Any amendments to this combined synopsis/solicitation will be posted to the FEDBIZOPPS website, www.fedbizopps.gov/.
- Place of Performance
- Address: Washington, DC
- Zip Code: 20552
- Country: USA
- Zip Code: 20552
- Record
- SN00861721-W 20050805/050803212738 (fbodaily.com)
- Source
-
FedBizOpps.gov Link to This Notice
(may not be valid after Archive Date)
| FSG Index | This Issue's Index | Today's FBO Daily Index Page |