Ervin & Associates, Inc.

B-275693 Mar 17, 1997 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights DIGEST Contention that agency improperly conducted a limited competition for equity monitoring services is denied where the record shows that agency reasonably determined that only a limited number of sources were capable of meeting the agency's urgent requirements and the urgency was not the result of a lack of advance planning. Allegation that agency improperly failed to solicit the protester in limited competition for equity monitoring services is denied where there is no evidence in the record that prior to issuing the solicitation. Contracting officials either knew or should have known of the protester's capability or interest in performing the urgently required services. Ervin argues that HUD's need to limit the competition was the result of a lack of advance planning by the agency. View Decision Matter of: Ervin & Associates, Inc. File: B-275693 Date: March 17, 1997 DIGEST Attorneys DECISION Ervin & Associates, Inc. protests the decision by the Department of Housing and Urban Development (HUD) to limit the number of sources solicited under request for proposals (RFP) No. DU100C000018545 for equity monitoring services for the Federal Housing Administration (FHA). Ervin argues that HUD's need to limit the competition was the result of a lack of advance planning by the agency. The protester also maintains that since HUD knew of its capability to provide these services, HUD improperly failed to solicit the firm. We deny the protest. BACKGROUND The purpose of the procurement is to obtain an equity monitoring contractor for the FHA's "Class B Trust Certificate" interests. The Trust is the result of a sale of what is referred to in the record as "partially-assisted" multifamily mortgages. This is a structured financing arrangement whereby HUD transferred 157 mortgages with an unpaid principal balance of approximately $850 million to the Trust. The mortgages are formerly FHA-insured, fully amortizing mortgages at varying levels of delinquency, secured by first liens on multifamily properties. At the conclusion of the transaction, HUD retains a minimum of 30 percent of the beneficial interest in the Trust. The agency states that in May 1995, FHA proposed a structured transaction to dispose of the portfolio of the mortgages involved here, modeled after a program conducted by the Resolution Trust Corporation (RTC), referred to as the RTC's "N-Series program." The record indicates that HUD had finalized its decision to proceed with the transfer of the mortgages to the Trust by the fall of 1995. At about the same time, HUD also determined that HUD's equity interest as a result of the transfer of the mortgages to the Trust would require monitoring. In January 1996, HUD set mid-April as the date by which the partially-assisted note sale and, thus, the transfer of the mortgages to the Trust, would be completed. Since the RTC had recently undergone a similar process with the N-Series program, and since HUD had no prior experience with this type of transaction, HUD turned to the RTC for guidance with the transaction and for assistance in identifying the responsibilities and functions of an equity monitor. During February, HUD met with RTC program managers and with one of the RTC's current equity monitors to discuss the functions and responsibilities of an equity monitor. HUD states that as a result of those meetings, it became evident that there were only a limited number of sources experienced and qualified in providing equity monitoring services. In March 1996, HUD determined that the equity monitor would have to be in place by the time the mortgage transfers were completed in order to ensure that HUD's equity interest was protected. In other words, the agency's goal was to complete the mortgage transfers concurrent with the award of a contract for the equity monitoring services. According to HUD, however, the agency would require 6-12 months to complete a procurement for an equity monitor using full and open competitive procedures. With the mortgage transfers rescheduled to be completed in June, less than 3 months away, the agency decided that a competitive procurement would not be feasible and explored several other approaches to meeting its requirement. In view of the RTC's recent experience with its "N-Series" program, HUD decided to request that the RTC identify firms experienced in equity monitoring work. In response, the RTC identified nine firms that it believed capable of providing equity monitoring services. Seven of those firms had recently submitted technically acceptable proposals in response to an unrestricted solicitation for equity monitoring services for the RTC. The other two firms identified by the RTC had performed several equity monitoring contracts for the RTC.