TREASURY SEEKS ASSET MANAGERS UNDER ECONOMIC BAILOUT

Washington DC — As part of the Emergency Economic Stabilization Act (EESA) and the Troubled Assets Relief Program (TARP) passed by Congress last week, the government will be moving quickly to seek asset managers to oversee the takeover of troubled securities and mortgages.

These asset managers will be considered financial agents of the United States rather than contractors, with the ultimate responsibility of protecting the economic interests of the U.S.

The asset managers will be divided into two distinct categories.

Managers of securities will be in charge of Prime, Alt-A, and Sub-prime residential mortgage backed securities, commercial MBS, and MBS collateralized debt obligations.

Managers of mortgage whole loans will oversee residential first mortgages, home equity loans, second liens, and commercial mortgage loans.

The selection process will follow the same procedure for both types of asset managers and will be characterized by a three step process. During this review, financial institutions which respond to the Treasury Department’s notice of solicitation will be required to provide additional information about their expertise, as well as asset management strategies, risk management, and performance measurements.

Following this phase, the Treasury Department will do a final evaluation potentially based on an interview of representatives of the financial institution to determine their suitability.

Treasury will also be issuing separate notices of solicitation in order to accommodate small, minority-owned, and woman-owned businesses.

Their goal is ensuring that those businesses which do not meet the minimum qualifications for current assets under management are still able to participate in the program although they will do so as sub-managers within the portfolio.

Below are links where you can find more information about the guidelines and procedures for TARP.

Procurement Authorities and Procedures, http://www.treas.gov/press/releases/hp1179.htm

Interim Guidelines for Conflicts of Interest, http://www.treas.gov/press/releases/hp1180.htm

Process for Selecting Asset Managers Pursuant to the EESA, http://www.treas.gov/press/releases/reports/assetmanagers.pdf

Procurement Authorities and Procedures

Washington, DC– In implementing the Emergency Economic Stabilization Act of 2008, Treasury has available two mechanisms for engaging private-sector firms. These mechanisms are financial agent authority, and procurement under the Federal Acquisition Regulation. Treasury will make a determination on which of these authorities best applies on a case by case basis.

Financial Agent Authority

Treasury has long had the statutory authority to retain financial agents to provide services on its behalf. The Act broadens that authority to encompass all reasonable duties related to the Act that may be required and permits the retention of a broader class of financial institutions as agents. In general, financial agent authority will be used when a firm is needed to conduct transactions on Treasury’s behalf, for example where Treasury needs the services of an asset manager.

Selection of financial agents will occur through processes which will be posted on the Treasury website. Although the process may be tailored to a specific situation, typically Treasury prepares a notice to interested and qualified financial institutions, evaluates the response to that notice, and negotiates one or more financial agency arrangements.

Procurement Contracts under the Federal Acquisition Regulation

Treasury also may obtain supplies or services using a procurement contract under the Federal Acquisition Regulation (FAR). In general, the FAR requires the solicitation of offers from all interested sources. However, competition for procurements may be limited for various reasons, including in circumstances of unusual or compelling urgency. Certain procurements may be set aside for certain small businesses. Due to the paramount need for expeditious implementation of the Secretary’s authorities under the Act, Treasury anticipates that a number of contracts will be awarded through other than full and open competition, using the previously established FAR provisions applicable under conditions of unusual and compelling urgency. Information on contracts awarded by Treasury will be posted at www.fedbizopps.gov (Federal Business Opportunities website) and/or at https://www.fpds.gov (Federal Procurement Data System).

Additionally, the Act grants to the Secretary of the Treasury the authority, under certain specified conditions, to waive specific provisions of the FAR.

Where applicable, procurement opportunities will be posted at www.fedbizopps.gov. Businesses may submit capability statements to the Department’s Office of the Procurement Executive at ootpe@do.treas.gov.

For information on how small businesses can participate in Treasury contracting, contact Treasury’s Office of Small and Disadvantaged Business Utilization at TreasuryOSDBU@do.treas.gov.

Interim Guidelines for Conflicts of Interest

Washington, DC– Treasury issued the following interim guidelines for potential conflicts of interest related to the authorities granted under the Emergency Economic Stabilization Act of 2008:

These procedures outline the process for reviewing and addressing actual or potential conflicts of interest (COIs) among contractors performing services in conjunction with the Emergency Economic Stabilization Act of 2008 (EESA). Section 108 of the EESA requires Treasury to develop guidelines for addressing COIs as soon as practicable after enactment of the law. These procedures should be considered interim guidelines and will remain in effect until final guidelines are developed.

EESA contracts raise potential for “impaired objectivity” COIs. Under such COIs, the contractor’s judgment or objectivity may be impaired due to the fact that the substance of the contractor’s performance has the potential to affect other interests of the contractor. EESA contractors may also face potential COIs if they obtain access to sensitive, non-public information (belonging to Treasury or to third parties) while performing the contract. To address this latter type of COI, it may be necessary to restrict the disclosure of such information or to include restrictions on the dissemination of information within the contractor’s organization. Lastly, contractor employees are not always subject to the same ethical restrictions that are imposed by law on Federal Government employees. Therefore, EESA contracts may create a potential for personal COIs involving individual employees of a contractor.

Treasury officials should adhere to the following guidelines for addressing COIs arising with EESA contractors:

• Where appropriate, Treasury may obtain non-disclosure agreements and COI agreements in advance of supplying an offeror a solicitation.
• The solicitation should instruct prospective offerors that they must disclose any actual or potential COIs (including those associated with an affiliate, consultant, or subcontractor) which could arise from performance of the contract. The solicitation will indicate that, if actual or potential COIs are identified, the prospective offeror must submit a mitigation plan as part of its initial proposal. In some situations, Treasury may also desire to include provisions requiring that the prospective offeror identify personal COIs among employees who would be performing the work, and include measures in its mitigation plan for addressing such personal COIs.
• The solicitation should include an evaluation factor or criteria whereby Treasury will assess the likely effectiveness of the proposed COI mitigation plan.
• The solicitation will identify any minimum requirements or standards for the COI mitigation plan. For example, if Treasury requires that the mitigation plan will address certain specific issues, offerors should be so advised in the solicitation.
• If the contractor will owe a fiduciary duty to Treasury in performing the contract, the solicitation should include a statement to that effect. This provision will become part of the resulting contract.
• The solicitation should include non-disclosure provisions which, at a minimum, apply to the prime contractor. In some situations, Treasury may also desire to include provisions requiring that the prime contractor obtain comparable non-disclosure and/or COI agreements from subcontractors or individual employees.
• The solicitation should state that Treasury will oversee and enforce the proposed mitigation plan as part of the contract.
• The Treasury Senior Procurement Executive will review and approve all provisions related to COIs prior to issuance of the solicitation.
• The solicitation should require that mitigation plans be submitted with offerors’ initial proposals. Treasury’s evaluators, source selection personnel, and legal counsel will examine the proposed mitigation plans to determine the extent to which those plans provide sufficient protection against actual or potential COIs.
• The severity of a COI is necessarily dependent upon the circumstances of the case and the nature of the contractual action. Treasury personnel should not assume that a mitigation plan which is acceptable under one situation would also be acceptable under different circumstances.
• The contracting officer may negotiate the mitigation plan with the offeror, taking into account the type of procurement being conducted.
• Notwithstanding the submission of a mitigation plan, it is possible that contractor COIs may exist which cannot be effectively neutralized or mitigated. An offeror with an unacceptable mitigation plan will not be eligible for award unless conflicts are waived by the agency head or designee.
• It is possible that a COI may be waived by the agency head or a designee. Any request for such a waiver should first be coordinated with the Treasury Senior Procurement Executive.
• Upon award of the contract, the successful offeror’s mitigation plan will be formally incorporated into the contract, making the mitigation plan a contractually binding obligation.