[Federal Register: October 2, 2000 (Volume 65, Number 191)]
[Notices]
[Page 58755-58757]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02oc00-52]
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DEPARTMENT OF EDUCATION
Office of Postsecondary Education
Notice Seeking Bonding Authority for the Historically Black
College and University Capital Financing Program
SUMMARY: The U.S. Department of Education is seeking proposals from
businesses interested in applying to be selected by the Secretary to
serve as the ``designated bonding authority'' (DBA) under the
Historically Black College and University Capital Financing Program.
This notice describes the duties of the DBA, the selection criteria,
and the application process.
DATES: Notice of intent to submit proposals must be received by October
16, 2000. Proposals must be received by November 1, 2000.
FOR FURTHER INFORMATION CONTACT: Mr. Jesse Carter, U.S. Department of
Education, Institutional Development and Undergraduate Education
Service, Institutional Receivables Team, L'Enfant Plaza Station, P.O.
Box 23471, Washington, DC 20026-3471, (202) 502-7777. If you use a
telecommunications device for the deaf (TDD), you may call the Federal
Information Relay Service (FIRS) at 1-800-877-8339.
Individuals with disabilities may obtain this document in an
alternative format (e.g., Braille, large print, audiotape, or computer
diskette) on request to the contact person in the preceding paragraph.
SUPPLEMENTARY INFORMATION: The Historically Black College and
University (HBCU) Capital Financing Program, authorized under title
III, part D of the Higher Education Act of 1965, as amended (HEA) (20
U.S.C. 1066 et seq.) facilitates low-cost capital financing for HBCUs
to enable them to continue and expand their educational mission and
enhance their significant role in American higher education. Under this
program, the U.S. Department of Education provides financial insurance
to guarantee up to $375,000,000 in loans and interest to qualifying
HBCUs for specified kinds of capital projects. To date, all bonds
issued have been purchased by the Federal Financing Bank of the U.S.
Treasury.
The Office of the Assistant Secretary for Postsecondary Education
is now seeking proposals from any private for-profit organization or
entity wishing to serve as the DBA for this program. The DBA issues
taxable construction bonds, and plays a central role in administering
and executing the program. The DBA works with prospective borrowers to
develop loan applications. With the approval of the Secretary, the DBA
makes loans after determining, based on a credit review, that there is
a reasonable expectation the loans will be repaid according to their
terms. The DBA charges a rate of interest adequate to service the bond
interest rate, as well as pay various items including fees for services
of the DBA, a Trustee, and other parties. Costs of issuance, however,
are not to exceed 2 percent of the principal amount of the proceeds of
the bonds. The DBA monitors and enforces the loan agreements, including
covenants and default provisions.
The DBA also has construction oversight responsibilities (including
approval of construction plans, oversight of construction progress, and
compliance with Federal and State building codes), and generally is the
focal point of information for the HBCU Capital Financing Program. The
DBA and other participants in the program are paid only by the
operation of the program, and the Federal Government is not responsible
for any of their fees.
Security for the bonds issued by the DBA includes investments,
program loans, an escrow account funded with 5 percent of loan
proceeds, and an insurance agreement executed by the Secretary of
Education or his delegate which will, subject to section 343(c)(1) of
the HEA, 20 U.S.C. 1066b(c)(1), provide the full faith and credit of
the United States to insure the payment of interest and principal on
the bonds.
Eligible borrowers under the program are limited to historically
black colleges and universities as defined in section 322(2) of the HEA
(20 U.S.C. 1061(2)).
The DBA selected by the Department will generally take on the
responsibilities of the incumbent designated bonding authority under
the Agreement to Insure executed by the Department on November 29,
1994, although the new agreement will be amended to conform with
statutory changes made in 1998. Copies of the Agreement to Insure, as
well as of the master trust indenture, program financing agreement, and
bond purchase agreements currently used in the program, will be
provided to all who timely submit a written notice of intent to submit
a proposal in accordance with this notice. Also provided will be forms
for the loan application, credit criteria, construction loan agreement,
and promotional literature as developed by the incumbent DBA.
Specific duties imposed on the DBA by statute generally include,
but are not limited to, the following:
Use the proceeds of the qualified bonds, less costs of
issuance not to exceed 2 percent of the principal amount thereof, to
make loans to eligible institutions or for deposit into an escrow
account for repayment of the bonds;
Provide in each loan agreement that not less than 95
percent of the loan proceeds will be used to finance the repair,
renovation, construction or acquisition of a capital project, or to
refinance an obligation the proceeds of which were used for such a
capital project;
Charge such interest on loans, and provide for such a
repayment schedule, as will, upon the timely repayment of the loans,
provide adequate and timely funds for the payment of principal and
interest on the bonds; and require that any payment on a loan expected
to be necessary to make a payment of principal and interest on the
bonds be due not less than 60 days prior to the date of the payment on
the bonds;
Provide for a prior credit review of the institution
receiving the loan and assure the Department that, on the basis of such
credit review, it is reasonable to anticipate that the institution will
be able to repay the loan in a timely manner;
Provide in each loan agreement that, if a delinquency
results in a funding under the insurance agreement, the institution
shall repay the Department, upon terms determined by the Secretary for
such funding;
Assign any loans to the Department, upon demand of the
Secretary, if a delinquency has required a funding under the insurance
agreement;
In the event of a delinquency, engage in such collection
efforts as the Secretary shall require for a period of not less than 45
days prior to requesting a funding under the insurance agreement;
Establish an escrow account into which each institution
shall deposit 5 percent of the proceeds of any loan made, with each
institution required to
[[Page 58756]]
maintain in escrow an amount equal to 5 percent of the outstanding
principal of all loans made to that institution under the program. The
escrow's balance shall be available first to the Secretary for the
payment of principal and interest on the bonds in the case of a
delinquency in loan repayment. Following scheduled repayment of an
institution's loan, the balance shall be used to return to the
institution an amount equal to any remaining portion of that
institution's 5 percent deposit of loan proceeds; and
Provide in each loan agreement that if a delinquency
results in a withdrawal from the escrow account to pay principal and
interest on bonds, subsequent payments on such loan shall be available
to replenish the escrow account.
Criteria for Selection
The Secretary will select the DBA upon consideration of the
following criteria:
1. Support of Minority Participation. In accordance with section
348 of the HEA (20 U.S.C. 1066g), the extent to which the proposer, in
its employment, subcontracting and partnering activities, encourages
applications from members of groups that have been traditionally
underrepresented based on race, color, national origin, gender, age, or
disability, will be a positive factor.
2. Existence of trained staff to perform the various duties of the
DBA. It will be a positive factor if the proposer will use existing
trained resources, as opposed to having to hire and train new personnel
and obtain new systems. Staff knowledge in the areas of bond financing,
higher education credit, evaluation of security and collateral, program
management, construction oversight (including knowledge of State and
Federal building codes and standards), and loan servicing will be
positive factors.
3. Capacity to manage the issuance of a large offering of debt
securities to the Federal Financing Bank pursuant to a direct
placement. It will be a positive factor if the proposer is a regular
participant in the capital markets, using similar financing structures
as described in the Agreement to Insure between the Department and the
existing DBA.
4. Financial position and stability relative to industry norms. It
will be a positive factor if the proposer is a mature, stable
corporation with favorable trends in key financial strength indicators
like net worth and stable earnings.
5. Approach in performing the requirements of the program. It will
be a positive factor if the proposer presents a well thought out
approach to the program, and thorough familiarity with the
documentation used in the program. Suggestions for change in program
documentation and administration will be entertained. Extra credit will
be applied where positive innovation is displayed over and above the
proposal requirements.
6. Experience and resources available and commitment to providing
business development services. It will be a positive factor if the
proposer currently undertakes similar business development functions as
those required under the DBA agreement. Ideas for business development
which are included in the proposal will be positive factors.
7. Past performance on previous Federal Government contracts. Good
prior performance on Federal Government contracts, and familiarity with
the particular requirements of the Federal Government, will be a
positive factor.
8. Demonstrated history and ability in addressing the special needs
of HBCUs. It will be a positive factor if the proposer can demonstrate
that it has extensive experience working closely and successfully with
HBCUs. Particularly helpful will be activities related to the HBCUs'
educational mission; or to improvement of HBCUs' facilities; or to
HBCUs' financial planning.
9. Detailed cost proposal, including the approach of the cost
proposal. Separation of fees, including separate pricing for promotion,
financing, loan review, construction oversight, ongoing servicing,
program monitoring and program administration, will connote an
understanding of the various tasks, and will be a positive factor.
Statements indicating the proposer's willingness to promote the
program, realizing that payment of fees is contingent on making the
loans to HBCUs, will be a positive factor.
10. Corporate authority and ability to comply with for-profit
requirement. The proposer must have full corporate authority to perform
the functions of the DBA. If the proposer will be a special, for-profit
subsidiary of a not-for-profit entity and proposes to enter into a
long-term contract with the not-for-profit, under which the not-for-
profit will perform all or some of the actual tasks, we will assess the
relationship proposed to make sure it is workable over the long-term.
Agreements that are unconditional will be positive, and agreements with
extensive conditions will be negative.
11. Cohesiveness with any subcontractors. It is possible that a
proposer may seek to use subcontractors in performing the duties under
the DBA agreement. Such arrangements will be reviewed in light of how
extensive the subcontractor's role would be, and the ability of the
contractor to replace a subcontractor for cause. An arrangement in
which a subcontractor performs a discrete function, and receives
specific identifiable compensation, will receive a more positive rating
than an arrangement with a subcontractor in which tasks and
compensation are shared between the contractor and the sub-contractor.
12. No conflict of interest. We will not consider any proposal that
indicates an actual or apparent conflict of interest.
13. Senior management stability: It will be a positive factor if
the senior management of the proposer is experienced and stable.
Selection Process
Firms interested in submitting proposals must send a written notice
of their intent, postmarked on or before October 16, 2000, to Mr. Jesse
Carter, U.S. Department of Education, Institutional Development and
Undergraduate Education Service, Institutional Receivables Team,
L'Enfant Plaza Station, P.O. Box 23471, Washington, D.C. 20026-3471, or
the notice of intent may be faxed on or before 3:00 p.m. on October 16,
2000 to Mr. Carter at (202) 502-7861. Telephone requests are not
acceptable. All requests must include the company name, address,
telephone number, e-mail address, fax number, and point of contact. The
Department will then supply the firm with copies of the current DBA
agreements, forms and documentation described above.
The proposer must deliver, by mail postmarked on or before November
1, 2000, eight (8) copies of its written proposal to Mr. Carter at the
above address.
Consideration of all proposals submitted will be based on the 13
criteria listed. Department staff will rank the proposers
quantitatively after giving each criterion a score of 1 to 10, with 1
being generally unfavorable and 10 being generally favorable. Highest
ranking proposers will be contacted for an oral interview, currently
scheduled for the third week after the closing date for submission of
written proposals.
Final selection will be made by the Secretary, upon consideration
of the highest ranking proposals in light of the 13 criteria and of
staff recommendations. Selection is expected to be completed within
approximately ten weeks of the date of this notice.
[[Page 58757]]
Proposal Content
The proposal must state that the proposer has the legal corporate
authority to perform all of the services covered by the DBA agreement.
The proposal must contain assurances that no conflicts of interest
or apparent conflicts of interest exist. The proposal must describe the
review and analysis that led the proposer to this conclusion. The
proposer must include in its proposal resumes of owners and proposed
program managers.
The proposal must describe the proposer's experience with respect
to each of the DBA's tasks as described in this notice, including in
particular any current relevant experience the proposer may have. The
proposal must discuss existing resources available to perform these
duties, and the need (if any) to hire and train additional staff. Since
the DBA is expected to perform these duties for an extended period, the
proposal must discuss similar programs and tasks which the proposer
currently expects to perform for an extended period.
The proposal must include the proposer's approach to performing
each of the DBA's tasks, and must reflect the proposer's review and
understanding of the current program documents and processes.
Innovative presentations will convey the proposer's understanding of
the proposed duties and will be favorably received.
The proposal must also include information with respect to the
proposer's financial strength and copies of the proposer's last five
annual audited financial statements. The proposal must contain factors
that assure the proposer's existence for an extended period, including,
for example, issuance of other long-term non-callable debt, or other
long-term ventures which will require the long-term existence of the
company.
The proposal must discuss the proposer's history in working with
HBCUs, particularly with respect to experience relating to HBCU
physical facilities, financial planning, and the HBCUs' educational
mission. It must also describe actions the proposer has taken and plans
the proposer has made for recruiting and outreach programs to insure a
diverse applicant pool in the proposer's employment, subcontracting,
and partnering activities, as well as the success the proposer has
achieved in attracting diverse applicants.
Since the Department desires that the HBCU Capital Financing
Program not experience any lapse in its outreach efforts, the
proposer's demonstrated ability to become fully operational as the DBA
immediately upon appointment will be important. The appointment will
become effective as of the date of expiration of the incumbent DBA's
appointment, which will occur in mid-December, 2000.
Electronic Access to This Document
You may view this document, as well as all other Department of
Education documents published in the Federal Register, in text or Adobe
Portable Document Format (PDF) on the Internet at either of the
following sites:
http://ocfo.ed.gov/fedreg.htm
http://www.ed.gov/news.html
To use PDF you must have the Adobe Acrobat Reader, which is available
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PDF, call the U.S. Government Printing Office (GPO), toll free, at 1-
888-293-6498; or in the Washington, D.C., area at (202) 512-1530.
Note: The official version of this document is the document
published in the Federal Register. Free Internet access to the
official edition of the Federal Register and the Code of Federal
Regulations is available on GPO Access at:
http://www.access.gpo.gov/nara/index.html
Dated: September 27, 2000.
Claudio R. Prieto,
Acting Assistant Secretary, Office of Postsecondary Education.
[FR Doc. 00-25280 Filed 9-28-00; 11:57 am]
BILLING CODE 4000-01-P