[Federal Register: October 2, 2000 (Volume 65, Number 191)]
[Page 58755-58757]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



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. 
    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 
     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 
    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.

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    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]