Department of the Interior, Minerals Management Service, Procurement Operations Branch, MS2500, 381 Elden Street, Herndon, Virginia 20170-4817

D -- ROYALTY SUSPENSION VIABILITY PROGRAM VERSION 2.1 (RSVP) DEEP WATER ROYALTY RELIEF ANALYTICAL COMPUTER PROGRAM SOL RFQ16159 DUE 090399 POC Dotty Quinn, Contracting Officer, (703) 787-1365 DESCRIPTION: This notice is a combined synopsis/request for a quotation for a commercial item in accordance with Federal Acquisition Regulation Part 13 and Subpart 12.6. This announcement constitutes the only request; quotations are being requested and a written Request for Quotations will not be issued. This acquisition is a 100% set aside for Small Business. The Government estimates the effort at 2-4 months and cost estimated of $25,000 to $50,000. PLEASE READ THIS ENTIRE NOTICE CAREFULLY AS IT CONSTITUTES THE ONLY NOTICE THAT WILL BE ISSUED. PROJECT: Review and evaluate the RSVP deep water royalty relief model. TASKS: 1. Conceptual Design and Computational Accuracy: Review/test the Resource and Viability Modules of RSVP to determine if they are configured properly and provide analytically reliable results. Identify any flaws in the program's methodology and any errors in the computer algorithms. Comment on whether these modules are the appropriate/preferred tools for the task. Suggest and defendother possible approaches. 2. Development/Production Scenarios and Sequential Sampling: The RSVP employs up to three development cost/production rate scenarios that are associated with levels of resources/reserves. The RSVP sequentially samples resources, then reserves during anticipated stages of activity. Review and comment on this methodology, especially the association between the resources and reserves and their respective interrelationship to the development/production scenarios, i.e., the use of resource/reserves distributions to direct the scenarios. Suggest and defend possible alternative approaches. 3. Loss Limiting Routines: Limitations on financial losses is a means of eliminating nonsensical trials occasioned by extreme low levels of profitability on particular iterations of RSVP. This methodology is justified citing that such iterations are simulated as purely chance events when, in practice, their outcomes are (at least partly) controlled by decision factors, e.g., lease abandonment. Comment on whether the current treatment is statistically legitimate and whether the RSVP's loss limiting criteria are reasonable. Suggest and defend possible alternative approaches. 4. Dependencies: Through its Crystal Ball host software, RSVP has the capability of expressing dependent relationships between any set of assumption distributions through the specification of correlation coefficients. Correlation of degrees of uncertainty between certain specific assumption distributions is often desirable (e.g., between the dry risks of related reservoirs or between area and thickness of a single reservoir). Of the assumption distributions required by RSVP, identify those distributions that should be treated as interrelated. Provide instruction to MMS Royalty Relief Team members regarding the proper use of and the mathematical/statistical basis for Crystal Ball's correlation coefficient feature in regards to the interrelated distributions. Discuss alternative ways to treat those dependencies and how they can be accommodated and used in RSVP. 5. Performance Conditions: To retain all or part of royalty relief granted, the lessee must satisfy certain conditions on performance prior to the start of production. Outcomes that lead to reduction or default of relief typically are excluded from the analysis. Assess the way in which these performance conditions influence the input distributions and decision variables, indicate whether they should be treated differently, and discuss how they might be handled within the framework of RSVP. 6. Value of Options: Deep water offshore development projects of the type being modeled using the RSVP are often comprised of a series of sequential steps. Frequently, the results of a previous step are needed to identify the course of action for the next step. At the conclusion of each step the developer typically has options on how to proceed. Comment on how the RSVP can be improved in terms of properly valuing the flexibility that a developer possesses. Suggest and defend possible alternative approaches. INTRODUCTION: Among the Minerals Management Service's (MMS) responsibilities is the administration of the Outer Continental Shelf (OCS) Deep Water Royalty Relief Act (the Act) of 1995. The Act directs the MMS to suspend royalties on existing leases in certain deep water areas of the Gulf of Mexico OCS Region when a specific set of conditions are met. Upon receipt of a complete application, the MMS is to determine whether proposed new production would be economic while subject to the requirement to pay Federal royalties. The Act directs the MMS to consider in its determination, the increased risk of operating in deep water and all costs associated with exploring, developing and producing. Lessees are required to submit a complete application which provides the necessary raw and interpreted data on the field so that such a determination can be made. There are two economic hurdles that a field must clear to be eligible for a royalty suspension. If, after reviewing the application, the MMS determines that the new production would be economic while paying Federal royalties, then royalty obligations will not be suspended. Further, a determination that no amount of royalty-free production would make the new production economically viable also disqualifies the field from a royalty suspension. Alternatively, if the field would not be economic while paying Federal royalties but some amount of royalty-free production would make the new production economically viable, the field would qualify for relief of an amount at least equal to the minimum suspension volume. Should production from a field not be economic with a royalty suspension volume equal to the mandated minimum, the MMS must determine the precise volume of royalty-free production which would make the production economic. OBJECTIVE: The RSVP is the primary analytical tool that is used by relief applicants and the MMS in determining the economic need for relief. Employing a monte carlo range of values stochastic process, the RSVP considers risk and uncertainty while performing its calculations. The RSVP is a dynamic program. It has been used in various generational forms to evaluate each of the 5 deep water royalty relief applications received by the MMS to date. Continuous improvement is sought and incorporated into the model. The tasks enumerated in this solicitation are formulated such that the RSVP's methodology will be verified, validated, and improved. BACKGROUND: The RSVP, is a Microsoft Excel spreadsheet which employs Crystal Ball as its risk analysis add-on software. The RSVP was developed by the MMS to be used by applicants who are applying for a royalty suspension volume under the Act. A requirement of a complete application for a royalty suspension volume is that applicants must perform an economic analysis of the field using the RSVP. The RSVP is actually two models (or modules) in one. The Resource Module calculates the recoverable resources for the field while the Viability Module performs a discounted cash flow analysis of the revenues generated by the resources versus the costs of developing and producing the field. Uncertainty in the information and data required for resource estimations and cash flow calculations is incorporated into the RSVP using the Crystal Ball risk analysis software. Critical parameters are input as probability distributions (called assumption distributions) of potential values for the parameter instead of single point or deterministic values. The program then performs a simulation consisting of many iterations. Every iteration is a separate calculation of the entire program where each assumption distribution is sampled and all calculations are performed using the sampled data. Distributions of possible results (forecasts) are created by saving the results of the calculations of each iteration. The average (mean) values of each forecast are the expected values of the simulation. The RSVP version 2.1 computer program and associated documentation are publicly available via the INTERNET at www.mms.gov/econ/default.htm. Important related regulations and guidelines can also be obtained at the same INTERNET address by selecting the "Gulf of Mexico Royalty Relief Page". REPORTS AND DELIVERABLES: 1. Draft Work Plan. Within 15 days of contract award, the Contractor shall meet with the Contracting Officer's Technical Representative (COTR) and provide a written Draft Work Plan that describes how the tasks will be accomplished. The COTR will provide the comments to the Contractor by telephone (with a written follow-up) within 5 days. 2. Final Work Plan. The final work plan is responsive to the COTR's comments in the Draft Plan shall be submitted within 30 days of the contract award. 3. Progress Reports. Send monthly progress reports to the COTR by the 15th of each month during the contract. The progress reports shall include: a summary of work performed in the preceding month and correspondence to the schedule in the approved work plan; a summary of problems encountered and solutions proposed; and a description of any other actions that could affect the successful completion of the contract. 4. Final Written Report. Within 4 months of the contract award, the Contractor shall provide a written final report which addresses the findings on each of this project. A separate section of the report should be devoted to each of the 6 tasks. The contractor shall submit 10 copies of the report to the COTR. 5. Training Session and Discussion of Results. Within 1 month following the submission of the final report, the Contractor shall meet with the MMS Royalty Relief Team in Herndon, VA to instruct them on the dependency/correlation issues of Task 4 and to informally discuss the findings presented in the final written report. This meeting will be 2 business days in length. HOW TO RESPOND: In order to compete for this project, interested parties must demonstrate that they are qualified to perform the work by providing a brief (25 pages or less) Capabilities Statement and Cost Proposal before 4:00 PM, ET, September 3, 1999. Capabilities Statement detailing: 1. Key personnel (those who would have the primary responsibility for performing and/or managing the project) with their qualifications and specific experience; 2. Your organization's experience with programming and developing similar simulation models using Microsoft's EXCEL and Decisioneering's Crystal Ball and a description of your facilities; and 3. Past performance with specific references (including project identifier/contract number and description, period of performance, dollar amount, client name and current telephone number) for work of this nature that your personnel or organization is current performing or has completed within the last year. Include any negative references and your rebuttal explaining your side of the story. All references will be checked to validate the information provided. Cost Proposal citing the price for Tasks 1 through 6. Offerors shall submit an original and five copies of the capabilities Statement and Cost Proposal to Ms. Dottie Quinn, Contracting officer, Minerals ManagementService, Procurement Operations Branch 381 Elden St., MS 2510, Herndon, VA 20170-4817. Your Capabilities Statement will be evaluated on the following: 1. The skills, abilities, education, professional credentials, and experience of proposed key personnel; 2. The experience of your organization, including number, size, location of projects, and complexity of similar projects completed by the proposed project team and your organization to determine your potential for success and contract award; and 3. The past performance of your organization, including adherence to schedules and budgets, effectiveness of cost control, the acceptability of previous products delivered, effectiveness of program management, and the offeror's willingness to cooperate with the customer in both routine matters and when confronted by unexpected difficulties. Cost Proposal based on Tasks 1 through 6 for best value. The evaluation criteria are equal in value and a best value analysis will determine which offeror will receive the award. Price to perform the basic work will be evaluated along with other factors. The following provisions Federal Acquisition Regulations clauses are incorporated by reference: FAR 52.212-3, Offeror Representations and Certifications-Commercial Items (May 99), 52.212-4 (May 99), 52.21.-5, Contract Terms and Conditions Required to Implement Statutes of Executive Orders-Commercial Items (May 99). Offerors can retrieve these clauses on the INTERNET at www.gsa.gov/far or obtain a hard copy of the clauses by faxing a request to Ms. Dottie Quinn on (703) 787-1387, or e-mail to dotty.quinn@mms.gov. Questions about this requirement must be in writing and submitted by fax or e-mail. Telephone inquiries are strongly discouraged. All inquiries must include the RFQ number, your full name, organization name, address, phone and fax numbers and be received before August 31, 1999, noon. It is the responsibility of the Offeror to ensure the Capabilities Statement and Cost Proposal are received before the date and time shown above. Small Disadvantaged Business Regulatory Change Notice: The Federal Acquisition Regulation authorizes the use and price and evaluation credits in industries where SDB prime contractors and subcontractors have been underutilized . We ask that you inform your SDB subcontractors that they should contact SBA's Office of Certification and Eligibility at (80) 558-0884 to obtain an application, or to log on to SBA's Website (www.sba.gov.sdb). If you are an SDB prime contractor who is not SDB-certified, we also ask that you apply for certification. Effective October 1, 1998, certified SDB prime contractors were eligible for a price credit wen bidding on Federal prime contracts. Effective January 1, 1999, prime contractors who contract with SBA-certified or self-certified SDBs are eligible for evaluation credits. Please note that prime contractors may continue to rely on self-certification of their SDB subcontractors through October 1, 1999. For solicitations issued on or after October 2, 199, prime contractors must use SDB-certified SDB subcontractors in order to be eligible for evaluation credits. Posted 08/12/99 (W-SN367076). (0224)

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