Budget Shortfalls Boost Governments' Need for ARM Professionals

Requests for proposal from public entities looking to outsource delinquent debt collection yielded at least 60 opportunities in the first quarter of 2009. The RFPs represent more than $600 million in placements, according Nick Bernardo, publisher of MyGovWatch.com. 

About one-third of the bids sought were placed by small towns and counties, said Bernardo, who expects to see RFPs from municipalities comprise a larger share of the opportunities issued by public entities.

“Large cities and states have already proven that outsourcing works, it’s a mature market,” said Bernardo, who also is president of consulting firm Net Gain Marketing. The Collingswood, N.J.-based company offers a variety of marketing and specialized information about government RFPs for accounts receivable management professionals. “The smaller towns and counties are just learning that they are leaving money on the table by not outsourcing,” he noted.

Bruce Cummings, president of government collection agency Municipal Services Bureau (MSB), told insideARM that the economic crisis weighing down state, city and county budgets has given municipalities added incentive to outsource their debt collections operations.   

“Every dollar matters to every municipality, but it matters more to the smaller entities,” Cummings said.  “Smaller cities and counties have a greater sense of urgency because they have limited resources.”

And despite concerns some ARM professionals may have that debt collection contracts issued by the federal government will decline under the Obama administration, Cummings said he isn’t fearful of that possibility because private debt collection vendors have more skill and resources to produce better results than a government’s internal staff.

“We take on the tougher stuff that governments can’t collect.   After they work it they turn it over to MSB for a focused collections recovery effort.  I don’t see that changing,” he said.

In business 18 years, Cummings said Austin-Tex.-based MSB — which specializes in collecting delinquent court fines, fees and debts for a variety of government entities nationwide — has always relied on an in-house sales team to identify and respond to public entity RFPs.  

“It allows them to stay closer to the client,” Cumming said. “For the most part, they know when an opportunity is coming due. “

Even if a company can afford to invest in their own sales department, Bernardo said NGM can provide the same services for less and does to some of the largest government contractors in the industry.  He said the six-year old firm has enjoyed year-over-year double digit growth by doing the leg work any internal sales team would for a debt collection company or call center.

“Whether you are the smallest company in the industry or the largest company in the industry, no individual company can replicate our work process and do it as cost effectively as we can do it,” he said.  “We track everything, even if we have no clients interested in a contract because a client may care about it in three to five years when it comes out for rebid.”

Additionally, Bernardo said NGM provides more recent and relevant information that lets clients know how to price their bids.  By example, he cited a current RFP issued by Louisiana State University to collect payment on delinquent student loans. Although the LSU RFP is public and contains information about the companies awarded similar contracts three years ago, Bernardo said NGM can offer its clients something more.

“We know all the companies who bid in 2006, why the losers lost and why the winners won,” he said.  “We also know pricing trends for those debt types and the specific prices offered by all vendors in 2006.”

Currently, NGM’s services are supported by monthly client fees from agencies.  Bernardo said the company will eventually offer public entities a service that will allow them to compare their collections services costs to those paid by peer group municipalities. NGM also is considering providing a service that will let municipalities rate the performance of agencies they have worked with, Bernardo said.