ED Snapshot: A Small Firm Prepares for the Big Time

A small firm is gearing up to compete with the big guys as the U.S. Department of Education begins today its conference on its collection program as part of the agency’s naming this fall the next round of participating firms.

Canoga Park, Calif.-based Account Control Technology is one of the more than 100 collection agencies sitting down with ED in Washington, D.C., as the agency prepares its Request for Proposal for its next collection contract (see “Live from ED: Contract a ‘Different Kind of Collections’”).

ACT has been part of the program for the last 34 months, though it was categorized as a small business, those firms with less than an average of $6.5 million in gross income in the previous three years. ACT has done well, collecting in the recent fourth quarter $10.9 million on a recovery rate of 3.10 percent. ACT works with colleges and universities, state educational guarantee agencies and private education lenders.

The company’s success has meant ACT no longer qualifies as a small business and now must qualify in the unrestricted category, competing with such major firms as Pioneer Credit Recovery, the unit of SLM Corp., or Sallie Mae, which collected $410 million for ED in the last 34 months. In comparison, the top firm in the small business category was Continental Service Group, with collections of $94 million, followed by ACT with $75.2 million in collections.

ACT President Don Taylor, who calls the ED contract the “holy grail” for collectors, said the company is adding staff in order to attempt to challenge these firms. ACT recently announced it would grow its San Angelo, Texas, staff from 20 today to as many as 90 by the end of the year. “Staffing plays a big role,” Taylor says.

Under the current schedule, ED is likely to release its RFP around April, and bids will be due by the middle of June. The contract will be awarded sometime around September. ED hasn’t said how many firms will participate but indicated it could consider from 13 to 21 firms.

ED looks at several factors when considering the success of a collector, in addition to dollars collected the agency considers total accounts serviced and administrative resolutions. The dollars collected criterion is based on recovery rate rather than total dollars. Seventy percent of an agencies score is based on recovery rate, 20 percent on accounts serviced rate, and the remaining 10 percent on administrative resolution percentage.

ACT’s total score was in excess of 99, according to Taylor. A score of 85 is considered outstanding. The company has been consistently achieving scores in the outstanding range for the last several years, so Taylor is hopeful the company will be successful in its ED bid.

Still, the staffing addition means the company will have to invest a significant sum of money before the contract is awarded. If that’s what it takes, so be it, said Taylor. “Life is a risk.”