The Department of Education Contract Award – What Does It Mean?

On Saturday insideARM published a Breaking News report that the Department of Education (ED) had finally announced the names of companies that had been selected to receive business in the “Unrestricted Category” under Solicitation No. ED-FSA-16-R-0009, Debt Collection Services for the U.S. Department of Education (ED), Office of Federal Student Aid (FSA). The Breaking News story can be found here.

Now the big question – What does this mean in the ARM industry?

Currently ED is placing all of its accounts to two different groups of companies.

First, the five companies that received 2-year extensions last February and the 11 companies that received small business awards back in October of 2014. The five unrestricted size companies currently receiving placements are:

• GC
• Windham
• FMS
• Account Control Technology
• ConServe

Second, the eleven small business companies currently receiving placements are:

• Action Financial Services
• Bass & Associates
• Central Research
• Coast Professional
• Credit Adjustments
• FH Cann & Associates
• Immediate Credit Recovery
• National Credit Services, Inc.
• National Recoveries
• Professional Bureau of Collections of Maryland
• Reliant Capital Solutions

Seven Companies received the new award. There are:

• Financial Management Systems Investment Corp (FMS)
• GC Services Limited Partnership (GC)
• Premiere Credit of North America, LLC (Premier)
• The CBE Group, Inc. (CBE)
• Transworld Systems Inc. (TSI)
• Value Recovery Holding, LLC (Value)
• Windham Professionals, Inc. (Windham)

For these seven companies, the new award is terrific news.  However, it also means that these companies have a lot of work to do to prepare for significant placements under the new contract.  Note: As mentioned above, FMS, GC, and Windham were awarded two year extensions of their prior contact in February of 2015 and have been receiving significant placements all along. Three of the other four companies (Premier, CBE, and TSI) have not been receiving new placements since March of 2015. They have been winding down work on old inventory. The fourth company, Value, did not previous have an ED contract, though they may have been doing some subcontracting for other ED contractors. The ramp up may be more significant for those four companies.

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For the eleven small business companies, the latest announcment is also terrific news. Prior to last Friday there was significant speculation as to the number of unrestricted companies that would be selected by ED. Would ED choose 10-20 companies? With only seven unrestricted companies there will be lots of volume for the smaller companies.

For 41 other responders to the RFP this is awful news. The ED contract has historically been the most lucrative contract in the business. While ramp up costs can be expensive and impactful to a company’s bottom line during the ramp up period, the historical revenue and margins have made the ramp up investment worthwhile.

In their communication regarding the award ED gave all parties three calendar days to submit a written request for a “debriefing in accordance with Federal Acquisition Regulation 15.506.”  That means companies who desire such a debriefing must submit their written request by close of business today, December 12, 2016.  insideARM suspects that many of the 41 companies will seek the debriefing. Anyone seeking the debriefing will want to know the answer to one critical question: What was the methodology used to determine who received an award? If there was a scorecard used to determine the winners, every company will want to review that scorecard.

What will happen after the debriefing is the unknown wild card.

insideARM has spoken with numerous players in the student loan arena.  Not surprising, nobody wants to go “on the record” with their reactions. “Stunning”, “amazing”, “nonsensical” “head-scratching”, “shocking”, and “bizarre” were the adjectives used to describe the awards.

The biggest buzz has been around potential protests and/or other litigation surrounding the new awards. Most people believe there will be a large number of protests.  Some of the best and brightest legal minds in the country will be engaged in the battle. If there are protests, it is unknown whether the protests could delay implementation of the new contracts.

insideARM will continue to monitor and report on this story.