On Friday afternoon before the Memorial Day weekend, the Department of Education (ED) issued its anticipated Amendment to Solicitation No. ED-FSA-16-R-0009 for private collection agency services. The amendment was issued pursuant to ED’s planned “Do Over.”  A copy of the Amendment can be found here

Interested parties will now be in scramble mode to respond to this revised solicitation. As initially outlined, and as specified in the revised solicitation, ED plans to conduct its reevaluation in accordance with the following schedule:  

  • May 26, 2017 - Solicitation amendment and request for revised proposals issued 
  • June 16, 2017 - Due date for the submission of revised proposals 
  • June 19, 2017 to August 24, 2017 - Evaluation of past performance and management approach; selection of most advantageous proposals, responsibility determinations and other pre-award activities 
  • August 25, 2017 - Notice of awards and notices of termination issued 

On Thursday, May 25, one day prior to release of the new solicitation, ED also filed with the Court of Federal Claims an “Amendment to Defendant’s Notice of Corrective Action.” A copy of that document can be found here.  Though ED notes it is a “minor change to the prior plan,” this document outlines a significant change to their initial corrective action plan. 

Specifically, ED states:

“The corrective action set forth in the (original) notice did not permit offerors to revise small business participation plans. After further review, and considering the time that has passed since the original solicitation and the desire to receive up-to-date small business participation plans that are consistent with the other elements of the revised proposals, ED has decided to amend the notice and to allow offerors to submit revised small business participation plans, if they so choose.” 

Regarding the subcontracting issue, ED stated in the original plan:

“As part of the responsibility determination of every apparently successful offeror, ED will review the offeror’s subcontracting plan, if required to be submitted. Every offeror will be given an opportunity to revise its subcontracting plan to address any inconsistencies between the subcontracting plan and the offeror’s original, unrevised small business participation plan. Revisions to small business participation plans will not be permitted.”  Emphasis added by insideARM.

Thus, any company that was not originally selected in the RFP process because of perceived defects in its subcontracting plan will now have the opportunity to correct those defects. 

In particular, this change could have a significant positive impact to Continental Service Group, Inc (Continental), Pioneer Credit Recovery, Inc (Pioneer), and Account Control Technology, Inc. (ACT). As insideARM outlined on May 22, those three firms had each filed a lawsuit in the Court of Federal Claims challenging the awards.

In their separate lawsuits Pioneer and Continental each had alleged that ED treated offerors disparately and erred in determining that both were non-responsible because its subcontracting plan neither reflected nor was consistent with the commitments made in their small business participation plan. Pioneer’s complaint had been consolidated with the Continental case. 

In a separate but related case ACT alleged that ED violated statutes and regulations in its evaluation of their proposals submitted in response to the solicitation. ACT also claimed error in the evaluation under the small business participation factor.

Apart from the remediation plan, the Court of Federal Claims has still not ruled on whether it will lift the Preliminary Injunction that is in place that prohibits ED from placing any new accounts with any Private Collection Agency (PCA). After a hearing on May 22, 2016 the court issued an order continuing the Preliminary Injunction until June 1, 2017. A copy of that order can be found here. It is presumed that there will be another hearing on or before June 1, 2017 on whether the injunction should be lifted or modified.

ED has filed a motion to lift the injunction. As part of the pleadings filed with the motion, ED submitted the Declaration of James W. Runcie, then the Chief Operating Officer of Federal Student Aid (FSA), U.S, Department of Education. [Editor’s note: Mr. Runcie resigned his position on Tuesday, May 23, 2017.]

Mr. Runcie’s declaration outlines ED’s arguments in favor of relief from the stay:

“FSA requests that the Court lift that portion of the Preliminary Injunction which prohibits FSA from assigning accounts needing private collection agency (PCA) services to a group of small business contractors who have been performing such services since 2014. The validity of those small business contracts is not subject to any legal challenge.

The Court’s May 2, 2017 Preliminary Injunction states that the Department may not transfer “work to be performed under the contract at issue in this case to other contracting vehicles to circumvent or moot this protest.” The Court’s orders have been interpreted to prohibit FSA assignment of accounts to the small business. As a direct result, the Government has been seriously harmed and tens of thousands of students across the country have been denied critical services and significant benefits.

This means that by the end of this month (May, 2017) a total of 234,000 borrowers holding accounts valued at $4.6 billion will have been denied PCA services if the Court’s injunction is not lifted.

A second way in which the Court’s Preliminary Injunction is harming borrowers is by preventing FSA from recalling accounts held by six PCA’s (per the declaration - The CBE Group, Premier Credit of North America LLC, Alltran Education, Inc., Progressive Services, Inc., Collection Technology, Inc., and Transworld Systems Inc.) whose contracts expired on April 21, 2017. Due to the Court’s order, FSA cannot recall the accounts nor transfer them to the small business contractors. Accordingly, those borrowers are unable to obtain critical services (e.g. establishing a new repayment agreement).  FSA’s Default Resolution Group can provide only limited services to those borrowers as the accounts are still assigned to the PCA but the PCA’s contract has expired.

As many of the borrowers whose accounts have not been recalled are enrolled in rehabilitation programs, they may be particularly impacted by any disruption in service and may risk falling out of rehabilitation.”

insideARM Perspective

What a mess! The RFP process starts anew. Accounts that are ready for placement are being held by ED. Accounts that were supposed to be recalled are stuck in limbo, held by the PCAs that were originally working them, with ED claiming they have no contractual ability to allow those firms to continue working the accounts.

The six firms that were originally chosen in the RFP in December, 2016 are not getting new placements – for which they most likely spent considerable resources getting ready. Will the court allow ED to place business with those firms? Will ED be able to recall the accounts held subject to the expired contracts and re-place them with the small business contractors? What are the chances of awards being issued under the new RFP without another round of protests and lawsuits?

It will be interesting to see the next activity. Fortunately, it does not appear that we will need to wait too long to see what will happen to the Preliminary Injunction. The court must do something by COB on June 1st.

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