Finally – New Developments in the ED Debt Collection Services RFP

On late Friday afternoon, the U.S. Department of Education (ED) posted two items on the FedBizOpps website.  First, an amendment which states:

“The purpose of this notice is to cancel current solicitation ED-FSA-13-R-0010. This solicitation is being cancelled so that Federal Student Aid (FSA) can reassess its requirements for Debt Collection Services. FSA intends to issue a new solicitation for this requirement in the future.”

Almost immediately following that posting, ED announced a new RFP solicitation for Debt Collection Services, which can be found here.

Questions are due no later than 5:00PM EST on December, 21 2015.  Responses to the new RFP are due on January 22, 2016.

insideARM Perspective

There is a longstanding tool used frequently by Presidents, Congress, and regulatory agencies, in an attempt to avoid media scrutiny around bad news.  It is affectionately known as “Friday News Dump” or “Take out the Trash Friday”. The television show “The West Wing” once devoted an episode to the practice.

Donna: What’s take out the trash day?
Josh: Friday.
Donna: I mean, what is it?
Josh: Any stories we have to give the press that we’re not wild about, we give all in a lump on Friday.

The Friday afternoon news is shocking, and yet, not surprising at the same time.  Large ARM Firms interested in the ED contract have to decide whether to laugh or cry at this development. If one didn’t know better you would think the story was the plot of an awful soap opera. The ED Debt Collection RFP process has had stops and starts, twists and turns, and high drama throughout.

insideARM has written extensively about both the ED contact and the current solicitation.  Historically, the ED contract has been the “Golden Ticket” for ARM firms. The business was very lucrative. The contracts were long-term.  Under the last RFP (from 2009) there were 17 firms selected to receive business in the “unrestricted” size category and 5 firms selected to receive business under the small business category.

Let’s recap:

1. The solicitation that was just cancelled had begun in 2013.
2. In October 2014 ED announced it had selected eleven companies for the new contract in the small business set aside category.
3. In the unrestricted category, the process has been slowed by protests and amendments to the documentation. More than 40 companies had made their way to Phase II of the process. Theoretically all of those agencies that had moved to Phase II were still in the running for the new contract.
4. The 2009 contracts expired in March of this year. The final placements to holders of the prior (2009) ED contract were made as the contract expired.
5. On February 27^th of this year (coincidentally, also on a Friday afternoon) ED announced that it was ending contracts with five ARM firms.  This unprecedented announcement stunned the ARM industry and led to another round of litigation by those five firms.
6. During that same timeframe ED gave two-year contract extensions to five existing vendors in the unrestricted category, including: Account Control Technology, Inc., Continental Service Group, Inc., d.b.a ConServe, Financial Management Systems, GC Services, and Windham Professionals, Inc.
7. The five agencies who were granted two-year extensions have received new placements since April, 2015.
8. Very quietly, last month ED began making placements under the aforementioned October, 2014 small business award, though not all eleven vendors are receiving business. Apparently, only six of those firms currently have their Authority to Operate (ATO) from the government.

The Friday developments are probably a positive for the industry. While no ARM executive will go on the record on the subject, the individuals we spoke with were cautiously optimistic. Most are wondering what the motive was for tossing an existing RFP and starting all over again. Said one long-term ED player, “I don’t know why Ed did what they did.  But Friday’s announcements at least implies that RFP process is moving forward again and not stuck in neutral.”

Another industry executive added, “The release of the RFP Friday, I think is a great holiday gift for the industry’s student loan collection firms.  After several months, it eliminates the uncertainty of how ED will pursue the collections of its accounts in the future.  It also establishes a long term commitment with a 5 year base period and an optional 5 year extension that will allow firms to fully invest and commit to the success of the contract.”

Responding to an ED RFP is a very time consuming process. By cancelling the 2013 solicitation and issuing a new RFP, ED has assured that interested ARM firms will be in full scramble mode during the holiday season.  Whether one views this development as an early Christmas present or a lump of coal in your stocking may depend upon your perceived ability to respond quickly and effectively to the new RFP.