ED's Student Loan Collection Contract to be Further Delayed for Large Companies

The Department of Education will likely be delayed for several more months in announcing the winners of its debt collection contracts for larger companies. The procurement process in the Unrestricted category has been slowed by protests and amendments to the contract.

Originally, ED had hoped to end the debt collection contract award process in the fourth quarter of 2014. The agency has already announced 11 companies that will be collecting student loan debt under the contract’s small business set aside.

Changes to the contract for the larger companies have prompted a sense of urgency and finality among bidders, leading to protests and delays along the way.

The most significant structural change in the new contract is the proposed duration. ED is classifying this contract as indefinite delivery, indefinite quantity (IDIQ) and has attached an initial five-year term with a five-year extension option. With other potential extensions triggered by contract language, the total term of the contract could reach up to 12 years.

That is a departure from the lengths of previous solicitations. For example, the current contract had an initial period and extensions not to exceed five years in total. Even with triggered extensions, or “award terms,” the current contract has a total duration of about half of the new proposed contract.

This new contract duration has put potential bidders into overdrive in their attempts to either remain on the contract or be one of the few new companies chosen to participate. If the companies are not successful, there may not be another chance to win the business for another decade.

ED also initially signaled that it would be dramatically cutting the number of Unrestricted vendors on its collection contract. This added another layer of urgency for bidders.

There are currently 17 unrestricted companies collecting on the contract. In a question and answer document early in the procurement process, ED said that it anticipated awarding between eight and 12 contracts to companies from that pool. This is also a departure from more recent behavior when ED significantly expanded its Small Business set-aside on the contract from the current five to the 11 announced last Fall.

ED has backed away somewhat from that initial expectation, however. In an amended Q&A document posted last week to the official procurement portal, ED says that the total number of Unrestricted awards is “to be determined.” Still, most believe that the number will be smaller than the current 17.

Bidders, and even current contractors, have found various reasons to challenge or protest the ongoing procurement.

More than 40 large collection agencies entered the process. After ED made its initial cut in the two-phase process, formal protests were launched by some of the companies not making it to Phase II. Most of the challenges were made through the Government Accountability Office (GAO), with one filed in federal court.

The nature of those protests challenged the criteria for selecting companies to move to Phase II. There were more protests filed later in the process for other issues, such as the weight placed on a certain performance metric that could have favored some collection agencies over others, including ARM firms new to the contract.

In total, at least 10 protests have been filed under this procurement. Each time a protest is resolved, ED must make changes to the documentation and set a new timeline for the contract award and bidders must resubmit part or all of their proposals.

On Friday, yet another protest was filed, the very same day updated bids were due after updates from a previous challenge. The “due date” on the action, as stated by GAO, is April 27, 2015.

It is highly likely the new protest will be resolved before that date. And for its part, ED has expressed at least some urgency in getting the contract awards finalized.

In the updated Q&A, rather than being pinned down to an explicit timeframe, ED said numerous times that it wants to make the awards “as soon as possible.”

It will be interesting to see what the final mix of companies looks like when ED makes its final award. Will the agency stick to its initial estimation of a contraction among unrestricted collection vendors? Will all of the winners be past or current contractors, or will there be new companies added? If there are new companies, why did they get the award over current contractors? Will ED move some of the 11 small business vendors over to the Unrestricted side?

Hopefully, the industry will have those answers in short time.