BREAKING: Department of ED Completes Corrective Action in Debt Collection Contract

UPDATED 9:20am 1/12/2018: The following details about the award were published in a press release today by Performant Corporation:

According to the Department of Education, the total contract award amount for the base period and option period is not to exceed $400,000,000. The base period of performance for this contract is January 11, 2018 through January 10, 2023. The contract also includes a single, three (3) year Optional Ordering Period which is January 11, 2023 through January 10, 2026; a one year (1) Optional In-payment Retention Period, which is January 11, 2026 through January 10, 2027; and two 6 month Optional In-payment Retention Periods, which is January 11, 2027 through July 10, 2027 and July 11, 2027 through January 10, 2028.

One of the few publicly-traded companies in the ARM industry, Performant Corporation (PFMT) stock is up significantly since yesterday's announcement.

Meanwhile, last night The Washington Post published an article that re-opened the matter of alleged ties between Education Secretary Betsy DeVos and Performant through a loan made to the firm several years ago by LMF WF Portfolio, a limited liability corporation in which DeVos was once an investor. insideARM wrote about this when it was first reported in January 2017, and also published a response from the company.

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This afternoon, as ordered last month by Judge Thomas Wheeler, the Department of Education (ED) completed the long-awaited corrective action for the Private Debt Collection Unrestricted Contract Award. According to several sources, letters have been sent to all offerors. ED has submitted the following to the U.S. Court of Claims:

On January 11, 2018, the Department of Education completed its corrective action. The Department evaluated revised proposals, prepared and documented a new source selection decision, and awarded contracts to Performant Recovery, Inc. and Windham Professionals, Inc., the two offerors whose proposals were determined to be the most advantageous to the Government. (emphasis added)

Also on January 11, 2018, the Department of Education issued notices of termination for the convenience of the Government of seven contracts issued on December 9, 2016 (The CBE Group, Inc., Financial Management Systems Investment Corporation, GC Services Limited Partnership, Premiere Credit of North America, LLC, Value Recovery Holdings, LLC, Windham Professionals, Inc., and Transworld Systems, Inc.).

Finally, the Department of Education is proceeding to send out the appropriate notifications to the unsuccessful offerors.

So what's left:

• The two firms that are operating under Award Term Extensions (ATEs) on April 28, 2017 -- Alltran (formerly Enterprise Recovery Systems, Inc.) and Pioneer Credit Recovery.   
• The small business contractors: 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, and Reliant Capital Solutions
• The two companies receiving the unrestricted contract award today, Performant Recovery and Windham Professionals.

You can download a copy of the notice to the court here.

insideARM Perspective

Wow. This is indeed surprising. Many of us thought that the corrective action would lead to more unrestricted contract awards, not fewer.

Well, the good news is that a decision has been made and accounts should now be able to flow without restriction. That's good for borrowers, for the firms receiving the work, and likely for ED, which can now possibly move on with overseeing the servicing rather than focusing on the deciding of who will service.

Of course, those that had originally received the unrestricted award on December 9, 2016 but have now lost it are not going to be happy (no doubt the understatement of the year). These firms have invested heavily to remain prepared to service accounts; and they have invested heavily in the legal battle to protect their contract award.

And, there are those that invested heavily to (unsuccessfully) protest the December 9, 2016 award. Also not happy.

Will there be another round of lawsuits? Time will tell.

What will happen now will be a re-ramping up among the firms left standing to accept what will seem like a firehose of accounts. This process began among the small business contractors and those with the ATEs just before the holidays, as ED placed 930,000 accounts after a months-long temporary restraining order imposed by the original judge overseeing the protests.

Today's decision lends additional certainty for the companies that came out of the melee with a contract, so actual planning for the future can begin. What we may also see is those who have a contract hiring those who don't in order to manage the volume.

A new chapter begins.

Visit this page to see the complete coverage on insideARM of the Department of Education Private Collection Contract.