Judge Says Plaintiffs in ED Case Likely to Succeed on Merits of Protest

Yesterday Judge Thomas C. Wheeler issued a preliminary injunction in favor of the plaintiffs in the case of FMS v. USA (Department of Education, or ED). ED is now enjoined from recalling borrower accounts that are being serviced as part of the 2015 Award Term Extensions (ATEs) granted to FMS Investment Corp. (FMS), Account Control Technology, Inc. (ACT), GC Services Limited Partnership (GC Services), and Continental Service Group, Inc. (ConServe).

Judge Wheeler came down squarely on the side of the collection agencies, and said he was “convinced that Plaintiffs are likely to succeed on the merits of their bid protests.”

You can download the Order here.

Background

As insideARM reported on February 21, 2018, seventeen law suits have so far been filed in the Court of Federal Claims in the second round of the matter of the Department of Education (ED) Private Collection Agency (PCA) contract. This is the newest chapter in a story that began in 2014. Our February 13 story provides a more comprehensive summary, but briefly:

There were seventeen collection agencies on the 2009 five-year unrestricted (large company) federal student loan contract (there were five firms on the small business contract). In 2014, eleven firms won new small business contract awards. The unrestricted awards were delayed until December 2016, when seven firms received contracts. During that delay, five firms received Award Term Extensions (ATEs) in order to continue to service accounts in repayment (meaning the borrower is actively making payments and has not re-defaulted). Those ATEs expire in April 2019.  

The awards were protested and lawsuits were filed. In May 2017 ED promised a do-over, or “corrective action.” Bidders re-submitted offers and everything was re-evaluated.

On January 11, 2018 ED completed the corrective action and awarded contracts to just two companies, Performant Recovery, Inc. (Performant) and Windham Professionals, Inc. (Windham). They also issued a notice of recall for those in repayment accounts from four of the five companies (the 5^th is Windham, which did not have its accounts recalled). This ended the prior round of litigation, but opened the door for a new one… which just about brings us to today.

While this case proceeds, FMS, ACT, GC and ConServe requested a preliminary injunction to prevent ED from recalling those in repayment accounts.

Yesterday’s Decision

The facts in this case have been sealed under protection, so this is the first look we are getting at what Judge Wheeler has reviewed. His comments in the Order are telling:

While a full administrative record has not yet been filed in this case, the Court has before it a set of core documents from ED that include, among other things, ED’s Past Performance, Technical Evaluation, and Small Business Evaluation Committees’ Consensus Reports, the Source Selection Decision Memorandum, and the Contracting Officer’s Responsibility Determination. After reviewing this documentation and considering Plaintiffs’ arguments both in their motions and in open court, the Court has serious questions over ED’s evaluation of proposals in this procurement. The evidence currently before the Court points to inconsistencies, omissions, unequal treatment of offerors, and cherry-picked data that the Court finds to be rather problematic. Based on these initial observations, the Court finds that Plaintiffs have demonstrated a likelihood of success on the merits in their bid protests.

For this and other reasons, he granted the request to prevent ED from recalling the accounts being worked under the 2015 ATEs until the current bid protest can be fully resolved.

insideARM Perspective

Meanwhile, ED has represented to the Court that it has agreed to voluntarily stay its contract awards to Performant and Windham. This means that all debt collection servicing is currently being done by the small business contractors, with some outsourcing excess volume to larger contractors who had previously done this work. This is irony. And, it also puts relatively smaller businesses in the position of supervising larger businesses, which would be more likely to have the infrastructure required for vendor oversight.

If you need a good bedtime read and want a complete history of this matter, you can see all of our coverage here.