BREAKING: ED Cancels Contested Debt Collection Solicitation

The Department of Education (ED) just notified the Court of Federal Claims that it has completed its review of the contested solicitation for private debt collection services. They have cancelled the whole thing.

Here's what the notice says,

"The solicitation will be cancelled due to a substantial change in the requirements to perform collection and administrative resolution activities on defaulted Federal student loan debts. In the future, ED plans to significantly enhance its engagement at the 90-day delinquency mark in an effort to help borrowers more effectively manage their Federal student loan debt. ED expects these enhanced outreach efforts to reduce the volume of borrowers that default, improve customer service to delinquent borrowers, and lower overall delinquency levels. The current private collection agencies (PCA) under contract with ED have sufficient capacity to absorb the number of accounts expected to need debt collection services while the process for transitioning to the new approach is developed and implemented. Therefore, additional PCA contract work is not currently needed.

ED will cancel the solicitation and terminate for convenience the awards to
Performant Recovery, Inc. and Windham Professionals, Inc. on or after May 7, 2018. Following those actions, we will move to dismiss this consolidated action as moot."

insideARM Perspective

So, what began in 2009 as a 5-year contract for 17 large and 5 small debt collection companies, became a contract in 2014 for 11 small companies and a delay for the large firm awards, eventually resulting in a 2016 award to seven large companies, launching dozens of protests, a re-do, a whittling down to just 2 large companies, then more protests, and now... nothing. No large company awards at all.

This was not entirely unexpected. Several weeks ago ED submitted a notice to the Court of Federal Claims which said, “It appears likely that a course of action other than continued litigation of the pending protests will be pursued. ED has not completed the analysis yet and has not made a final decision as to a course of action. All options remain on the table.” (emphasis added)

As we reported earlier this week, sources familiar with what’s happening in this space alerted insideARM that ED recently signaled its intent to hold another procurement for Private Collection Agency (PCA) services in the months ahead – one set aside for small businesses. 

Randy Kamm, a consultant in the space, posted this comment on that last article:

"While true that ED's procurement forecast lists a recompetition of the small restricted contracts for this quarter (in lieu of exercising the second five-year option period in September 2019), my sources indicate that the forecast is simply part of a broader contingency plan/placeholder given all of the unknowns related to ED's servicing and default collections environment. ED isn't really planning a small business reprocurement in the short term. If ED does decide to rebid the small biz contracts, the proverbial 'tea leaves' indicate the reprocurement process probably would not occur until mid to late 2019 -- when (hopefully) ED has a better line of sight on (1) the actual capacity of the restricted contractors (and their subcontractor networks) to handle the volume, (2) the outcome of the unrestricted protests (still unresolved) and (3) the status of its "Next Generation" servicing solution. My view is that ED is attempting to sync-up all of the 'moving parts' related to its ability to fully manage and service, in its entirety, the $1.4-trillion in outstanding loans and $140-billion in defaulted loans."

Of course, we now know what happened vis a vis his #2. I suspect it will be quite some time before we know the true status of #3, the "Next Generation" solution, if only because it's an enormous project and will likely take multiple years to implement.

That leaves #1 - the actual capacity of the restricted contractors (and their subcontractor networks) to handle the volume. And also, the somewhat new information announced today that "In the future, ED plans to significantly enhance its engagement at the 90-day delinquency mark..." ED doesn't say when "the future" is.

We will continue to report on the situation as it unfolds. Meanwhile, I suspect a lot of upheaval and uncertainty will be experienced by a number of companies and hundreds - if not thousands - of individuals in the coming days, weeks and months.