Department of Education awards $218M contract to Action Financial Services for federal student loan debt collection

Contract Overview

Contract Amount: $218,477,552 ($218.5M)

Contractor: Action Financial Services, LLC

Awarding Agency: Department of Education

Start Date: 2015-10-16

End Date: 2024-09-30

Contract Duration: 3,272 days

Daily Burn Rate: $66.8K/day

Competition Type: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Number of Offers Received: 21

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: "CRITICAL FUNCTION" - IGF::CT::IGF PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS.

Place of Performance

Location: CENTRAL POINT, JACKSON County, OREGON, 97502

State: Oregon Government Spending

Plain-Language Summary

Department of Education obligated $218.5 million to ACTION FINANCIAL SERVICES, LLC for work described as: "CRITICAL FUNCTION" - IGF::CT::IGF PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS. Key points: 1. Contract value represents significant investment in debt recovery operations. 2. Full and open competition suggests a potentially competitive bidding process. 3. Long contract duration (2015-2024) indicates a sustained need for these services. 4. Firm Fixed Price contract type provides cost certainty for the government. 5. The contract supports the critical function of collecting defaulted federal student loans. 6. Geographic scope includes Oregon, suggesting a regional focus or operational base.

Value Assessment

Rating: good

The contract value of over $218 million over its duration is substantial, reflecting the scale of federal student loan debt collection. Benchmarking against similar large-scale debt collection contracts would be necessary for a precise value-for-money assessment. However, the firm fixed-price structure generally offers good cost control. The duration of the contract suggests a stable, ongoing need for these services, which can sometimes lead to better pricing through economies of scale.

Cost Per Unit: N/A

Competition Analysis

Competition Level: limited

The contract was awarded under 'Full and Open Competition After Exclusion of Sources,' which implies that while the competition was intended to be open, specific sources may have been excluded for reasons not detailed in the provided data. This could indicate a complex procurement process or specific requirements that narrowed the field. The number of bidders (21) is robust, suggesting significant interest and a competitive environment, which is generally positive for price discovery.

Taxpayer Impact: A competitive bidding process, even with exclusions, generally benefits taxpayers by encouraging lower bids. The participation of 21 bidders suggests that the government likely received competitive pricing for these essential debt collection services.

Public Impact

Federal student loan borrowers who have defaulted on their loans are directly impacted. The Department of Education benefits from the recovery of outstanding federal funds. The contract supports administrative resolution activities for student loan debts. The geographic impact is noted as Oregon, potentially indicating the primary operational area for the contractor. The contract supports jobs within the debt collection industry, specifically at Action Financial Services, LLC.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for aggressive collection tactics impacting borrowers.
Lack of transparency regarding the specific reasons for excluding certain sources in the competition.
Long-term reliance on a single contractor for a critical function.

Positive Signals

Robust competition with 21 bidders indicates market interest and potential for good pricing.
Firm Fixed Price contract provides budget certainty.
Contract supports a critical government function of debt recovery.

Sector Analysis

The debt collection industry is a significant sector supporting various government agencies and private businesses. Federal contracts for debt collection, particularly for large portfolios like student loans, are substantial. This contract fits within the broader financial services and administrative support sector. Comparable spending benchmarks would involve analyzing other large federal contracts for debt collection services across different agencies.

Small Business Impact

The provided data indicates that this contract was not set aside for small businesses (ss: false, sb: false). Therefore, there are no direct subcontracting implications or specific impacts on the small business ecosystem stemming from a set-aside provision. The focus appears to be on securing the most capable and cost-effective provider for a large-scale operation.

Oversight & Accountability

Oversight for this contract would primarily fall under the Department of Education's contracting and program management offices. The firm fixed-price nature of the contract provides a degree of financial oversight. Transparency regarding the specific exclusion of sources in the 'full and open competition after exclusion of sources' would be a key area for further scrutiny. Inspector General jurisdiction would apply if any fraud, waste, or abuse were suspected.

Related Government Programs

Federal Student Loan Programs
Department of Education Financial Management
Government Debt Collection Services
Administrative Resolution Activities

Risk Flags

Potential for aggressive collection practices
Limited transparency on source exclusion
Long-term reliance on a single contractor

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $218.5 million to ACTION FINANCIAL SERVICES, LLC. "CRITICAL FUNCTION" - IGF::CT::IGF PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS.

Who is the contractor on this award?

The obligated recipient is ACTION FINANCIAL SERVICES, LLC.

Which agency awarded this contract?

Awarding agency: Department of Education (Department of Education).

What is the total obligated amount?

The obligated amount is $218.5 million.

What is the period of performance?

Start: 2015-10-16. End: 2024-09-30.

What is the track record of Action Financial Services, LLC in handling federal debt collection contracts?

Action Financial Services, LLC has been awarded this significant contract by the Department of Education, indicating a level of trust and capability in handling federal student loan debt. The contract's long duration (2015-2024) suggests a history of performance that has met the agency's needs. Further analysis would involve reviewing past performance evaluations, any reported disputes or contract modifications, and their success rates in debt recovery across their federal portfolio. Without access to specific performance metrics or historical contract data beyond this award, a comprehensive assessment of their track record is limited to the fact that they were selected and have maintained this substantial contract.

How does the $218 million contract value compare to similar federal debt collection efforts?

The $218 million total contract value over its nearly decade-long duration is substantial, reflecting the immense scale of federal student loan debt. To benchmark this effectively, one would need to compare it against other large-scale debt collection contracts awarded by the Department of Education or other federal agencies (e.g., IRS, Treasury) for similar types of debt. Factors like the percentage of debt recovered, the cost per dollar collected, and the specific services rendered (e.g., administrative vs. legal collection) are crucial for a meaningful comparison. Given the 'full and open competition after exclusion of sources' and 21 bidders, the pricing is likely competitive within the market for such extensive services.

What are the primary risks associated with this contract for the Department of Education?

Primary risks include potential reputational damage if collection practices are perceived as overly aggressive or unfair to borrowers, leading to public backlash or legislative scrutiny. There's also a performance risk that the contractor may not achieve the desired recovery rates, impacting the government's return on investment. Operational risks could involve data security breaches of sensitive borrower information. Furthermore, the long duration of the contract could lead to complacency or a lack of innovation if not actively managed and overseen. The 'exclusion of sources' aspect also introduces a risk if it inadvertently limited the pool of highly capable bidders.

How effective is this contract in achieving its objective of collecting defaulted student loans?

The effectiveness of this contract is primarily measured by the amount of defaulted student loan debt recovered. While the contract value indicates significant activity, the actual effectiveness hinges on the recovery rates achieved by Action Financial Services, LLC. Key performance indicators (KPIs) likely established within the contract would track metrics such as the volume of debt collected, the percentage of targeted debt recovered, and the cost-effectiveness of these collections. Without access to these specific performance data and recovery rates, a definitive assessment of effectiveness is challenging. The sustained award suggests a degree of satisfaction with the contractor's performance to date.

What are the historical spending patterns for federal student loan debt collection?

Historical spending on federal student loan debt collection has generally trended upwards, mirroring the growth in outstanding federal student loan debt. The Department of Education utilizes a mix of in-house efforts and private collection agencies, with contracts like this one representing a significant portion of outsourced collection activities. Spending fluctuates based on legislative changes affecting loan servicing and collection policies, economic conditions impacting borrower repayment abilities, and the overall volume of defaulted loans. This $218 million contract is indicative of the substantial resources allocated to managing and recovering this large federal asset.

What does the 'Full and Open Competition After Exclusion of Sources' designation imply for cost and competition?

This designation suggests a procurement process that aimed for broad competition but ultimately excluded certain potential bidders. The reasons for exclusion are critical – they could range from specific technical requirements, past performance issues with certain companies, or even national security concerns. While having 21 bidders is a strong indicator of competition, the exclusion of sources might have limited the absolute number of potential competitors. This could potentially impact price discovery, though a robust number of bidders often mitigates this risk. For taxpayers, it means the government sought competitive bids but had specific criteria that narrowed the field, potentially balancing breadth of competition with specific needs.

Industry Classification

NAICS: Administrative and Support and Waste Management and Remediation Services › Business Support Services › Collection Agencies

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION AFTER EXCLUSION OF SOURCES

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 21

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 4894 N RUNWAY DR, CENTRAL POINT, OR, 97502

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Limited Liability Corporation, Not Designated a Small Business, Special Designations, U.S.-Owned Business, Woman Owned Business

Financial Breakdown

Contract Ceiling: $219,193,101

Exercised Options: $219,193,101

Current Obligation: $218,477,552

Actual Outlays: $148,540

Contract Characteristics

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: EDFSA14D0010

IDV Type: IDC

Timeline