Department of Education awards $115M contract for student financial aid servicing, highlighting critical function support

Contract Overview

Contract Amount: $115,164,460 ($115.2M)

Contractor: Pennslyvania Higher Education Assistance Agency

Awarding Agency: Department of Education

Start Date: 2013-01-01

End Date: 2013-12-17

Contract Duration: 350 days

Daily Burn Rate: $329.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: IGF::CT::IGF "CRITICAL FUNCTION". TASK ORDER 0007 PROVIDES SERVICING OF TITLE IV STUDENT FINANCIAL AID IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152, 124 STAT. 1029)FOR THE JANUARY 01, 2013 TO JUNE 16, 2014 TIME PERIOD.

Place of Performance

Location: HARRISBURG, DAUPHIN County, PENNSYLVANIA, 17102

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Education obligated $115.2 million to PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY for work described as: IGF::CT::IGF "CRITICAL FUNCTION". TASK ORDER 0007 PROVIDES SERVICING OF TITLE IV STUDENT FINANCIAL AID IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152, 124 STAT. 1029)FOR THE JANUARY 01, 2013 TO JUNE 16, 2014 TIME PERIOD… Key points: 1. Contract supports critical function of student financial aid servicing, indicating essential government operations. 2. Awarded under full and open competition, suggesting a robust market for these services. 3. Fixed Price with Economic Price Adjustment (FPEPA) contract type introduces potential for cost fluctuations. 4. Contract duration of 350 days for Task Order 0007 indicates a focused, short-term operational need. 5. The significant dollar value points to the scale and importance of managing federal student aid. 6. Contractor, Pennsylvania Higher Education Assistance Agency, has a direct role in state-level higher education finance.

Value Assessment

Rating: good

The contract value of $115.16 million for a period of approximately one year for student financial aid servicing appears reasonable given the critical nature of the service. Benchmarking against similar large-scale federal contracts for financial aid administration suggests that this award falls within expected ranges for comprehensive servicing operations. The FPEPA pricing structure, while allowing for adjustments, necessitates careful monitoring to ensure value for money is maintained throughout the contract term.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. With 4 bidders participating, the competition level suggests a healthy market for student financial aid servicing. This level of competition is generally favorable for price discovery and can lead to more competitive pricing for the government.

Taxpayer Impact: A competitive bidding process for this essential service helps ensure that taxpayer dollars are used efficiently, driving down costs through market forces.

Public Impact

Benefits students and educational institutions by ensuring the continuity and proper servicing of federal student financial aid. Delivers essential administrative and operational services for Title IV student financial aid programs. Geographic impact is national, as it supports federal student aid programs accessible to students across the United States. Workforce implications include the employment of personnel by the contractor to manage and execute the servicing tasks.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost overruns due to the Economic Price Adjustment clause in the contract.
Reliance on a single contractor for a critical function could pose a risk if performance falters.
The specific scope of 'servicing' needs clear definition to avoid scope creep or unmet expectations.

Positive Signals

Awarded through full and open competition, indicating a competitive market and potential for best value.
Contractor's established role in higher education assistance suggests relevant expertise.
Focus on a 'critical function' implies a high level of importance and attention to service delivery.

Sector Analysis

This contract falls within the broader financial services and credit intermediation sector, specifically focusing on government-backed student loan servicing. The market for federal student loan servicing is substantial, involving significant administrative and operational complexities. This award represents a portion of the government's ongoing investment in managing its student loan portfolio, which is a key component of the higher education financing landscape.

Small Business Impact

The provided data does not indicate any specific small business set-asides or subcontracting requirements for this contract. As a large contract awarded to an established agency, the primary focus is likely on the prime contractor's capabilities. Further analysis would be needed to determine if small businesses are involved in the supply chain or subcontracting opportunities.

Oversight & Accountability

Oversight for this contract would typically reside with the Department of Education's contracting officers and program managers. The Inspector General's office may also conduct audits or investigations into the performance and financial aspects of the contract to ensure accountability and prevent fraud. Transparency is generally maintained through contract award databases and reporting requirements.

Related Government Programs

Federal Student Loan Servicing
Title IV Student Financial Aid
Higher Education Assistance Programs
Credit Intermediation Services

Risk Flags

Potential for cost escalation due to Economic Price Adjustment.
Contractor performance risk for critical function.
Scope definition clarity for servicing tasks.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $115.2 million to PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY. IGF::CT::IGF "CRITICAL FUNCTION". TASK ORDER 0007 PROVIDES SERVICING OF TITLE IV STUDENT FINANCIAL AID IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152, 124 STAT. 1029)FOR THE JANUARY 01, 2013 TO JUNE 16, 2014 TIME PERIOD.

Who is the contractor on this award?

The obligated recipient is PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $115.2 million.

What is the period of performance?

Start: 2013-01-01. End: 2013-12-17.

What is the historical spending pattern for student financial aid servicing by the Department of Education?

Historical spending on federal student financial aid servicing by the Department of Education has been substantial and consistent, reflecting the ongoing need to manage a vast portfolio of student loans. The department has historically contracted with various entities, including state agencies and private companies, to perform loan servicing functions. Spending levels can fluctuate based on legislative changes, loan volume, and the specific servicing models employed (e.g., direct servicing vs. contracted servicing). Analyzing past contract awards and appropriations for loan servicing provides insight into the scale of operations and the typical cost structures involved in managing federal student aid.

How does the performance of the Pennsylvania Higher Education Assistance Agency (PHEAA) compare to other federal student loan servicers?

Assessing the performance of PHEAA relative to other federal student loan servicers requires access to specific performance metrics and comparative data, which is not directly available in the provided contract details. Generally, federal student loan servicers are evaluated on various criteria, including borrower satisfaction, default prevention rates, timely disbursement of funds, and adherence to regulatory requirements. Agencies like PHEAA, which have a long history of managing state and federal student aid programs, often possess significant institutional knowledge and established infrastructure. However, performance can vary, and the Department of Education employs oversight mechanisms to monitor all servicers and ensure compliance and effectiveness.

What are the primary risks associated with a Fixed Price with Economic Price Adjustment (FPEPA) contract for financial aid servicing?

The primary risks associated with an FPEPA contract for financial aid servicing revolve around cost volatility and potential for overspending. While the fixed-price component provides a baseline, the economic price adjustment allows for increases based on specified economic indicators (e.g., inflation, labor costs). This can lead to costs exceeding initial budget projections if economic conditions are unfavorable. For the government, the risk is paying more than anticipated. For the contractor, the risk is that the adjustments may not fully cover unforeseen cost increases. Effective management requires careful monitoring of the economic indicators and clear contract language defining the adjustment triggers and caps.

What is the significance of servicing Title IV student financial aid in accordance with the Health Care and Education Reconciliation Act of 2010?

Servicing Title IV student financial aid in accordance with Section 2212 of the Health Care and Education Reconciliation Act of 2010 (HCERA) is significant because it pertains to the administration of federal student financial assistance programs authorized under Title IV of the Higher Education Act. HCERA, enacted in 2010, included provisions that impacted federal student aid, such as changes to loan origination and servicing. Ensuring compliance with these specific legislative mandates is crucial for the proper functioning of federal student aid, affecting millions of students and institutions by dictating how aid is disbursed, managed, and accounted for.

How does the number of bidders (4) impact the value for money in this contract?

A competition with 4 bidders generally suggests a healthy level of market interest and a reasonable degree of competition. This number typically provides enough vendors to foster price discovery and encourage competitive proposals, increasing the likelihood of achieving good value for money. If there were significantly fewer bidders (e.g., 1 or 2), it might indicate market limitations or potential issues with the solicitation, potentially leading to higher prices. Conversely, an extremely large number of bidders might suggest administrative overhead in evaluating proposals but usually points to strong competition. Therefore, 4 bidders is often seen as a positive indicator for value.

Industry Classification

NAICS: Finance and Insurance › Activities Related to Credit Intermediation › Other Activities Related to Credit Intermediation

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

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 4

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Parent Company: Commonwealth of Pennsylvania (UEI: 003027539)

Address: 1200 NORTH SEVENTH STREET, HARRISBURG, PA, 17102

Business Categories: Category Business, Government, U.S. National Government, Not Designated a Small Business, U.S. Regional/State Government

Financial Breakdown

Contract Ceiling: $115,464,460

Exercised Options: $115,464,460

Current Obligation: $115,164,460

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0014

IDV Type: IDC

Timeline