Department of Education awards $186.6M for student financial aid servicing, with a $51.3M task order

Contract Overview

Contract Amount: $186,570,150 ($186.6M)

Contractor: Pennslyvania Higher Education Assistance Agency

Awarding Agency: Department of Education

Start Date: 2017-09-01

End Date: 2018-08-31

Contract Duration: 364 days

Daily Burn Rate: $512.6K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::CT::IGF CRITICAL FUNCTION BASE AWARD: 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 PERIOD OF JUNE 17, 2009 TO JUNE 16, 2019. TASK ORDER: 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 PERIOD OF SEPTEMBER 1, 2017 TO AUGUST 31, 2018.

Place of Performance

Location: HARRISBURG, DAUPHIN County, PENNSYLVANIA, 17102

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Education obligated $186.6 million to PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY for work described as: IGF::CT::IGF CRITICAL FUNCTION BASE AWARD: 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 PERIOD OF JUNE 17, 2009 TO JUNE 16, 2019. TASK ORDER: SE… Key points: 1. Contract focuses on critical function of servicing Title IV student financial aid. 2. Awarded under full and open competition, indicating broad market participation. 3. Task order period is one year, suggesting a need for ongoing operational support. 4. The base award covers a decade, highlighting long-term program requirements. 5. Contract type is Firm Fixed Price, which shifts cost risk to the contractor. 6. The North American Industry Classification System (NAICS) code 522390 points to credit intermediation activities.

Value Assessment

Rating: good

The total award of $186.6 million over 10 years for student financial aid servicing appears reasonable given the critical nature of the service. The task order of $51.3 million for one year is a significant portion of the base award, indicating substantial activity within that period. Benchmarking against similar large-scale student loan servicing contracts would provide a more precise value-for-money assessment, but the scale suggests a complex and vital operation.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, suggesting that multiple bidders had the opportunity to compete for the work. The presence of four bids (no: 4) indicates a healthy level of interest and competition for this significant contract. This competitive process is expected to drive better pricing and service quality.

Taxpayer Impact: Full and open competition generally benefits taxpayers by fostering a competitive environment that can lead to lower prices and more innovative solutions, maximizing the value of federal dollars spent.

Public Impact

Students and educational institutions benefit from the reliable servicing of Title IV financial aid programs. Ensures compliance with federal regulations related to student loans and grants. Supports the Department of Education's mission to promote educational opportunity. The contract's geographic impact is national, covering all recipients of federal student aid. Likely involves a workforce dedicated to loan servicing, customer support, and administrative functions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for vendor lock-in if the contractor becomes indispensable over the long base award period.
Reliance on a single entity for critical financial aid servicing could pose systemic risk if performance falters.
Ensuring data security and privacy for sensitive student financial information is paramount.

Positive Signals

Awarded through full and open competition, suggesting a robust selection process.
Firm Fixed Price contract structure aligns contractor incentives with cost control.
The long base award period (10 years) indicates a stable, long-term need for these essential services.

Sector Analysis

The student financial aid servicing sector is a critical component of the education finance industry. This contract falls under the broader financial services and credit intermediation sector, specifically focusing on government-backed student loan programs. The market for such services is substantial, involving entities experienced in managing large volumes of financial transactions, compliance, and customer service. Comparable spending benchmarks would likely be found within other large government contracts for financial processing and loan servicing.

Small Business Impact

The data indicates this contract was awarded under full and open competition and does not specify any small business set-asides. While the prime contractor, Pennsylvania Higher Education Assistance Agency (PHEAA), is a state agency, it's important to understand if subcontracting opportunities are made available to small businesses. The scale of this contract might lend itself to specialized subcontracting roles, but without explicit set-aside goals, the direct impact on the small business ecosystem is uncertain.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's program offices responsible for student financial aid. The contract's performance is likely monitored through regular reporting, performance metrics, and potentially site visits. Given the critical nature of financial aid, there may be specific Inspector General (IG) jurisdiction for fraud, waste, and abuse, ensuring accountability and transparency in the servicing of federal funds.

Related Government Programs

Federal Student Loan Program
Pell Grants Administration
Higher Education Act Programs
Department of Education Financial Management Systems

Risk Flags

Long-term contract duration may reduce flexibility for adopting new technologies or processes.
Performance monitoring is crucial to ensure service quality over the contract's life.
Cybersecurity and data privacy are critical risk areas for financial aid servicing.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $186.6 million to PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY. IGF::CT::IGF CRITICAL FUNCTION BASE AWARD: 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 PERIOD OF JUNE 17, 2009 TO JUNE 16, 2019. TASK ORDER: 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 PERIOD OF SEPTEMBER 1, 2017 TO AUGUST 31, 2018

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 $186.6 million.

What is the period of performance?

Start: 2017-09-01. End: 2018-08-31.

What is the track record of the Pennsylvania Higher Education Assistance Agency (PHEAA) in servicing federal student financial aid programs?

The Pennsylvania Higher Education Assistance Agency (PHEAA) has a long history of servicing federal student financial aid. As a state agency, it has been involved in managing and servicing student loans and grants for decades. Its experience includes handling large volumes of financial transactions, managing borrower communications, and ensuring compliance with federal regulations. PHEAA has previously held significant federal contracts for these services, demonstrating its capacity and expertise. However, like any large-scale service provider, it has faced scrutiny and challenges in the past regarding operational efficiency and customer service, which are typical for entities managing complex federal programs of this magnitude.

How does the $51.3 million task order for one year compare to historical spending on student financial aid servicing by the Department of Education?

The $51.3 million task order represents a substantial portion of the overall $186.6 million base award, indicating a significant operational period within the 2017-2018 timeframe. To compare this to historical spending, one would need to analyze annual expenditures for student financial aid servicing contracts over previous years. The Department of Education manages numerous contracts for loan servicing, default aversion, and related activities. A direct comparison would involve identifying similar large-scale servicing contracts and their annual values. Given that this task order is for a critical function and covers a full year of operations, its value suggests a significant operational scale, likely aligning with or exceeding the annual costs of comparable servicing contracts in prior years, especially considering inflation and program volume.

What are the primary risks associated with relying on a single contractor for servicing Title IV student financial aid?

Relying on a single contractor for servicing Title IV student financial aid presents several key risks. Firstly, there's a risk of vendor lock-in, where the government becomes heavily dependent on the contractor's systems and processes, making transitions difficult and costly. Secondly, performance degradation is a concern; if the contractor's service quality declines, it could impact millions of students and educational institutions, leading to processing errors, communication failures, and compliance issues. Thirdly, a single point of failure exists: any major operational disruption, cybersecurity breach, or financial instability within the contractor could severely disrupt the flow of federal student aid. Finally, reduced competition over time could lead to complacency and potentially higher costs in future contract renewals.

How effective is the Firm Fixed Price (FFP) contract type in ensuring value for money in student financial aid servicing?

The Firm Fixed Price (FFP) contract type is generally effective in ensuring value for money for the government in services like student financial aid servicing, particularly for well-defined tasks. Under an FFP contract, the contractor assumes most of the cost risk, agreeing to a fixed price regardless of their actual costs. This incentivizes the contractor to manage their expenses efficiently and deliver the service within the agreed budget. For routine, predictable services like loan servicing, where the scope of work is clear, FFP can lead to cost savings for the government. However, if unforeseen complexities arise or the scope of work needs significant adjustments, managing changes under an FFP contract can become challenging and potentially lead to disputes or costly modifications.

What are the implications of the 10-year base award period for the long-term stability and cost-effectiveness of student financial aid servicing?

A 10-year base award period for student financial aid servicing provides significant long-term stability for the Department of Education and the students relying on these services. It allows the contractor to make substantial investments in infrastructure, technology, and personnel, knowing there is a long-term commitment. This stability can lead to greater operational efficiencies and potentially lower per-unit costs over time due to economies of scale and amortization of investments. From a cost-effectiveness perspective, a long-term contract can lock in prices, potentially shielding the government from market fluctuations. However, it also carries the risk of the government being locked into a contract that may become less cost-effective or technologically outdated if market conditions or technological advancements outpace the contract's terms.

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: FIRM FIXED PRICE (J)

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: $207,790,485

Exercised Options: $207,790,485

Current Obligation: $186,570,150

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0014

IDV Type: IDC

Timeline