Department of Education's defaulted student loan collection contract awarded to Collection Technology Inc. for over $20.5M

Contract Overview

Contract Amount: $20,518,237 ($20.5M)

Contractor: Collection Technology Incorporated

Awarding Agency: Department of Education

Start Date: 2004-09-30

End Date: 2009-03-31

Contract Duration: 1,643 days

Daily Burn Rate: $12.5K/day

Competition Type: COMPETITIVE DELIVERY ORDER

Number of Offers Received: 40

Pricing Type: FIXED PRICE INCENTIVE

Sector: Other

Official Description: COLLECT ON DEFAULTED STUDENTS LOANS FOR THE U.S. DEPARTMENT OF EDUCATION

Place of Performance

Location: BURBANK, LOS ANGELES County, CALIFORNIA, 91502

State: California Government Spending

Plain-Language Summary

Department of Education obligated $20.5 million to COLLECTION TECHNOLOGY INCORPORATED for work described as: COLLECT ON DEFAULTED STUDENTS LOANS FOR THE U.S. DEPARTMENT OF EDUCATION Key points: 1. Contract awarded via competitive delivery order, suggesting multiple bids were considered. 2. Fixed Price Incentive contract type aims to control costs while incentivizing performance. 3. Contract duration of over 4 years indicates a significant, long-term need. 4. Focus on defaulted student loan collection addresses a critical financial management area for the Department. 5. The contract's value places it as a substantial investment in debt recovery services. 6. Performance context is crucial to assess if the collection rates justify the expenditure.

Value Assessment

Rating: fair

Benchmarking the value-for-money for this specific contract is challenging without detailed performance metrics and comparison to similar defaulted loan collection contracts. The fixed-price incentive structure suggests an attempt to manage costs, but the ultimate value depends on the effectiveness of Collection Technology Incorporated in recovering funds. Without data on recovery rates versus collection costs, a definitive value assessment is difficult. However, the contract's substantial value indicates a significant investment in this service area.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded as a 'COMPETITIVE DELIVERY ORDER,' indicating that it was competed among multiple potential offerors. This suggests a level of market engagement and potential for price discovery. The fact that it was a delivery order under a larger contract vehicle implies that the initial competition for the vehicle itself was robust. The number of bidders for this specific delivery order is not provided, but the competitive nature is a positive sign for price negotiation.

Taxpayer Impact: A competitive award process generally benefits taxpayers by fostering lower prices and encouraging efficient service delivery through market forces.

Public Impact

Benefits the U.S. Department of Education by aiding in the recovery of defaulted student loan funds. Services delivered include the collection of debts owed by former students. Geographic impact is national, covering all defaulted student loans managed by the Department. Workforce implications may include specialized roles in debt collection and account management within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Lack of specific performance metrics makes it difficult to assess the true effectiveness and value for money.
The fixed-price incentive contract type requires careful monitoring to ensure the incentives align with optimal taxpayer outcomes.
Potential for high overhead costs associated with large-scale debt collection operations.
The long contract duration could lead to complacency if not actively managed and reviewed.

Positive Signals

Awarded through a competitive process, suggesting potential for cost efficiencies.
The fixed-price incentive structure aims to align contractor performance with desired outcomes.
Focus on defaulted student loans addresses a specific, important financial management need for the government.

Sector Analysis

The federal sector for debt collection services is a specialized niche within professional services. This contract falls under the broader category of financial services and administrative support. The market for student loan servicing and collection is significant, with various government and private entities involved. Benchmarking this contract's value requires comparison to other federal contracts for similar debt collection services, particularly those managed by the Department of Education or Treasury.

Small Business Impact

Information regarding small business set-asides or subcontracting plans is not explicitly provided in the data. The contract was awarded as a competitive delivery order, and without further details on the prime contractor's size or subcontracting requirements, its direct impact on the small business ecosystem remains unclear. It is possible that smaller firms could be involved as subcontractors if the prime contractor utilizes them for specialized collection activities.

Oversight & Accountability

Oversight for this contract would primarily reside with the U.S. Department of Education's contracting officers and program managers. Accountability measures are typically embedded within the contract's performance standards and reporting requirements, especially given the fixed-price incentive structure. Transparency would be enhanced through regular performance reviews and public reporting of contract data, though specific details on collection success rates may be sensitive. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected.

Related Government Programs

Federal Student Aid (FSA)
Department of Education Financial Management
Government Debt Collection Services
Treasury Offset Program

Risk Flags

Performance metrics not readily available for value assessment.
Potential for high operational costs in debt collection.
Contract duration may limit flexibility.
Data security risks associated with sensitive financial information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $20.5 million to COLLECTION TECHNOLOGY INCORPORATED. COLLECT ON DEFAULTED STUDENTS LOANS FOR THE U.S. DEPARTMENT OF EDUCATION

Who is the contractor on this award?

The obligated recipient is COLLECTION TECHNOLOGY INCORPORATED.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $20.5 million.

What is the period of performance?

Start: 2004-09-30. End: 2009-03-31.

What is the historical spending pattern for defaulted student loan collection services by the Department of Education?

Historical spending on defaulted student loan collection by the Department of Education has varied over the years, influenced by economic conditions, federal policy changes regarding loan forgiveness and repayment options, and the overall volume of defaulted loans. The Department utilizes a mix of in-house efforts and contracts with private collection agencies and law firms. Major contracts often span multiple years and can range from tens to hundreds of millions of dollars cumulatively, depending on the scope and duration. Analyzing specific contract awards like the one to Collection Technology Incorporated provides a snapshot, but a comprehensive view requires aggregating data across numerous contracts and fiscal years to identify trends in spending, contractor types, and average contract values.

How does the performance of Collection Technology Incorporated compare to other contractors in collecting defaulted student loans?

Direct comparison of Collection Technology Incorporated's performance against other contractors is difficult without access to specific, granular performance data for this contract and its peers. Key performance indicators (KPIs) for such contracts typically include recovery rates (percentage of debt collected), cost per dollar collected, timeliness of collections, and compliance with regulations. The Department of Education likely tracks these metrics internally. Publicly available data often focuses on contract awards and spending rather than detailed performance outcomes. A thorough assessment would require analyzing the contractor's success in meeting contractual KPIs, such as those tied to the incentive portion of the fixed-price incentive contract, and benchmarking these against industry standards and other government contracts for similar services.

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

The primary risks associated with this contract include potential inefficiencies in collection efforts leading to a lower return on investment for taxpayers, contractor non-compliance with federal debt collection regulations (e.g., Fair Debt Collection Practices Act), data security breaches of sensitive student financial information, and potential reputational damage if collection practices are perceived as overly aggressive or unfair. Furthermore, the fixed-price incentive structure, while designed to control costs, carries the risk that the incentives may not perfectly align with the Department's overall objectives or that the baseline cost estimates are inaccurate, leading to unexpected expenditures or insufficient motivation for the contractor. The long duration also poses a risk of vendor lock-in or reduced flexibility.

What is the typical cost structure for federal defaulted student loan collection contracts?

The cost structure for federal defaulted student loan collection contracts typically involves a combination of base fees, performance-based incentives, and sometimes commissions based on recovered amounts. Contractors often incur significant operational costs related to staffing, technology (databases, communication systems), skip tracing, and legal processes. Fixed-price incentive contracts, like this one, aim to establish a target cost and target profit, with adjustments based on actual costs incurred. The government pays a share of cost overruns or provides a share of cost savings, up to certain limits, while also adjusting the fee based on performance against targets. This structure incentivizes the contractor to manage costs effectively while achieving collection goals.

How does the 'COMPETITIVE DELIVERY ORDER' award mechanism impact the overall value and efficiency of this contract?

Awarding this contract as a 'COMPETITIVE DELIVERY ORDER' suggests that it was competed under an existing indefinite-delivery/indefinite-quantity (IDIQ) contract or similar vehicle. This mechanism generally enhances value and efficiency by leveraging pre-negotiated terms and conditions from the parent contract, reducing the time and administrative burden of a full, standalone procurement. The competitive nature of the delivery order itself means that multiple vendors likely vied for this specific task, fostering price competition and allowing the Department of Education to select the offer that provides the best value based on price, technical approach, and other factors. This process typically leads to more favorable pricing and service terms compared to a sole-source award.

Industry Classification

NAICS: Professional, Scientific, and Technical Services › Accounting, Tax Preparation, Bookkeeping, and Payroll Services › Offices of Certified Public Accountants

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

Competition & Pricing

Extent Competed: COMPETITIVE DELIVERY ORDER

Offers Received: 40

Pricing Type: FIXED PRICE INCENTIVE (L)

Contractor Details

Address: 99 E PROVIDENCIA AVE, BURBANK, CA, 91502

Business Categories: Category Business, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $20,528,237

Exercised Options: $20,528,237

Current Obligation: $20,518,237

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS23F0227N

IDV Type: FSS

Timeline