Department of Education awarded $34.2M to FMS Investment Corp for student loan default collection services

Contract Overview

Contract Amount: $34,228,619 ($34.2M)

Contractor: FMS Investment Corp

Awarding Agency: Department of Education

Start Date: 2004-09-30

End Date: 2011-10-01

Contract Duration: 2,557 days

Daily Burn Rate: $13.4K/day

Competition Type: COMPETITIVE DELIVERY ORDER

Number of Offers Received: 5

Pricing Type: FIXED PRICE INCENTIVE

Sector: Other

Official Description: TO PROVIDE COLLECTION ON DEFAULTED STUDENT LOANS.

Place of Performance

Location: SCHAUMBURG, COOK County, ILLINOIS, 60173, UNITED STATES OF AMERICA

State: Illinois Government Spending

Plain-Language Summary

Department of Education obligated $34.2 million to FMS INVESTMENT CORP for work described as: TO PROVIDE COLLECTION ON DEFAULTED STUDENT LOANS. Key points: 1. Contract awarded for collection services, indicating a need to recover defaulted student loan funds. 2. The fixed-price incentive contract structure suggests a focus on performance-based outcomes. 3. A duration of over 2500 days points to a long-term engagement for debt recovery. 4. The contract was competitively awarded, implying multiple bidders vied for the opportunity. 5. The specific NAICS code 523999 covers miscellaneous financial investment activities, aligning with debt collection. 6. The award was a delivery order, suggesting it was part of a larger indefinite-delivery/indefinite-quantity (IDIQ) contract.

Value Assessment

Rating: fair

Benchmarking the value of this contract is challenging without knowing the specific recovery rates and the total value of defaulted loans managed. However, the fixed-price incentive structure implies that the government sought to control costs while incentivizing efficient collection. Comparing this to other contracts for similar services would require access to detailed performance metrics and recovery data from other agencies or previous contracts.

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 under full and open competition. This suggests that multiple vendors had the opportunity to bid on the requirement. The presence of competition is generally positive for price discovery and can lead to more favorable terms for the government.

Taxpayer Impact: A competitive award process helps ensure that taxpayer dollars are used efficiently by driving down costs through market forces. It provides assurance that the selected contractor offers the best value proposition among the competing firms.

Public Impact

Benefits taxpayers by facilitating the recovery of defaulted federal student loan funds, thereby reducing the net cost of the student loan program. Provides services essential for the financial health of the student loan portfolio managed by the Department of Education. The geographic impact is national, as it pertains to defaulted student loans across the United States. Workforce implications are primarily within the contractor's organization, focused on collection specialists and administrative staff.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for aggressive collection tactics impacting borrowers.
Effectiveness of collection efforts can vary significantly, impacting recovery rates.
Long contract duration may lead to complacency if not actively managed.

Positive Signals

Competitive award process suggests potential for cost-effectiveness.
Fixed-price incentive structure aligns contractor performance with government objectives.
Focus on defaulted loans addresses a critical area of financial management for the Department.

Sector Analysis

This contract falls within the Financial Services sector, specifically focusing on debt collection and financial management. The market for federal debt collection services is competitive, with numerous firms specializing in recovering delinquent government debts. The Department of Education is a significant player in this space due to the large volume of federal student loans.

Small Business Impact

The provided data indicates that small business participation (sb) was false, and there was no specific small business set-aside (ss). This suggests the contract was not specifically targeted towards small businesses, and larger, established firms likely competed for and won this award. Subcontracting opportunities for small businesses are not explicitly detailed but are possible depending on the prime contractor's strategy.

Oversight & Accountability

Oversight for this contract would typically reside with the Department of Education's contracting officers and program managers. Performance metrics and collection success rates would be key indicators for monitoring. While specific Inspector General (IG) jurisdiction isn't detailed, the Department of Education's Office of Inspector General would have oversight over potential fraud, waste, and abuse related to federal funds.

Related Government Programs

Federal Student Loan Program
Department of Education Financial Management
Government Debt Collection Services
Defaulted Loan Recovery

Risk Flags

Contract duration is lengthy, requiring sustained oversight.
Performance metrics for collection success are critical but not detailed here.
Potential for borrower complaints regarding collection practices.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $34.2 million to FMS INVESTMENT CORP. TO PROVIDE COLLECTION ON DEFAULTED STUDENT LOANS.

Who is the contractor on this award?

The obligated recipient is FMS INVESTMENT CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $34.2 million.

What is the period of performance?

Start: 2004-09-30. End: 2011-10-01.

What was the specific performance criteria tied to the 'incentive' in the Fixed Price Incentive contract type?

The 'Fixed Price Incentive' (FPI) contract type is designed to share the risks and rewards between the government and the contractor. For this specific contract, the incentive likely related to exceeding certain collection targets or achieving recovery rates above a predetermined baseline. The exact performance criteria, target costs, ceiling prices, and share ratios would be detailed in the contract's Statement of Work (SOW) and pricing clauses. Without access to the full contract document, the precise nature of the incentive cannot be determined. However, FPI contracts generally aim to motivate the contractor to control costs and maximize performance by offering a bonus for achieving or exceeding specific goals, while also establishing a ceiling to protect the government from excessive costs.

How does the $34.2 million award compare to historical spending on defaulted student loan collection by the Department of Education?

Comparing this $34.2 million award to historical spending requires a broader analysis of the Department of Education's budget and contracting history for debt collection services. This single award represents a specific contract's value over its period of performance (September 30, 2004, to October 1, 2011). The Department manages a vast portfolio of student loans, and collection efforts are ongoing. To assess its relative scale, one would need to examine annual spending on similar contracts, the total volume of defaulted loans during that period, and the average cost per dollar collected. Without this broader context, it's difficult to definitively state whether $34.2 million is high, low, or average. However, it indicates a significant investment in recovering funds from borrowers who have defaulted on their federal education loans.

What are the primary risks associated with contracting for defaulted student loan collection services?

Several risks are associated with contracting for defaulted student loan collection. A primary risk is the potential for ineffective collection efforts, leading to lower-than-expected recovery rates and a poor return on investment for the government. Conversely, there's a risk of overly aggressive or non-compliant collection practices by the contractor, which could lead to legal challenges, reputational damage for the Department, and harm to borrowers. Ensuring contractor compliance with the Fair Debt Collection Practices Act (FDCPA) and other relevant regulations is crucial. Furthermore, data security and privacy risks arise when sensitive borrower information is shared with a third-party contractor. Finally, the cost-effectiveness of outsourcing collection versus maintaining in-house capabilities needs continuous evaluation.

What is the typical success rate or recovery percentage for contracts of this nature?

The success rate or recovery percentage for defaulted student loan collection contracts can vary widely depending on several factors, including the age and amount of the defaulted debt, the economic conditions of the borrowers, and the effectiveness of the collection strategies employed by the contractor. Government agencies often set specific performance targets for recovery rates within their contracts. For instance, contracts might aim to recover a certain percentage of the principal and interest owed. However, these rates are not publicly disclosed for individual contracts. Industry benchmarks suggest that recovery rates for older or more challenging debt can be lower. The Department of Education likely monitors these metrics closely to ensure the contractor is meeting its obligations and providing value for the funds expended.

How does the 'Miscellaneous Financial Investment Activities' NAICS code relate to student loan default collection?

The North American Industry Classification System (NAICS) code 523999, 'Miscellaneous Financial Investment Activities,' is a broad category that encompasses various financial services not classified elsewhere. While not exclusively for debt collection, it can include activities related to the management and recovery of financial assets, which directly applies to collecting defaulted student loans. Federal agencies often use broad NAICS codes when a more specific one doesn't perfectly fit or when the contract involves a mix of financial services. In this context, the code likely covers the financial management and recovery aspects of dealing with defaulted loans, treating the debt portfolio as a financial asset requiring investment and management to yield returns through collection efforts.

Industry Classification

NAICS: Finance and Insurance › Other Financial Investment Activities › Miscellaneous Financial Investment Activities

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

Competition & Pricing

Extent Competed: COMPETITIVE DELIVERY ORDER

Offers Received: 5

Pricing Type: FIXED PRICE INCENTIVE (L)

Contractor Details

Address: 4938 HAMPDEN LN STE 218, BETHESDA, MD, 20814

Business Categories: Category Business, Small Business, Woman Owned Business

Financial Breakdown

Contract Ceiling: $34,228,619

Exercised Options: $34,228,619

Current Obligation: $34,228,619

Parent Contract

Parent Award PIID: GS23F0063J

IDV Type: FSS

Timeline