Department of Education contract for student aid servicing awarded to Pennsylvania Higher Education Assistance Agency for over $183 million

Contract Overview

Contract Amount: $183,474,509 ($183.5M)

Contractor: Pennslyvania Higher Education Assistance Agency

Awarding Agency: Department of Education

Start Date: 2016-09-01

End Date: 2017-12-31

Contract Duration: 486 days

Daily Burn Rate: $377.5K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: IGF::CT::IGF SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2016 THROUGH 8/31/2017. PROVIDES FUNDING FOR TITLE IV AID SERVICING, THROUGH APPROXIMATELY 12/31/2016. PROVIDES FUNDING FOR THE DELINQUENCY REDUCTION COMPENSATION PROGRAM, IN A NOT-TO-EXCEED AMOUNT OF $500,000 PER QUARTER AND $2,000,000 ANNUALLY.

Place of Performance

Location: HARRISBURG, DAUPHIN County, PENNSYLVANIA, 17102

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Education obligated $183.5 million to PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY for work described as: IGF::CT::IGF SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2016 THROUGH 8/31/2017. PROVIDES FUNDING FOR TITLE IV AID SERVICING, THROUGH APPROXIMATELY 12/31/2016. PROVIDES FUNDING FOR THE DELINQUENCY REDUCTION COMPENSATION PROGRAM, IN A NOT-TO-EXCEED AMOUNT OF $500,000 P… Key points: 1. The contract supports critical Title IV student financial aid servicing functions. 2. Funding is allocated for the Delinquency Reduction Compensation Program, capped at $2 million annually. 3. The contract duration spans over 486 days, indicating a significant operational period. 4. The North American Industry Classification System (NAICS) code 522390 suggests activities related to credit intermediation. 5. The contract was awarded under a firm fixed-price structure, providing cost certainty. 6. The agency's historical performance and capacity for managing large-scale financial aid programs are key to successful execution.

Value Assessment

Rating: good

The contract value of over $183 million for student financial aid servicing appears substantial, reflecting the scale of federal student loan programs. Benchmarking against similar large-scale IT and financial servicing contracts within the Department of Education would provide a clearer picture of value for money. The firm fixed-price nature suggests a degree of cost control, but the overall value is contingent on the efficiency and effectiveness of the services rendered in managing student aid.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded through full and open competition, indicating that multiple bidders had the opportunity to submit proposals. This competitive process is generally expected to drive better pricing and service quality. The number of bidders, while not explicitly stated, is implied to be more than one due to the 'full and open' designation, suggesting a healthy market for these specialized services.

Taxpayer Impact: Full and open competition is beneficial for taxpayers as it encourages a competitive environment that can lead to more cost-effective solutions and potentially lower overall program costs for student financial aid servicing.

Public Impact

Students receiving federal financial aid benefit from the continued servicing and administration of their loans and aid programs. The Department of Education benefits from a reliable partner to manage complex financial aid operations. The contract supports the operational infrastructure necessary for the delivery of federal student financial aid. The workforce involved in servicing student loans and financial aid programs is supported by this contract.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep if program requirements evolve significantly during the contract period.
Ensuring consistent service quality across all aspects of student financial aid servicing.
Managing the transition of services if future contracts are awarded to different entities.

Positive Signals

The contract's focus on critical student financial aid servicing ensures continuity for students.
The firm fixed-price structure provides budget predictability for the Department of Education.
Awarding through full and open competition suggests a robust market and potential for competitive pricing.

Sector Analysis

This contract falls within the financial services and credit intermediation sector, specifically focusing on the administration of federal student financial aid. The market for such services involves entities with specialized expertise in loan servicing, compliance, and customer support for student borrowers. The scale of federal student aid programs necessitates large, experienced contractors capable of handling significant transaction volumes and regulatory requirements. Comparable spending benchmarks would likely be found within other large federal contracts for financial management and loan servicing.

Small Business Impact

Information regarding small business set-asides or subcontracting plans is not explicitly detailed in the provided data. As this is a large contract likely requiring specialized capabilities, the primary awardee may not be a small business. Further analysis would be needed to determine if subcontracting opportunities exist for small businesses within the scope of this agreement.

Oversight & Accountability

Oversight of this contract would typically be managed by the Department of Education's contracting officers and program managers. Accountability measures would be defined in the contract's performance work statement, with potential for performance reviews and audits. Transparency is generally maintained through contract award databases and reporting requirements, though specific operational details may be proprietary. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Federal Student Loan Programs
Student Financial Aid Administration
Credit Intermediation Services
Government Financial Management Contracts

Risk Flags

Potential for performance issues impacting student borrowers.
Cybersecurity risks associated with sensitive financial data.
Dependency on contractor for critical financial aid functions.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $183.5 million to PENNSLYVANIA HIGHER EDUCATION ASSISTANCE AGENCY. IGF::CT::IGF SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2016 THROUGH 8/31/2017. PROVIDES FUNDING FOR TITLE IV AID SERVICING, THROUGH APPROXIMATELY 12/31/2016. PROVIDES FUNDING FOR THE DELINQUENCY REDUCTION COMPENSATION PROGRAM, IN A NOT-TO-EXCEED AMOUNT OF $500,000 PER QUARTER AND $2,000,000 ANNUALLY.

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 $183.5 million.

What is the period of performance?

Start: 2016-09-01. End: 2017-12-31.

What is the historical performance record of the Pennsylvania Higher Education Assistance Agency (PHEAA) in managing federal student financial aid contracts?

PHEAA has a long-standing history of managing federal student loan programs and financial aid servicing. As a major state-based student loan authority, they have experience with large-scale operations, including loan origination, servicing, and default management. Their track record includes managing significant portfolios of federal student loans, processing payments, and providing borrower assistance. While specific performance metrics for this particular contract are not detailed, PHEAA's extensive experience suggests a capacity to handle the complexities of Title IV aid servicing. However, like any large contractor, past performance reviews and any documented issues or successes would provide a more granular understanding of their capabilities and reliability in fulfilling federal obligations.

How does the awarded amount of over $183 million compare to similar federal contracts for student financial aid servicing?

The awarded amount of over $183 million for a contract spanning approximately 15 months (September 2016 to December 2017) is substantial, reflecting the significant operational scale of federal student financial aid. To benchmark this value, one would compare it to other large contracts awarded by the Department of Education or other agencies for similar services, such as loan servicing, debt collection, or financial program administration. Factors like the number of borrowers served, the complexity of services (e.g., default aversion, repayment plan management), and the contract duration are crucial for a fair comparison. Without specific data on comparable contracts' values, durations, and scopes, it's challenging to definitively state if this represents excellent or fair value. However, the 'full and open competition' award suggests market forces were at play to determine a competitive price.

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

The primary risks associated with this contract include potential disruptions in student financial aid servicing, which could negatively impact student borrowers and the Department's ability to disburse and manage aid effectively. Performance risk is also significant; failure by PHEAA to meet contractual obligations regarding timely processing, accurate reporting, or borrower communication could lead to compliance issues and reputational damage. There's also a risk of cost overruns if the firm fixed-price contract doesn't adequately account for unforeseen complexities or changes in federal regulations. Cybersecurity risks are inherent in handling sensitive student financial data, requiring robust security measures from the contractor. Finally, dependency on a single contractor for critical functions poses a risk if the contractor faces financial instability or operational failures.

What is the expected effectiveness of the Delinquency Reduction Compensation Program funded under this contract?

The Delinquency Reduction Compensation Program, capped at $500,000 per quarter and $2 million annually, is designed to incentivize efforts to reduce delinquency in student loan portfolios. Its effectiveness hinges on the specific strategies and performance metrics established within the contract. Typically, such programs aim to improve borrower outreach, offer tailored repayment solutions, and implement proactive measures to prevent loans from becoming delinquent. The compensation structure likely rewards the contractor for achieving specific reduction targets. The actual effectiveness will depend on the program's design, the contractor's execution, and the overall economic conditions affecting borrowers. Data on delinquency rates before and after the program's implementation, along with borrower engagement metrics, would be necessary to quantitatively assess its success.

How does the contract's duration of 486 days influence the overall cost and management of student financial aid servicing?

A contract duration of 486 days (approximately 16 months) provides a stable period for the Pennsylvania Higher Education Assistance Agency (PHEAA) to manage student financial aid servicing operations without immediate concerns about contract renewal. This stability can lead to more efficient operations and potentially better cost management, as the contractor can invest in processes and staffing without the pressure of short-term uncertainty. For the Department of Education, a defined duration allows for predictable budgeting and planning. However, it also means that the Department needs to initiate the procurement process for subsequent contracts well in advance to ensure seamless service continuity. The cost is spread over this period, and the firm fixed-price nature means the total cost is largely predetermined, making the duration a key factor in how that total cost is amortized.

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

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: $183,474,509

Exercised Options: $183,474,509

Current Obligation: $183,474,509

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0014

IDV Type: IDC

Timeline