Department of Education's $248.8M student loan debt collection contract awarded to Allied Interstate LLC

Contract Overview

Contract Amount: $248,786,925 ($248.8M)

Contractor: Allied Interstate LLC

Awarding Agency: Department of Education

Start Date: 2009-07-01

End Date: 2015-04-21

Contract Duration: 2,120 days

Daily Burn Rate: $117.4K/day

Competition Type: COMPETITIVE DELIVERY ORDER

Number of Offers Received: 26

Pricing Type: FIXED PRICE INCENTIVE

Sector: Other

Official Description: PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS.

Place of Performance

Location: MINNEAPOLIS, HENNEPIN County, MINNESOTA, 55426

State: Minnesota Government Spending

Plain-Language Summary

Department of Education obligated $248.8 million to ALLIED INTERSTATE LLC for work described as: PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS. Key points: 1. The contract focused on debt collection and administrative resolution for federal student loans. 2. Allied Interstate LLC was the primary contractor for these services. 3. The contract spanned from July 2009 to April 2015. 4. This initiative aimed to recover funds from defaulted federal student loans. 5. The contract type was a competitive delivery order under a larger program. 6. The total award value reached approximately $248.8 million.

Value Assessment

Rating: fair

Benchmarking the value for money on this specific contract is challenging without detailed performance metrics and cost breakdowns. However, the significant award value suggests a substantial effort in debt recovery. Comparing it to similar contracts would require access to data on collection rates, recovery costs, and the total debt portfolio managed. The fixed-price incentive structure suggests an attempt to align contractor performance with recovery goals, but the ultimate value depends on the effectiveness of these incentives and the overall recovery efficiency.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded through a competitive delivery order process, indicating that multiple vendors likely had the opportunity to bid. The 'full-and-open' competition suggests a robust process designed to solicit the best offers. The number of bidders and the specific terms of the competition would provide further insight into the level of price discovery achieved. A competitive environment generally leads to more favorable pricing for the government.

Taxpayer Impact: A competitive award process helps ensure that taxpayer dollars are used efficiently by driving down costs and encouraging high-quality service delivery through market forces.

Public Impact

Federal student loan borrowers who have defaulted on their loans are directly impacted by these collection activities. The services delivered include administrative resolution and collection of outstanding debts. The geographic impact is national, covering all federal student loan programs. The contract supports the financial stability of federal student aid programs by recovering defaulted funds. The workforce implications include employment opportunities within Allied Interstate LLC and potentially within the Department of Education's oversight functions.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for aggressive collection tactics impacting borrowers.
Effectiveness of collection efforts in relation to administrative costs.
Data privacy and security of borrower information during collection.

Positive Signals

Competitive award process likely secured favorable pricing.
Focus on administrative resolution aims for efficient debt recovery.
Contract duration suggests a sustained need and established program.

Sector Analysis

The federal student loan program is a massive sector within the U.S. economy, involving trillions of dollars in outstanding debt. Contracts for debt collection and servicing are crucial for managing defaults and ensuring the program's financial health. This contract fits within the broader financial services and government contracting sector, specifically focusing on accounts receivable and debt recovery. Comparable spending benchmarks would involve looking at other large-scale debt collection contracts, both within student aid and other federal agencies managing delinquent debts.

Small Business Impact

Information regarding small business set-asides or subcontracting plans for this specific contract is not readily available in the provided data. Typically, large contracts may include provisions for small business participation. Without specific details, it's difficult to assess the direct impact on the small business ecosystem. However, the nature of large-scale debt collection often favors established firms with significant infrastructure and experience.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education, likely through its Federal Student Aid (FSA) office. Accountability measures would be embedded in the contract terms, performance standards, and reporting requirements. Transparency is generally maintained through contract award databases and public reporting, though specific operational details of collection activities may be sensitive. Inspector General jurisdiction would apply to any allegations of fraud, waste, or abuse related to the contract.

Related Government Programs

Federal Student Aid Programs
Department of Education Debt Management
Government Debt Collection Services
Financial Services Contracts

Risk Flags

Potential for aggressive collection practices
Data privacy and security concerns
Effectiveness of recovery efforts vs. cost

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $248.8 million to ALLIED INTERSTATE LLC. PRIVATE COLLECTION AGENCY PERFORMS COLLECTION AND ADMINISTRATIVE RESOLUTION ACTIVITIES ON DEBTS RESULTING FROM NON-PAYMENT OF STUDENT LOANS MADE UNDER THE VARIOUS FEDERAL STUDENT AID LOAN PROGRAMS.

Who is the contractor on this award?

The obligated recipient is ALLIED INTERSTATE LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $248.8 million.

What is the period of performance?

Start: 2009-07-01. End: 2015-04-21.

What was the historical spending pattern for federal student loan debt collection prior to and following this contract?

Analyzing historical spending patterns for federal student loan debt collection requires access to detailed budget and contract data over an extended period. Prior to this $248.8 million contract (2009-2015), the Department of Education would have utilized various methods and contractors for debt collection. Spending would fluctuate based on the volume of defaulted loans and the chosen collection strategies. Following this contract, the Department has continued to evolve its approach, potentially shifting to different contractors, in-house efforts, or technological solutions. Recent trends show a significant increase in federal student loan debt, which likely correlates with increased spending on servicing and collection, though the specific allocation to third-party collectors versus internal operations can vary. Understanding these patterns involves tracking the total debt portfolio, delinquency rates, and the aggregate value of contracts awarded for collection services over time.

How did Allied Interstate LLC's performance on this contract compare to other debt collection agencies serving the federal government?

A direct comparison of Allied Interstate LLC's performance on this specific Department of Education contract against other federal debt collection agencies is challenging without access to standardized performance metrics and comparative data. Key performance indicators for debt collection typically include recovery rates (percentage of debt collected), cost per dollar recovered, compliance with regulations (e.g., FDCPA), and borrower satisfaction or complaint levels. If the Department of Education conducted performance evaluations or used a contractor performance assessment reporting system (CPARS), that data would be invaluable. Generally, agencies are evaluated on their ability to meet or exceed targets for debt recovery while adhering to legal and ethical standards. Without such specific comparative data, we can only infer that the competitive nature of the award suggests Allied Interstate was deemed capable of meeting the government's requirements at the time of bidding.

What were the primary risks associated with this student loan debt collection contract, and how were they managed?

The primary risks associated with this student loan debt collection contract likely included: 1) **Compliance Risk:** Ensuring adherence to the Fair Debt Collection Practices Act (FDCPA) and other relevant consumer protection laws to avoid legal challenges and reputational damage. 2) **Performance Risk:** The possibility that Allied Interstate might not achieve the targeted recovery rates, leading to lower-than-expected returns for the government. 3) **Data Security Risk:** Protecting sensitive borrower information from breaches or misuse. 4) **Reputational Risk:** Negative public perception or borrower complaints regarding aggressive collection practices. Management strategies would typically involve robust contract oversight by the Department of Education, clear performance metrics and incentives, regular audits, strict data security protocols, and defined procedures for handling borrower disputes and complaints. The fixed-price incentive (FPI) contract type itself was a mechanism to mitigate performance risk by incentivizing the contractor to achieve specific outcomes.

What was the total amount of debt managed under this contract, and what was the estimated recovery rate?

The provided data indicates a total award value of $248,786,924.59 for the contract period (July 1, 2009 - April 21, 2015). However, this figure represents the total amount paid to Allied Interstate LLC for their services, not the total amount of debt managed or recovered. To determine the total debt managed, one would need access to the Department of Education's records detailing the portfolio of defaulted student loans assigned to the contractor. Similarly, calculating the recovery rate would require knowing the total amount of debt that was successfully collected by Allied Interstate during the contract period. This recovery rate is a critical metric for assessing the contract's effectiveness and value for money. Without these specific figures, it's impossible to provide an exact recovery rate or the precise volume of debt handled.

How did the 'Miscellaneous Financial Investment Activities' NAICS code relate to the services provided under this contract?

The North American Industry Classification System (NAICS) code 523999, 'Miscellaneous Financial Investment Activities,' is a broad category that encompasses a variety of financial services not elsewhere classified. In the context of this contract, it likely served as a general classification for the financial activities involved in debt collection and administrative resolution of defaulted federal student loans. While debt collection is a specific service, it falls under the umbrella of financial management and investment recovery, particularly when dealing with financial assets like student loans. This NAICS code suggests that the contract's scope extended beyond simple collection to potentially include aspects of financial analysis, asset management, and resolution strategies related to the defaulted loan portfolio, aligning with the broader 'financial investment activities' description.

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

Solicitation Procedures: NEGOTIATED PROPOSAL/QUOTE

Offers Received: 26

Pricing Type: FIXED PRICE INCENTIVE (L)

Evaluated Preference: NONE

Contractor Details

Parent Company: Allied Interstate LLC (UEI: 965995553)

Address: 435 FORD RD STE 800, MINNEAPOLIS, MN, 55426

Business Categories: Category Business, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $248,786,975

Exercised Options: $248,786,925

Current Obligation: $248,786,925

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS23F0266K

IDV Type: FSS

Timeline