Department of Education spent over $230M on debt collection services, with Transworld Systems Inc. as the primary contractor

Contract Overview

Contract Amount: $230,130,676 ($230.1M)

Contractor: Transworld Systems Inc.

Awarding Agency: Department of Education

Start Date: 2009-07-01

End Date: 2015-04-21

Contract Duration: 2,120 days

Daily Burn Rate: $108.6K/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: FORT WASHINGTON, MONTGOMERY County, PENNSYLVANIA, 19034

State: Pennsylvania Government Spending

Plain-Language Summary

Department of Education obligated $230.1 million to TRANSWORLD SYSTEMS INC. 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 administrative resolution of defaulted federal student loans. 2. A significant portion of the spending was allocated to debt collection activities. 3. The contract duration spanned nearly six years, indicating a long-term need for these services. 4. The fixed-price incentive contract type suggests performance-based payment structures. 5. The agency utilized a competitive delivery order process for this requirement. 6. The services provided are crucial for recovering federal funds from defaulted loans.

Value Assessment

Rating: good

The total award of over $230 million for debt collection services appears substantial, but it must be viewed in the context of the volume and value of defaulted student loans managed. Benchmarking this against similar large-scale debt recovery contracts is challenging without more specific performance metrics and recovery rates. However, the competitive nature of the delivery order suggests that pricing was subject to some market pressure. The fixed-price incentive structure implies that the government aimed to incentivize efficient and effective collection, potentially leading to better value than a purely cost-reimbursable contract.

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 presence of 26 delivery orders suggests a robust competition at the task order level under a larger indefinite-delivery/indefinite-quantity (IDIQ) contract or similar vehicle. This level of competition is generally favorable for price discovery and ensuring the government receives competitive pricing for the services rendered.

Taxpayer Impact: A competitive award process for debt collection services helps ensure that taxpayer money is used efficiently, as vendors are incentivized to offer competitive rates to secure the business. This process aims to maximize the recovery of defaulted student loan funds while minimizing the cost to the government.

Public Impact

Federal student loan borrowers who have defaulted on their loans are directly impacted by these collection activities. The Department of Education benefits from the recovery of funds, which can be re-lent to other students. The contract supports administrative resolution processes, aiming to resolve debts outside of more costly legal actions. The services contribute to the overall financial health and sustainability of federal student aid programs. The contract's execution likely involved a workforce dedicated to debt collection and administrative support.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for aggressive collection tactics impacting borrowers.
Ensuring compliance with all federal and state debt collection regulations.
Maintaining data security and privacy for sensitive borrower information.

Positive Signals

Competitive award process likely drove efficiency and cost-effectiveness.
Fixed-price incentive structure encourages performance and recovery rates.
Long-term contract indicates sustained need and potential for established processes.

Sector Analysis

The federal student loan program is a massive sector within the broader financial services industry. This contract falls under miscellaneous financial investment activities, specifically focusing on the recovery of defaulted loans. The market for debt collection services is competitive, with numerous private agencies specializing in government and commercial debt. The Department of Education's spending in this area is a critical component of managing its loan portfolio and ensuring the financial viability of its programs.

Small Business Impact

Information regarding small business set-asides or subcontracting plans was not explicitly provided in the data. However, given the scale of the contract and the nature of debt collection services, it is possible that larger prime contractors may engage small businesses for specialized support or regional collection efforts. Further analysis would be needed to determine the extent of small business participation.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's contracting officers and program managers. The contract's fixed-price incentive structure inherently includes performance monitoring to ensure the contractor meets agreed-upon recovery targets. Transparency is typically managed through contract reporting requirements and potential audits by the Department's Inspector General, especially concerning financial recovery and compliance.

Related Government Programs

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

Risk Flags

Potential for aggressive collection practices.
Compliance with debt collection regulations.
Data privacy and security of borrower information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $230.1 million to TRANSWORLD SYSTEMS INC.. 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 TRANSWORLD SYSTEMS INC..

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $230.1 million.

What is the period of performance?

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

What were the specific performance metrics and recovery rates achieved under this contract?

Specific performance metrics and recovery rates achieved under this contract are not detailed in the provided data. However, as a Fixed Price Incentive (FPI) contract, it implies that Transworld Systems Inc. was incentivized to meet or exceed certain targets related to debt recovery. The Department of Education would have established baseline recovery goals and potentially bonus structures for exceeding them, alongside penalties for underperformance. The effectiveness of the contract would be measured by the total amount of defaulted debt recovered relative to the cost of collection services and the total value of the debt portfolio managed.

How does the total spending of $230 million compare to the total value of defaulted student loans managed during the contract period?

The total spending of $230 million represents the cost incurred by the Department of Education to manage and collect on defaulted federal student loans over the contract's duration (approximately July 2009 to April 2015). To assess value, this figure needs to be compared against the total principal and interest of the defaulted loans assigned to Transworld Systems Inc. for collection. Without knowing the total portfolio value assigned, it's difficult to determine the exact return on investment. However, debt collection contracts are typically structured so that the recovered amounts significantly exceed the collection costs, making the $230 million expenditure a necessary investment to recoup potentially billions in defaulted loan principal.

What were the primary risks associated with this contract, and how were they mitigated?

Key risks associated with this contract likely included: 1) Contractor performance failure (i.e., not meeting recovery targets), mitigated by the Fixed Price Incentive structure which financially penalizes underperformance. 2) Non-compliance with debt collection laws and regulations (e.g., Fair Debt Collection Practices Act), mitigated through contract clauses requiring adherence to laws and potential audits. 3) Data security breaches of sensitive borrower information, mitigated by stringent data security requirements and contractual obligations for safeguarding information. 4) Reputational risk for the Department of Education due to aggressive collection practices, managed through oversight and adherence to ethical collection standards.

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

The provided data focuses solely on this specific contract awarded to Transworld Systems Inc. from 2009 to 2015. To understand historical spending patterns, one would need to examine the Department of Education's budget allocations and contract awards for debt collection services in the years preceding 2009 and following 2015. Federal student loan default rates fluctuate based on economic conditions and program policies, which in turn influence the volume of debt requiring collection and the associated spending. Analyzing broader trends would reveal if this $230 million contract represented a typical, increased, or decreased level of investment in debt collection services over time.

What is Transworld Systems Inc.'s track record with federal contracts, particularly in debt collection?

Transworld Systems Inc. (TSI) has a significant history of performing debt collection services for various government agencies, including the Department of Education. Their track record includes managing large portfolios of defaulted federal student loans, as evidenced by this contract. Government contract databases often show numerous awards and task orders issued to TSI over the years. While specific performance details for each contract vary, their continued engagement by federal entities suggests a capacity to meet contractual requirements. However, like many large collection agencies, they may have faced scrutiny or compliance reviews related to collection practices, which is common in this industry.

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: Platinum Equity, LLC (UEI: 837601723)

Address: 500 VIRGINIA DR STE 514, FORT WASHINGTON, PA, 19034

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

Financial Breakdown

Contract Ceiling: $231,206,192

Exercised Options: $231,206,192

Current Obligation: $230,130,676

Actual Outlays: $-11,923

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS23F0240K

IDV Type: FSS

Timeline