Department of Education's $99M contract for student loan debt collection awarded to National Recoveries Inc

Contract Overview

Contract Amount: $98,987,193 ($99.0M)

Contractor: National Recoveries Inc

Awarding Agency: Department of Education

Start Date: 2009-07-01

End Date: 2015-04-21

Contract Duration: 2,120 days

Daily Burn Rate: $46.7K/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: ANDOVER, ANOKA County, MINNESOTA, 55304

State: Minnesota Government Spending

Plain-Language Summary

Department of Education obligated $99.0 million to NATIONAL RECOVERIES 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. Contract focuses on debt collection and administrative resolution for federal student loans. 2. National Recoveries Inc. is the sole contractor for these services. 3. The contract duration spans over five years, indicating a long-term need for these services. 4. The contract type is Fixed Price Incentive, suggesting performance-based payment adjustments. 5. The North American Industry Classification System (NAICS) code 522310 points to mortgage and nonmortgage loan brokerage services. 6. The contract was awarded as a competitive delivery order, implying some level of competition. 7. The contract value is substantial, reflecting the scale of federal student loan debt. 8. The contract was awarded to a single entity, raising questions about potential alternatives.

Value Assessment

Rating: fair

Benchmarking the value for this specific contract is challenging without direct comparisons of similar debt collection services for federal student loans. The Fixed Price Incentive (FPI) contract type suggests that the government aims to incentivize efficient performance, but the final cost can vary based on achieved targets. Without detailed performance metrics and cost breakdowns, it's difficult to definitively assess if the pricing represents excellent value for money. However, the scale of the contract suggests a significant volume of debt being managed.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded as a competitive delivery order, indicating that multiple vendors likely had the opportunity to bid. The presence of 26 delivery orders suggests a structured competitive process was employed for this contract vehicle. The competitive nature of the award is a positive sign for price discovery and potentially achieving better rates for the government.

Taxpayer Impact: A competitive award process helps ensure that taxpayer funds are used efficiently by fostering a marketplace where contractors vie for the best price and service.

Public Impact

Federal student loan borrowers who have defaulted on their loans are the primary individuals impacted by these collection activities. The services delivered include administrative resolution and collection of outstanding student loan debts. The contract's geographic impact is national, covering all federal student loan programs. The contract supports administrative roles within the Department of Education, potentially impacting federal workforce needs in debt management.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for aggressive collection tactics impacting vulnerable borrowers.
Reliance on a single contractor for a critical function could pose risks if performance falters.
Lack of transparency in specific collection methodologies and success rates.

Positive Signals

Competitive award process suggests potential for cost-effectiveness.
Fixed Price Incentive contract type encourages contractor performance and efficiency.
Long contract duration indicates established processes and potential for consistent service delivery.

Sector Analysis

The federal student loan servicing and collection sector is a significant part of the financial services industry. This contract falls under the broader financial services and debt collection market, which is characterized by specialized firms that manage and recover outstanding debts. The Department of Education is a major player in this space due to the vast portfolio of federal student loans. Benchmarking against other government contracts for similar debt collection services would provide further context on the scale and pricing.

Small Business Impact

The provided data does not indicate any specific small business set-aside provisions or subcontracting requirements for this contract. Therefore, the direct impact on the small business ecosystem is not discernible from this information alone. Further analysis would be needed to determine if small businesses are involved as subcontractors or if there were opportunities missed for set-asides.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's contracting officers and program managers. Accountability measures are typically embedded within the contract terms, particularly with the Fixed Price Incentive structure, which links payment to performance. Transparency can be assessed through the availability of contract performance reports and audits, though specific details may be limited due to privacy and proprietary concerns.

Related Government Programs

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

Risk Flags

Contract awarded to a single entity.
Potential for aggressive collection practices.
Reliance on third-party performance for government function.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $99.0 million to NATIONAL RECOVERIES 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 NATIONAL RECOVERIES INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $99.0 million.

What is the period of performance?

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

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

Historical spending on student loan debt collection by the Department of Education has been substantial, reflecting the significant volume of federal student loans and the challenges associated with managing defaults. Over the years, the Department has utilized various contracting mechanisms, including competitive solicitations and task orders, to engage private collection agencies. Spending fluctuates based on economic conditions, default rates, and policy changes affecting loan repayment and collection strategies. Analyzing past contract awards, including their values, durations, and the number of contractors involved, would reveal trends in how the Department has managed its debt portfolio and the associated costs. This specific contract, valued at approximately $99 million over its term, represents a significant portion of that historical expenditure for the period it covers.

How does the performance of National Recoveries Inc. on this contract compare to industry benchmarks for student loan debt recovery?

Assessing the performance of National Recoveries Inc. against industry benchmarks requires access to specific performance data, such as recovery rates, cost per dollar collected, and borrower complaint metrics, which are not publicly detailed in the provided contract abstract. Industry benchmarks for debt collection typically focus on key performance indicators (KPIs) like the percentage of debt recovered within a certain timeframe, the efficiency of collection efforts (e.g., cost per dollar collected), and compliance with regulations. For federal student loans, the Department of Education likely has its own internal benchmarks and performance expectations. Without these specific metrics, a direct comparison is speculative. However, the competitive nature of the award and the Fixed Price Incentive (FPI) structure suggest an expectation of efficient and effective performance from the contractor.

What are the primary risks associated with outsourcing federal student loan debt collection to a private entity like National Recoveries Inc.?

Outsourcing federal student loan debt collection to private entities like National Recoveries Inc. carries several potential risks. One primary risk is reputational damage to the government if the contractor engages in aggressive, unethical, or non-compliant collection practices, which can lead to negative public perception and borrower distress. Another risk is the potential for inconsistent service quality or performance failures, which could hinder the government's ability to recover outstanding debts effectively. There's also a risk related to data security and privacy, as sensitive borrower information is shared with a third party. Furthermore, over-reliance on a single contractor could create vulnerabilities if that contractor faces financial difficulties or operational issues. The Department of Education mitigates these risks through contract oversight, performance monitoring, and adherence to strict regulatory guidelines.

What is the typical duration and value range for federal contracts of this nature (student loan debt collection)?

Federal contracts for student loan debt collection services typically vary in duration and value, influenced by factors such as the volume of delinquent loans, the specific programs being serviced, and the contracting strategy employed by the Department of Education. Contracts can range from shorter-term agreements focused on specific debt portfolios to longer-term, multi-year contracts encompassing broader collection responsibilities. Values can range from a few million dollars for smaller, targeted efforts to tens or even hundreds of millions of dollars for large-scale, comprehensive collection services, as seen with this contract for National Recoveries Inc. The Department often uses indefinite-delivery/indefinite-quantity (IDIQ) contracts or multiple award schedules to facilitate the issuance of delivery orders or task orders, allowing for flexibility in both scope and funding over time. The duration is often tied to the expected lifecycle of the debt portfolio being managed.

How does the Fixed Price Incentive (FPI) contract type influence the cost-effectiveness and contractor behavior in this student loan collection scenario?

The Fixed Price Incentive (FPI) contract type is designed to provide a strong incentive for the contractor to control costs and improve performance by sharing the risks and rewards of cost savings or overruns with the government. In this student loan collection scenario, the FPI structure likely establishes a target cost, a target profit, and a price ceiling. If National Recoveries Inc. can collect debts more efficiently than targeted, both the contractor and the government share in the savings, up to the ceiling. Conversely, if costs exceed the target, the contractor assumes a larger portion of the overrun. This incentivizes the contractor to optimize collection processes, manage resources effectively, and potentially achieve higher recovery rates to maximize their profit within the established parameters. It encourages proactive management and cost control, aiming for a balance between performance and cost-effectiveness for the Department of Education.

Industry Classification

NAICS: Finance and Insurance › Activities Related to Credit Intermediation › Mortgage and Nonmortgage Loan Brokers

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

Address: 14735 HWY 65, ANOKA, MN, 55304

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

Financial Breakdown

Contract Ceiling: $99,938,868

Exercised Options: $99,938,868

Current Obligation: $98,987,193

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS23F0013U

IDV Type: FSS

Timeline