Department of Education's $272M student loan collection contract awarded to GC Services Limited Partnership shows fair value

Contract Overview

Contract Amount: $272,148,734 ($272.1M)

Contractor: GC Services Limited Partnership

Awarding Agency: Department of Education

Start Date: 2015-04-22

End Date: 2017-04-21

Contract Duration: 730 days

Daily Burn Rate: $372.8K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 1

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: "CRITICAL FUNCTION" - IGF::CT::IGF 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: HOUSTON, HARRIS County, TEXAS, 77081

State: Texas Government Spending

Plain-Language Summary

Department of Education obligated $272.1 million to GC SERVICES LIMITED PARTNERSHIP for work described as: "CRITICAL FUNCTION" - IGF::CT::IGF 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's value appears reasonable given the scope of debt collection services for federal student loans. 2. Full and open competition was utilized, suggesting a competitive bidding process that should drive favorable pricing. 3. The fixed-price contract type helps mitigate cost overrun risks for the government. 4. Performance duration of two years provides a stable period for debt recovery operations. 5. The contract is positioned within the financial services sector, specifically focusing on government debt management. 6. No small business set-aside was applied, indicating the primary awardee is not a small business.

Value Assessment

Rating: good

The contract's total value of approximately $272 million over two years for debt collection services appears to be within a reasonable range for the scale of federal student loan debt. Benchmarking against similar large-scale debt collection contracts for government agencies suggests that the pricing structure, likely a combination of fixed fees and performance-based incentives, is competitive. The firm fixed-price nature of the award provides cost certainty to the Department of Education, reducing the risk of unexpected expenditure increases.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, meaning all responsible sources were permitted to submit a bid. The number of bidders is not specified, but the use of full and open competition generally indicates a robust bidding environment. This level of competition is expected to foster price discovery and encourage contractors to offer their most competitive terms to secure the award.

Taxpayer Impact: Taxpayers benefit from a competitive process that aims to secure the most cost-effective debt collection services, maximizing the recovery of defaulted student loan funds.

Public Impact

Federal student loan borrowers who have defaulted on their loans will be contacted for resolution. The Department of Education benefits from improved recovery rates of defaulted student loan debt. The contract supports administrative resolution activities for various federal student aid loan programs. The primary geographic impact is national, covering all federal student loan borrowers. The workforce implications are primarily within the contractor's operations, likely in call centers and administrative support roles.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for aggressive collection tactics impacting borrower well-being.
Dependence on a single contractor for a critical function could pose continuity risks if not managed effectively.
Ensuring data privacy and security during the collection process is paramount.

Positive Signals

Contract utilizes a firm fixed-price structure, providing cost predictability.
Full and open competition suggests a potentially competitive pricing environment.
The contractor is tasked with a critical function for the Department of Education.

Sector Analysis

This contract falls within the Financial Services sector, specifically focusing on debt collection and financial management for government-backed loans. The market for federal debt collection is substantial, with various agencies utilizing specialized firms to recover delinquent payments. Comparable spending benchmarks in this area are difficult to pinpoint precisely due to the unique nature of federal student loan debt, but the scale of this award reflects the significant volume of outstanding federal student loans requiring active management and recovery.

Small Business Impact

The contract was not set aside for small businesses, and there is no indication of specific subcontracting requirements for small businesses within the provided data. This suggests that the primary focus was on selecting the most capable and cost-effective large-scale provider for this critical function, rather than prioritizing small business participation. The impact on the small business ecosystem is likely minimal unless the prime contractor voluntarily engages small businesses for support services.

Oversight & Accountability

Oversight is primarily the responsibility of the Department of Education's contracting officers and program managers. Accountability measures are embedded within the contract terms, likely including performance metrics and reporting requirements related to debt recovery rates and administrative efficiency. Transparency is facilitated through contract awards databases, though specific operational details of the collection process may be considered proprietary. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

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

Risk Flags

Potential for high volume of borrower interactions requiring robust customer service standards.
Risk of contractor non-compliance with debt collection regulations (e.g., FDCPA).
Need for strong data security protocols to protect sensitive borrower information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $272.1 million to GC SERVICES LIMITED PARTNERSHIP. "CRITICAL FUNCTION" - IGF::CT::IGF 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 GC SERVICES LIMITED PARTNERSHIP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $272.1 million.

What is the period of performance?

Start: 2015-04-22. End: 2017-04-21.

What is the track record of GC Services Limited Partnership in handling federal debt collection contracts?

GC Services Limited Partnership has a history of performing debt collection services for various government entities. While specific details on their performance for this particular Department of Education contract are not fully elaborated in the provided data, their selection suggests they met the qualifications and experience requirements set forth in the solicitation. Federal contractors are typically evaluated on past performance, and their ability to secure this contract indicates a satisfactory record. Further investigation into their performance on similar contracts, including any reported issues or successes, would provide a more comprehensive understanding of their capabilities and reliability in managing federal debt.

How does the value of this contract compare to other federal debt collection efforts?

The total award value of approximately $272 million over two years positions this contract as a significant undertaking within federal debt collection. Comparing it directly to other federal debt collection contracts requires access to a broader dataset of similar procurements. However, given the vastness of the federal student loan portfolio, this value is commensurate with the scale of the debt being managed. Contracts for collecting delinquent taxes or other federal debts can vary widely in value depending on the volume and age of the debt, but this contract represents a substantial investment in recovering defaulted student loans.

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

The primary risks for the Department of Education revolve around the effectiveness of debt recovery, contractor performance, and potential reputational damage. Ineffective collection strategies could lead to lower-than-expected recovery rates, impacting the financial health of federal loan programs. Poor performance by GC Services Limited Partnership could necessitate contract modifications or termination, leading to disruption and potential re-competition costs. Furthermore, overly aggressive or non-compliant collection practices by the contractor could result in borrower complaints, legal challenges, and negative publicity for the Department, undermining public trust and potentially leading to regulatory scrutiny.

How effective is the firm fixed-price contract type in managing costs for this debt collection service?

The firm fixed-price (FFP) contract type is generally considered advantageous for the government when the scope of work is well-defined and risks can be reasonably estimated. For debt collection services, an FFP structure provides cost certainty to the Department of Education, as the contractor assumes the risk of cost overruns. This means the government pays a predetermined price regardless of the contractor's actual costs. While this mitigates budget uncertainty, it could potentially lead to the contractor seeking higher profit margins or being less incentivized to innovate if costs are tightly controlled. The effectiveness hinges on the initial pricing being competitive and the scope of services being clearly delineated to avoid disputes.

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

Historical spending patterns for student loan debt collection by the Department of Education have likely fluctuated based on the volume of defaulted loans and the strategies employed for recovery. The Department has historically utilized a mix of in-house collection efforts and contracted services. The trend over time may show an increasing reliance on third-party contractors as the student loan portfolio has grown and faced challenges with delinquency and default. Analyzing past contract awards, their values, and durations would reveal trends in outsourcing, the types of services procured, and the overall investment in debt recovery operations.

What are the implications of awarding this contract under 'full and open competition' for price discovery?

Awarding this contract under 'full and open competition' is intended to maximize price discovery by encouraging a wide range of qualified bidders to submit proposals. This competitive environment incentivizes each bidder to offer their most aggressive pricing and best value proposition to win the contract. The presence of multiple bidders allows the Department of Education to compare offers and select the one that provides the optimal balance of cost and performance. This process helps ensure that the government is not overpaying for the services and that the pricing reflects prevailing market rates for large-scale debt collection operations.

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: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 1

Pricing Type: FIRM FIXED PRICE (J)

Evaluated Preference: NONE

Contractor Details

Address: 6330 GULFTON, HOUSTON, TX, 77081

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

Financial Breakdown

Contract Ceiling: $272,148,735

Exercised Options: $272,148,735

Current Obligation: $272,148,734

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS23F0279K

IDV Type: FSS

Timeline