Department of Education's $284M contract with FMS Investment Corp for student loan debt collection faces scrutiny over value and competition

Contract Overview

Contract Amount: $284,215,604 ($284.2M)

Contractor: FMS Investment Corp

Awarding Agency: Department of Education

Start Date: 2015-04-22

End Date: 2017-04-21

Contract Duration: 730 days

Daily Burn Rate: $389.3K/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: BETHESDA, MONTGOMERY County, MARYLAND, 20814

State: Maryland Government Spending

Plain-Language Summary

Department of Education obligated $284.2 million to FMS INVESTMENT CORP 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 significant value of $284M highlights the scale of federal student loan debt collection efforts. 2. Full and open competition was utilized, suggesting a potentially competitive bidding process for this service. 3. The fixed-price contract type aims to control costs, but the effectiveness of debt recovery at this price needs evaluation. 4. The sector involves financial services and debt collection, a critical but often sensitive area of government operations.

Value Assessment

Rating: fair

The contract value of $284M for a 2-year period is substantial. Benchmarking against similar debt collection contracts is necessary to determine if the pricing is competitive and reflects efficient recovery rates.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, which theoretically allows for the best price discovery. However, the specific number of bidders and the final negotiated price are crucial to assess the true competitive impact.

Taxpayer Impact: The effectiveness of this contract directly impacts taxpayers by determining the efficiency and cost-effectiveness of recovering defaulted federal student loan debt.

Public Impact

Impacts borrowers facing debt collection actions. Affects the federal government's ability to recoup funds from defaulted student loans. Contributes to the overall financial health of federal student aid programs. Raises questions about the efficiency and fairness of private debt collection practices.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for aggressive collection tactics impacting borrowers.
Effectiveness of debt recovery at the awarded price point.
Transparency of the full and open competition process.

Positive Signals

Utilizes full and open competition.
Fixed-price contract aims for cost control.
Addresses a critical government function: debt recovery.

Sector Analysis

This contract falls within the Miscellaneous Financial Investment Activities sector, specifically focusing on the collection of defaulted federal student loans. Benchmarks for this sector often consider recovery rates and administrative costs relative to the total debt portfolio.

Small Business Impact

The data does not indicate whether small businesses were involved in this contract, either as prime contractors or subcontractors. Further analysis would be needed to determine the extent of small business participation.

Oversight & Accountability

Oversight by the Department of Education is crucial to ensure FMS Investment Corp adheres to all regulations and performs its collection activities ethically and effectively. Performance metrics and regular audits are key accountability mechanisms.

Related Government Programs

Miscellaneous Financial Investment Activities
Department of Education Contracting
Department of Education Programs

Risk Flags

Potential for high administrative costs relative to recovery.
Risk of non-compliance with debt collection regulations.
Borrower protection concerns.
Effectiveness of competition in driving down costs.
Long-term impact on borrower financial well-being.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $284.2 million to FMS INVESTMENT CORP. "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 FMS INVESTMENT CORP.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $284.2 million.

What is the period of performance?

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

What is the historical recovery rate for federal student loan debt collection by private agencies, and how does FMS Investment Corp's performance compare?

Historical recovery rates for federal student loan debt collection by private agencies can vary significantly based on the age and type of debt, as well as the collection strategies employed. A comprehensive analysis would require access to FMS's specific performance data and comparison against industry averages and government benchmarks. Without this data, it's difficult to definitively assess the value or effectiveness of this contract beyond its face value.

How does the cost per dollar collected under this contract compare to other methods of federal student loan debt recovery?

Determining the cost per dollar collected requires detailed financial data from FMS Investment Corp, including their operational expenses and the total amount of debt successfully recovered. This information is often proprietary or not publicly disclosed. Comparing this to in-house government collection efforts or other contracted services would reveal the efficiency of this specific arrangement and inform future contracting decisions.

What specific performance metrics and oversight mechanisms are in place to ensure FMS Investment Corp is effectively and ethically collecting student loan debt?

Effective oversight typically involves clearly defined performance metrics (e.g., recovery rates, compliance with Fair Debt Collection Practices Act, borrower complaint resolution times) and regular reporting requirements. The Department of Education should be conducting periodic reviews and audits to ensure FMS meets these standards. The absence of readily available public data on these metrics raises questions about the transparency and robustness of the oversight process.

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: 4938 HAMPDEN LN STE 218, BETHESDA, MD, 20814

Business Categories: Category Business, Small Business, Woman Owned Business

Financial Breakdown

Contract Ceiling: $284,215,605

Exercised Options: $284,215,605

Current Obligation: $284,215,604

Contract Characteristics

Commercial Item: COMMERCIAL ITEM PROCEDURES NOT USED

Parent Contract

Parent Award PIID: GS23F0063J

IDV Type: FSS

Timeline