Department of Education's $130M Debt Collection Contract with Van Ru Credit Corporation Raises Concerns
Contract Overview
Contract Amount: $129,612,421 ($129.6M)
Contractor: VAN RU Credit Corporation
Awarding Agency: Department of Education
Start Date: 2004-11-01
End Date: 2009-09-30
Contract Duration: 1,794 days
Daily Burn Rate: $72.2K/day
Competition Type: COMPETITIVE DELIVERY ORDER
Number of Offers Received: 40
Pricing Type: FIXED PRICE INCENTIVE
Sector: Other
Official Description: DEBT COLLECTION
Place of Performance
Location: DES PLAINES, COOK County, ILLINOIS, 60018, UNITED STATES OF AMERICA
State: Illinois Government Spending
Plain-Language Summary
Department of Education obligated $129.6 million to VAN RU CREDIT CORPORATION for work described as: DEBT COLLECTION Key points: 1. Significant contract value of $129.6 million over 5 years. 2. Limited competition noted, potentially impacting price discovery. 3. Potential risks associated with long-term debt collection contracts. 4. Contract falls under Miscellaneous Financial Investment Activities sector.
Value Assessment
Rating: questionable
The contract's fixed-price incentive structure aims to control costs, but the lack of detailed per-unit cost data makes a direct comparison difficult. The total award value is substantial for debt collection services.
Cost Per Unit: N/A
Competition Analysis
Competition Level: limited
This was a competitive delivery order, but the specific details of the competition are not fully elaborated. Limited competition can sometimes lead to higher prices than a fully open market.
Taxpayer Impact: Taxpayer funds are used to pay for debt collection services, with the effectiveness of these services directly impacting the recovery of outstanding debts.
Public Impact
Impacts individuals with outstanding debts owed to the Department of Education. Ensures the government can recover funds, potentially reducing the national debt. Raises questions about the efficiency and fairness of the debt collection process.
Waste & Efficiency Indicators
Waste Risk Score: 50 / 10
Warning Flags
- Limited competition
- Long contract duration
- Fixed Price Incentive contract type can be complex to manage
Positive Signals
- Competitive delivery order
- Clear agency (Department of Education)
Sector Analysis
This contract falls under Miscellaneous Financial Investment Activities, a broad category. Benchmarks for debt collection services can vary widely based on the type of debt and recovery rates.
Small Business Impact
The data indicates that small businesses were not awarded this contract (sb: false). This suggests the contract was likely awarded to a larger, established entity.
Oversight & Accountability
The contract's duration and value warrant oversight to ensure performance standards are met and taxpayer funds are used efficiently. Accountability for debt recovery rates is crucial.
Related Government Programs
- Miscellaneous Financial Investment Activities
- Department of Education Contracting
- Department of Education Programs
Risk Flags
- Potential for high cost per dollar collected due to limited competition.
- Risk of contractor performance degradation over the contract's 5-year term.
- Lack of transparency in specific performance metrics and recovery rates.
- Potential for negative public perception regarding debt collection practices.
Tags
miscellaneous-financial-investment-activ, department-of-education, il, do, 100m-plus
Frequently Asked Questions
What is this federal contract paying for?
Department of Education awarded $129.6 million to VAN RU CREDIT CORPORATION. DEBT COLLECTION
Who is the contractor on this award?
The obligated recipient is VAN RU CREDIT CORPORATION.
Which agency awarded this contract?
Awarding agency: Department of Education (Department of Education).
What is the total obligated amount?
The obligated amount is $129.6 million.
What is the period of performance?
Start: 2004-11-01. End: 2009-09-30.
What is the typical cost structure for government debt collection services, and how does this contract's pricing compare?
Government debt collection costs often involve a percentage of recovered debt, with rates varying by debt age and type. Without specific performance data and recovery rates for this $129.6 million contract, a direct cost comparison is challenging. However, the fixed-price incentive structure suggests an attempt to align contractor performance with cost-efficiency goals, though the baseline for 'incentive' is not detailed here.
What are the primary risks associated with a long-term, high-value debt collection contract like this one?
Key risks include potential for contractor inefficiency over time, leading to higher effective costs per dollar collected. There's also a risk of non-compliance with debt collection regulations, potentially harming individuals and the government's reputation. Furthermore, a long duration might reduce flexibility if collection strategies need to change or if better service providers emerge.
How effectively does this contract contribute to the Department of Education's mission of debt recovery and financial management?
The effectiveness hinges on the actual debt recovery rates achieved by Van Ru Credit Corporation relative to the contract's cost. While the contract aims to recover funds, its success is measured by the net amount recovered after accounting for all contract expenses. Without performance metrics, it's difficult to definitively assess its contribution to the department's financial management goals.
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
Offers Received: 40
Pricing Type: FIXED PRICE INCENTIVE (L)
Contractor Details
Address: 1550 N NORTHWEST HWY # 33, PARK RIDGE, IL, 60068
Business Categories: Category Business, Not Designated a Small Business
Financial Breakdown
Contract Ceiling: $129,612,421
Exercised Options: $129,612,421
Current Obligation: $129,612,421
Parent Contract
Parent Award PIID: GS23F0204K
IDV Type: FSS
Timeline
Start Date: 2004-11-01
Current End Date: 2009-09-30
Potential End Date: 2011-09-30 00:00:00
Last Modified: 2015-04-01
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