Governments Pleased with Collection Performance; Outsourcing More Work to Private Agencies
Despite the picture that a recent article might paint, municipal government collections is on the rise as those who already outsource collections are pleased with the arrangement and are sending more work and more cities elect to use private collectors.
Municipal government collections is a growing market within the accounts receivable management industry: most government agencies that outsource are happy with the arrangements they have, many are expanding and more governments are outsourcing collections on a continuing basis.
“Our program has been very successful,” said Lynne Reynolds, director of municipal court operations for the city of Boulder, Colo., which started outsourcing its traffic fine collections in 2002.
The success that Boulder and other governments have had with outsourced collections has caught the attention of other governments who are using outsourced collections to increase their revenues, according to Nick Bernardo of Net Gain Marketing, Collingswood, N.J., and publisher of MyGovWatch.com.
“With only a fraction of known U.S. municipalities currently outsourcing, and current outsourcers increasingly hiring multiple vendors, we expect this market to grow indefinitely, at least keeping pace with year over year growth we saw between 2007 and 2008,” Bernardo said.
In 2007, there were at least 200 new government contracts awarded, with placements to agencies of at least $5.7 billion, according to Bernardo. In 2008, those figures grew to at least 280 contracts placed at a value of $6.95 billion. The 2008 figure does not include the Department of Education collection portfolio of $23.8 billion.
The government entities awarding these contracts include the federal government, states, counties, municipalities, along with colleges, universities, regional utilities, and healthcare facilities that all receive direct public funding, Bernardo said.
“One of the things that is happening right now is that government budgets are under massive constraints, so they’re relying on reserves and increasing taxes to raise revenues,” said Michael Klozotsky, analyst for Kaulkin Ginsberg, a sister company of insideARM. Because of the economy, reserves in most governments are low, and raising taxes takes time and is politically sensitive. So accelerating collections is the remaining method to ease budget constraints.
Most government entities don’t have the funding that would be necessary to build a collection program, Klozotsky added. “They don’t have [collections] as a core competency.”
“The collection company works to locate violators with methods we do not have at our disposal,” Reynolds said.
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Comment from Robert Nicpon on March 19, 2009 at 11:43AM EST
Reading your March 6th headline "IRS Kills Private Debt Collection Program." I wonder what went wrong for the IRS outsourcing their back taxes portfolio versus the new headline "Outsourcing More Work to Private Agencies." Maybe someone from the IRS needs to rethink their strategy and perhaps learn a thing or two from Boulder Colorado Municipality.
Comment from Anonymous on March 19, 2009 at 7:16PM EST
We’ve watched with interest Mr. Bernardo’s quick entry into government contract bid notifications through his Net Gain Marketing GovWatch beginning around the time Onvia terminated their contract with ACA/GSP about four years ago (which as many remember delivered a $2,000 bid service for the price of membership in ACA and GSP. Those were the days!), and now MyGovWatch. We wonder how Net Gain Marketing’s GovWatch “one-to-many” model even exists within the operational realities of a bid notification market that as a standard uses a “one-to-one” model through its end user license agreements (similar to buying a seat license for CRS or FACS). This includes Onvia, FindRFP, BidNet, GovernmentBids, BidMain, and B2GSource, so as to control the proliferation of bootlegging of licensed products. What we can’t figure out is how a very small home-based startup with nearly no staff, competing against the likes of Onvia, FindRFP, BidNet, GovernmentBid, BidMain and B2GSource, in fact outputs the equivalent of all six put TOGETHER. Where do all those bids and all those released contract values come from?
We do not see any reseller’s logo or agreement with any of these companies on either the Net Gain Marketing or MyGovWatch website for any of these companies, which again is typically required of resellers in the bid notification market; there are few of them due to required subscriber thresholds.
That being so, to legitimately receive what Net Gain Marketing delivers through its GovWatch, we assume an agency has to go to each and every one of these bid providers, sign NOT Net Gain Marketing’s contract but rather each separate bid provider’s end-user license agreement, limitations of use, send a separate check to each one of these bid providers, and have notifications sent directly to the agency, since only resellers can forward bid notifications. Even then the reseller typically must show the bid providers logo as an authorized reseller on their website and usually the bid notification itself. If Net Gain Marketing is not a reseller for any of these companies, how does it know who paid for what service, and how is that communicated between Net Gain Marketing and the bid notification providers if there are no partner or reseller channel agreements in place?
What really caught our attention was the national scope of Net Gain Marketing’s bid notification coverage, coverage which would certainly impress even publicly-traded Onvia—with a market cap of $30 million, hundreds of employees, dozens of internal software and network engineers and web developers.
Maybe yet there’s a success story for Inside ARM or BusinessWeek: Where and how does a very small company, on the bid scene only for a few years, get access to so many bid notifications to out deliver even heavy hitters in the market like Onvia or FindRFP? I’m sure they would love to know!
Comment from Nick Bernardo on March 30, 2009 at 2:25PM EST
Dear Anonymous,
As someone who has been involved in issues surrounding government contracts in the collection industry for more than a decade, I can understand how you feel, I can see why you would have so many questions, and I can understand why you would be making some of the assumptions you make here.
Prior to using our service, other now-satisfied clients felt the same way. But what they have found is that our service at www.mygovwatch.com goes so far beyond what traditional “bid notification” companies provide, and is so tailored to our industry, it’s clear to clients why they should (and do) use our service.
So the truth is you are comparing apples to oranges. At this time I would like to invite you to call me directly at 877-533-1680, x701, so that I can personally dispel some of these myths and share with you some the things our staff does that the other companies you mention simply do not do. Or you can feel free to schedule a visit to our headquarters in Collingswood, New Jersey. And you can of course visit me at the home office, too, if you do decide to visit us in New Jersey.
I would also like to invite any others who may have read these comments to call me also. Mention this article by name and we will give you: 1). Pricing comps for any public sector RFPs you are now pursuing; and 2). A free public sector sales lead.
Thanks!
Nick Bernardo President Net Gain Marketing, Inc. 877-533-1680, x701