insideARM has written extensively about the ongoing saga of the Department of Education (ED) RFP for private collection agencies. It has been a story full of dramatic announcements, legal maneuvering, and political intrigue.  The latest chapter involves recent activity in a lawsuit filed in March, 2015. To understand its importance, it is necessary to review how that lawsuit came about.

Background 

On February 21, 2015, ED notified five contractors -- Windham Professionals, GC Services, ConServe, Account Control Technology, and Financial Management Systems -- that it intended to issue award-term Task Order Extensions to them for a period not to exceed a specified number of months. These letters, titled Notification of Award Term Extension and each signed by the Contracting Officer, expressly stated, “If the contract is extended pursuant to H.4, it will be accomplished via a contracting action, which will specifically identify all of the terms and conditions.”

Late Friday afternoon on February 27, 2015 ED publicly announced that it would also “wind down” its relationship with five private collection agencies on its student loan debt collection contract that ED says were providing inaccurate information to borrowers regarding rehabilitations. In a press release, ED said that a review of all 22 of its private debt collection contractors had revealed “unacceptably high rates” of misinformation regarding rehabilitations among five collection vendors: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.

A lawsuit was immediately filed in the Federal Court of Claims based on, inter alia, ED’s proposed issuance of award-term extensions under H.4 to the competitors. The four named plaintiffs in the lawsuit were Coast Professional (Coast), Enterprise Recovery Systems (ERS), National Recoveries (NRI), and Pioneer Credit Recovery (Pioneer). Intervening in the lawsuit as interested parties were the five aforementioned companies that received extensions: Financial Management Systems, Account Control Technology, Continental Service Group (ConServe), Windham Professionals, and GC Services.

The Court of Federal Claims dismissed the complaints. Pioneer and ERS separately appealed the decision for lack of jurisdiction.

(Editor’s note: In October 2014 ED had awarded contracts to Coast Professional and National Recoveries under the small business set-aside on its Default Collection Services contract and private collection agency (PCA) program, and both have been receiving placements under that new contract award.)

The Court of Federal Claims had concluded that these proposed new Task Orders (for the award-term extensions) should not be considered “the award of a contract” and thus were not eligible for a protest.

On July 14, 2016 we reported that Pioneer and ERS had won their appeal of a denied protest over their contracts not being extended in March, 2015. The appellate court saw things differently from the Court of Federal Claims and ruled that extension task orders awarded to five other companies counted as “new contracts” that could be challenged in bid protests. The appellate court sent the case back to the Court of Federal claims.

Meanwhile, on December 20, 2016 insideARM wrote that ED had awarded new unrestricted contracts under ED Solicitation Number: ED-FSA-16-R-0009 to:

  • Financial Management Systems
  • GC Services
  • Premiere Credit of North America
  • The CBE Group
  • Transworld Systems
  • Value Recovery Holding
  • Windham Professionals

In response to the December 20 awards there were 26 separate protests filed with the Government Accounting Office (GAO). Those protests are all still pending.

Current Activity 

Now, back to that 2015 lawsuit. On February 24, 2017 ED filed a Motion to Dismiss the 2015 lawsuit. But the motion is unusual. ED is asking the court to dismiss the lawsuit as moot because they have agreed to take “corrective” or “remedial action” with regard to the earlier decision not to issue contract extensions to the four named plaintiffs. ED has agreed that the contracting officer will reevaluate the four plaintiffs for an award term extension.  Specifically, ED will reevaluate the companies in accordance with the terms of the 2009 task orders, including clause H.4, as if EE had not previously declined to issue the plaintiffs award term extensions. 

Per ED’s motion: 

“In sum, plaintiffs will be reevaluated for the award term extensions in accordance with the terms of the 2009 task orders, the 2015 focused review will not be considered as part of the reevaluation, and any award term extensions received by the plaintiffs will be governed by the same material terms as the award term extensions that were issued to the intervenors in 2015.” 

insideARM Perspective 

What does all of this mean? It is another mystery to solve. 

As noted above, NRI and Coast were awarded small business contracts in 2014. However, both companies were looking to be awarded contracts in the unrestricted category.  Still, both companies have been receiving placements.  What could a reevaluation of those two firms mean? What remedy is appropriate for them?

On the other hand, ERS and Pioneer not only did not receive contract extensions back in March of 2015, they were also not selected in the December, 2016 award. Neither has received a placement since March of 2015. 

What happens if ED, after reevaluating ERS and Pioneer, decides to issue award term extensions to one or both? Would they then join the seven unrestricted firms awarded contracts in December 2016 and begin to receive placements?

Also, what does this mean for the 26 protests that were filed in response to the December 2016 awards? ERS and Pioneer both also protested those awards. Would this potentially put ERS and Pioneer into some type of special status for their protests?

Only the Department of Education can create this type of puzzle. insideARM will continue to monitor and report.


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