The ED Procurement Debacle: Decision Made?

January 18th, 2018

Mike Ginsberg, president and CEO of Kaulkin Ginsberg Company, sat down with Randy Kamm, founder and principal of Collection Quotient Consulting, to discuss the debacle that was, and continues to be, the U.S. Department of Education’s (ED) procurement process. To hear what Mike Ginsberg and Randy Kamm covered about this important and timely topic, listen to this two-part podcast available exclusively to KG Prime members. Log in or request your company code today!

Here are portions of their discussion:

Many people thought that ED would select more private collection agencies (PCAs), not fewer. The selection of just two PCAs probably has more to do with ED’s “New Generation” servicing initiative and new business model, which is taking a substantial amount of ED’s energy and focus. It appears that ED made a determination that the 11 restricted contracts, the 2 extension PCAs, the 2 unrestricted contractors announced last week in Windham Professionals and Performant Recovery (and their subcontractor network) can handle the capacity needs for the foreseeable future. They discussed why ED would add a larger number of large contractors at this point when their real priority is rethinking the servicing platform.

“We’re already seeing changes in the traditional subcontracting model,” said Randy. “In addition to requiring substantial small business subcontracting, the government is permitting small businesses to add on unrestricted large subcontractors. We’re very likely to see even more subcontracting to large unrestricted size PCAs. The only policy ED has described is that prime contractors cannot subcontract more than 50% of total volume.” Randy’s conclusion is that the industry is self-adjusting, and the paradigm is shifting, as the industry tries to manage through the changes.

Under the Trump Administration, all federal agencies need to rethink the cost associated with government services. ED’s redesign of its servicing platform, and the business model being used for debt collection, appears to be a result of an underlying government-wide effort to streamline and improve services, lower cost and make systems more efficient, which is in stark contrast to the previous administration.

“It would behoove the PCAs to proactively come up with a new pricing alternative for rehabs,” stated Randy, or he believes ED will unilaterally change pricing. As part of the servicing redesign cost reduction effort, ED is probably going to take a serious look at shifting the loan rehab process away from the PCAs and place it in the servicing contract. That way, ED will not pay the PCAs a large fee, like they currently do, but would instead pay an hourly rate for the servicer to process the paperwork. This would certainly lower costs and it would significantly alter the contingency fee pricing paradigm that’s been in place for decades.

But that’s not the only news coming from this announcement. Many have raised concerns about an appearance of a conflict of interest involving Secretary DeVos’ family investments in Performant. The backlash should have been anticipated by ED. However, given the source selection methodology outlined by ED to the Court during litigation, Randy describes the possible rationale ED used to arrive at its decision to select its vendors. Unlike earlier stages of this messy procurement, ED looked at three distinct evaluation components to reach its award decision:

  1. Evaluation factors (past performance, management plan, subcontracting plan)
  2. Evaluation of Responsible Bidder (legal judgments, financials, subcontracting plans)
  3. What is “Most Advantageous to the Government”

When Mike asked Randy about the decision to award Performant the contract based on the source selection, Randy stated, “I can’t comment on Performant’s performance across all of its federal contracts, but Performant does have experience on a number of major federal contracts, in addition to ED, that would probably score highly in an evaluation.” Whether or not there was an actual conflict of interest, Performant probably came in with the most federal experience compared to other companies.

With the perceived conflict of interest and the significant reduction in the number of awards, litigation will undoubtedly continue. ED needs to move forward. We’ve already seen collection agencies begin to reconfigure themselves and collaborate in new ways in this different world. ED will soon start directing the new award winners on how they are going to manage next steps and move forward. We will hopefully see movement and progress as all PCAs try to get back to a new normal, and students will then be able to obtain the information they need to manage their debt.

Listen to this 12 minute, and 11 minute, two part podcast on KG Prime today!


Randy Kamm is founder and principal of Collection Quotient Consulting. Randy and his team of industry experts specialize in providing strategic sales and marketing assistance, government and regulatory affairs and program support services, including proposal writing and other management services, to the credit and collection and customer care industries. With more than 38 years of successful policy, operations, sales and advocacy results for private, not-for-profit, and public sector organizations, Randy’s clients value the trusted, high integrity, and proven results he delivers to organizations seeking to strengthen their competitive market position and achieve important corporate or policy objectives.

Mike Ginsberg is the president and CEO of Kaulkin Ginsberg, offering M&A and strategic advisory expertise to the accounts receivable management (ARM) industry for over 25 years, and KG Prime, offering market intelligence for ARM professionals on client industries, economic- and industry-specific trends. He is also co-founder of Topline Valuation Group, providing ARM owners and executives with authoritative technical, financial and benchmarking services designed to improve decisions at the corporate and operational levels.

Comments are closed.


Kaulkin Ginsberg is Changing the Way That Busy Executives Access Strategic Information

February 20, 2018

At Kaulkin Ginsberg, we have become very dissatisfied with the limitations ARM professionals face when accessing critical market intelligence. That's why we created KG Prime.....

» see this post    » all posts

Stock Market's Impact on the Economy & ARM Industry

February 13, 2018

Last week, the S&P 500 and Dow Jones indexes each fell by nearly 10%, before rebounding on February 9. What do fluctuations in the stock market actually mean, and what impacts do they have on the economy and the accounts receivable management industry?....

» see this post    » all posts

Is a Corporate Roll-Up Strategy Right for You?

February 8, 2018

Investment bankers and private equity firms use phrases like "industry consolidation plays" or "spoke and wheel models," but few ever explain what that actually means, and how it will benefit the business owner. Here, we outline the corporate roll-up process for business owners and clarify what they expect as the buyer in this process.....

» see this post    » all posts


Mike Ginsberg to speak at RMA's 2018 Annual Conference

January 9, 2018

Mike Ginsberg, president and CEO of Kaulkin Ginsberg, will be joining a panel of industry experts at RMA's 2018 Annual conference to discuss M&A and financing in the ARM industry.....

» see more

Kaulkin Ginsberg Company announces the addition of the U.S. federal government market segment on KG Prime.

December 5, 2017

As part of Kaulkin Ginsberg expanding market intelligence series on KG Prime, their market research team recently retrieved and examined data regarding the US federal government market segment.....

» see more

Kaulkin Ginsberg Company Teams up with Topline Valuation Group to Offer a New Valuation Service

November 21, 2017

Kaulkin Ginsberg, in conjunction with its sister company Topline Valuation Group, announces the release of a product that provides ARM company owners with an in-depth assessment of their company's strategic opportunities.....

» see more