Plaintiffs’ Motion Denied in Challenge Against Department of Education Contract Process

Private collection agencies’ lengthy case against the department ends in judge finding no legal fault in DOE’s consolidated contract solicitation.

8/5/2019 1:30 PM

NewsGovernment
Plaintiffs’ Motion Denied in Challenge Against Department of Education Contract Process

U.S. Court of Federal Claims Judge Thomas Wheeler has denied a motion for a permanent injunction filed by several private collection agencies (PCAs) challenging the U.S. Department of Education’s (DOE) latest student loan servicing procurement process.

The agencies behind the injunction in FMS Investment Corp. v. United States collect defaulted student loan debt for the DOE and challenged the servicing procurement that sought to “combine the default collection with other student loan servicing work,” according to the court opinion and order. The agencies argued that the DOE’s proposed procurement process is “unlawful because it needlessly combines two separate services,” thereby restricting competition to offerors who can provide both servicing and default services.

The DOE, through the student loan servicing procurement, the “Next Generation Financial Services Environment,” would have one entity manage “the full life cycle” of a student loan, the opinion and order states. The goal was to connect borrowers with a consistent student loan servicer over the cycle of their loan.

“Because plaintiff PCAs only provide default collection services, they claim that Next Gen’s ‘full life-cycle structure unfairly excludes them from competing for contracts,” the opinion and order states.

The debate over the student loan contract procurement process between the PCAs and DOE dates back to 2015, when the department released a contract solicitation seeking default collection services, according to the opinion and order.

After a series of contract awards, protests and corrective actions preventing the DOE from making and executing a contract award, it completely canceled the request—resulting in a group of PCAs challenging the decision.

Over the next several months, the DOE continued its Next Gen Solicitation plan and the PCAs continued to challenge the plan. The DOE responded with corrective action against the collection agencies, prompting their request in court for a preliminary injunction to prevent an end to their contract.

That injunction was denied in December 2018, with the court reasoning the relief requested by the plaintiffs would go beyond the “status quo.”

Meanwhile, the DOE continued its new solicitation plan in January 2019, which was again challenged by the plaintiffs with existing contracts.

By May 2019, two plaintiffs in the group of PCAs dismissed their claims, two others discussed a settlement—ultimately dismissing their claims—and three plaintiffs remained, FMS Investment Corp., ConServe, and GC Services Limited Partnership.

Ultimately, in his decision whether to grant a permanent injunction for the plaintiffs, Wheeler found that hardships argued in the case did not favor either party and an injunction requiring the DOE to halt its Next Gen Solicitation would only delay that plan and not guarantee the plaintiffs would be awarded contracts under the regular bid process. “… This court cannot order [the DOE] to assign them accounts to service. So even if this court resurrected the PCA solicitation (again), and [the DOE] proceeded with awards, the winning PCAs are not entitled to some minimum amount of business.”

In addition to denying the plaintiffs’ motion for judgment and permanently preventing the DOE from continuing with the Next Gen Solicitation and cancelling the PCA solicitation, the court also granted the government’s motion for judgment on the administrative record.

“The fact that ED (the Department of Education) prevailed has little to do with justice or good portfolio management.  While the ruling upheld the department’s authority to manage the procurement, the record documents the unprecedented 51 GAO (Government Accountability Office) protests and is replete with the court’s criticism of how that procurement was mishandled,” said Balaji Rajan, CEO of Financial Management Systems (FMS), in a statement provided to ACA International.  “As far as FMS is concerned, we have pivoted to leverage our extensive expertise in helping student loan borrowers in other related areas and we take some comfort in knowing that the department’s data demonstrates that we were the top performing PCA. Unfortunately, the government and U.S. taxpayers have lost 710 fantastic people servicing defaulted borrowers.” 

In his decision, Wheeler concluded, “There is no such thing as a perfect procurement, and the Department of Education’s years-long series of student loan servicing and debt collection solicitations typifies the axiom. But a flawed procurement is not necessarily an illegal one.”

ACA International will continue to follow this story.

Related content from ACA International:

Student Loan Servicers Continue Opposition to U.S. Department of Education’s Contract Decisions

Education Department Cancels Debt Collection Contracts with Two Firms


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

Plaintiffs’ Motion Denied in Challenge Against Department of Education Contract Process

U.S. Court of Federal Claims Judge Thomas Wheeler has denied a motion for a permanent injunction filed by several private collection agencies (PCAs) challenging the U.S. Department of Education’s (DOE) latest student loan servicing procurement process.

The agencies behind the injunction in FMS Investment Corp. v. United States collect defaulted student loan debt for the DOE and challenged the servicing procurement that sought to “combine the default collection with other student loan servicing work,” according to the court opinion and order. The agencies argued that the DOE’s proposed procurement process is “unlawful because it needlessly combines two separate services,” thereby restricting competition to offerors who can provide both servicing and default services.

The DOE, through the student loan servicing procurement, the “Next Generation Financial Services Environment,” would have one entity manage “the full life cycle” of a student loan, the opinion and order states. The goal was to connect borrowers with a consistent student loan servicer over the cycle of their loan.

“Because plaintiff PCAs only provide default collection services, they claim that Next Gen’s ‘full life-cycle structure unfairly excludes them from competing for contracts,” the opinion and order states.

The debate over the student loan contract procurement process between the PCAs and DOE dates back to 2015, when the department released a contract solicitation seeking default collection services, according to the opinion and order.

After a series of contract awards, protests and corrective actions preventing the DOE from making and executing a contract award, it completely canceled the request—resulting in a group of PCAs challenging the decision.

Over the next several months, the DOE continued its Next Gen Solicitation plan and the PCAs continued to challenge the plan. The DOE responded with corrective action against the collection agencies, prompting their request in court for a preliminary injunction to prevent an end to their contract.

That injunction was denied in December 2018, with the court reasoning the relief requested by the plaintiffs would go beyond the “status quo.”

Meanwhile, the DOE continued its new solicitation plan in January 2019, which was again challenged by the plaintiffs with existing contracts.

By May 2019, two plaintiffs in the group of PCAs dismissed their claims, two others discussed a settlement—ultimately dismissing their claims—and three plaintiffs remained, FMS Investment Corp., ConServe, and GC Services Limited Partnership.

Ultimately, in his decision whether to grant a permanent injunction for the plaintiffs, Wheeler found that hardships argued in the case did not favor either party and an injunction requiring the DOE to halt its Next Gen Solicitation would only delay that plan and not guarantee the plaintiffs would be awarded contracts under the regular bid process. “… This court cannot order [the DOE] to assign them accounts to service. So even if this court resurrected the PCA solicitation (again), and [the DOE] proceeded with awards, the winning PCAs are not entitled to some minimum amount of business.”

In addition to denying the plaintiffs’ motion for judgment and permanently preventing the DOE from continuing with the Next Gen Solicitation and cancelling the PCA solicitation, the court also granted the government’s motion for judgment on the administrative record.

“The fact that ED (the Department of Education) prevailed has little to do with justice or good portfolio management.  While the ruling upheld the department’s authority to manage the procurement, the record documents the unprecedented 51 GAO (Government Accountability Office) protests and is replete with the court’s criticism of how that procurement was mishandled,” said Balaji Rajan, CEO of Financial Management Systems (FMS), in a statement provided to ACA International.  “As far as FMS is concerned, we have pivoted to leverage our extensive expertise in helping student loan borrowers in other related areas and we take some comfort in knowing that the department’s data demonstrates that we were the top performing PCA. Unfortunately, the government and U.S. taxpayers have lost 710 fantastic people servicing defaulted borrowers.” 

In his decision, Wheeler concluded, “There is no such thing as a perfect procurement, and the Department of Education’s years-long series of student loan servicing and debt collection solicitations typifies the axiom. But a flawed procurement is not necessarily an illegal one.”

ACA International will continue to follow this story.

Related content from ACA International:

Student Loan Servicers Continue Opposition to U.S. Department of Education’s Contract Decisions

Education Department Cancels Debt Collection Contracts with Two Firms


Follow ACA International on Twitter @ACAIntl and @acacollector, Facebook and request to join our LinkedIn group for news and event updates. ACA International members are welcome to submit news items for possible publication to comm@acainternational.org. Visit our publications page for news submission guidelines and subscriptions to ACA Daily, Collector magazine and Pulse.

Advertising is available for companies wishing to promote their products or services. Be sure to visit the ACA Events Calendar on the Education and Training page to view our listing of upcoming CORE Curriculum and Hot Topic seminars featuring critical educational opportunities for your company.


Subscribe to ACA Daily NEWSROOM

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