Department of Education awards $25.3M for critical student financial aid servicing, highlighting full and open competition

Contract Overview

Contract Amount: $25,329,302 ($25.3M)

Contractor: Missouri Higher Education Loan Authority

Awarding Agency: Department of Education

Start Date: 2013-12-17

End Date: 2014-09-30

Contract Duration: 287 days

Daily Burn Rate: $88.3K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 6

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: IGF::CT::IGF / CRITICAL FUNCTION TASK ORDER 0003 - SERVICING OF TITLE IV STUDENT FINANCIAL AID, IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152 STAT.1029)

Place of Performance

Location: CHESTERFIELD, SAINT LOUIS County, MISSOURI, 63005

State: Missouri Government Spending

Plain-Language Summary

Department of Education obligated $25.3 million to MISSOURI HIGHER EDUCATION LOAN AUTHORITY for work described as: IGF::CT::IGF / CRITICAL FUNCTION TASK ORDER 0003 - SERVICING OF TITLE IV STUDENT FINANCIAL AID, IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152 STAT.1029) Key points: 1. Contract awarded to Missouri Higher Education Loan Authority for servicing student financial aid. 2. The contract value is substantial, indicating a significant need for these services. 3. Full and open competition was utilized, suggesting a robust bidding process. 4. The contract duration is approximately 9 months, with a fixed-price economic adjustment structure. 5. This award falls under 'Other Activities Related to Credit Intermediation', a broad category. 6. The awardee is a state-level authority, potentially offering unique insights into state-federal aid coordination.

Value Assessment

Rating: good

The contract value of $25.3 million for a 9-month period appears reasonable for critical financial aid servicing functions. Benchmarking against similar large-scale IT or financial services contracts for federal agencies would provide more precise value-for-money assessment. The fixed-price with economic price adjustment structure aims to manage cost fluctuations while ensuring service continuity. Without specific performance metrics or detailed cost breakdowns, a definitive value assessment is challenging, but the competitive nature suggests a degree of price discovery.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit a bid. The presence of 6 bidders (no) suggests a healthy level of interest and competition for this requirement. This competitive environment is generally favorable for price discovery and potentially leads to more cost-effective solutions for the government. The agency's decision to pursue full and open competition implies confidence in the market's ability to meet the specified needs.

Taxpayer Impact: Full and open competition typically benefits taxpayers by fostering a competitive environment that can drive down prices and encourage innovation, leading to better value for public funds.

Public Impact

Students and educational institutions benefit from the reliable servicing of federal financial aid programs. The services delivered are critical for the ongoing operation and administration of student loan programs. The geographic impact is national, as federal student financial aid serves students across the United States. Workforce implications may include the need for specialized personnel in financial services, IT support, and customer service within the awardee organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for economic price adjustments to increase the final cost beyond initial projections.
Reliance on a single awardee for critical financial aid servicing could pose continuity risks if performance issues arise.
The broad 'Other Activities Related to Credit Intermediation' NAICS code may obscure the specific nature and complexity of the services provided.

Positive Signals

Awarded under full and open competition, indicating a fair and transparent procurement process.
The contract is for a critical function (student financial aid servicing), suggesting a well-defined and necessary government need.
The awardee, Missouri Higher Education Loan Authority, is a state entity with experience in loan servicing, potentially bringing specialized expertise.

Sector Analysis

This contract falls within the broader financial services sector, specifically focusing on credit intermediation and loan servicing. The market for federal student loan servicing is significant, involving numerous private and public entities. The Department of Education has historically contracted for these services, with spending fluctuating based on program needs and policy changes. This award represents a specific instance of federal spending within this established sector, aiming to ensure the efficient management of student financial aid.

Small Business Impact

The data does not indicate any specific small business set-aside provisions for this contract (ss: false, sb: false). Therefore, the primary focus of competition was likely on larger entities or those capable of meeting the extensive requirements. Subcontracting opportunities for small businesses are not explicitly detailed but could exist if the prime contractor identifies specialized needs that align with small business capabilities. The overall impact on the small business ecosystem is likely minimal unless significant subcontracting occurs.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's contracting officers and program managers. The contract's critical nature suggests regular performance monitoring and reporting requirements. Inspector General jurisdiction would apply to any potential fraud, waste, or abuse related to the contract funds. Transparency is facilitated through contract award databases, though detailed performance reports may not be publicly available.

Related Government Programs

Federal Student Loan Program Administration
Student Financial Assistance
Credit Intermediation Services
Government Contract Servicing
Higher Education Funding

Risk Flags

Potential for cost overruns due to economic price adjustments.
Risk of service disruption if contractor performance falters.
Data security and privacy concerns related to sensitive financial information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $25.3 million to MISSOURI HIGHER EDUCATION LOAN AUTHORITY. IGF::CT::IGF / CRITICAL FUNCTION TASK ORDER 0003 - SERVICING OF TITLE IV STUDENT FINANCIAL AID, IN ACCORDANCE WITH SECTION 2212 OF THE HEALTH CARE AND EDUCATION RECONCILIATION ACT OF 2010 (PUB.L.111-152 STAT.1029)

Who is the contractor on this award?

The obligated recipient is MISSOURI HIGHER EDUCATION LOAN AUTHORITY.

Which agency awarded this contract?

Awarding agency: Department of Education (Department of Education).

What is the total obligated amount?

The obligated amount is $25.3 million.

What is the period of performance?

Start: 2013-12-17. End: 2014-09-30.

What is the track record of the Missouri Higher Education Loan Authority (MOHELA) in servicing federal student financial aid?

The Missouri Higher Education Loan Authority (MOHELA) has a long-standing history of servicing student loans, both state and federal. As a state-based entity, it has been involved in the federal student loan program for decades, often acting as a loan servicer and guarantor. Its experience includes managing loan portfolios, processing payments, providing borrower assistance, and ensuring compliance with federal regulations. MOHELA's involvement in this critical function for the Department of Education suggests a demonstrated capability and established infrastructure to handle the complexities of federal student financial aid administration. Their track record is generally considered solid within the higher education finance sector, though specific performance metrics for this particular contract would offer a more granular view.

How does the awarded amount of $25.3 million compare to historical spending on student financial aid servicing by the Department of Education?

The awarded amount of $25.3 million for approximately 9 months of service is a significant sum, reflecting the scale and complexity of managing federal student financial aid. Historical spending by the Department of Education on loan servicing contracts has varied considerably over the years, influenced by factors such as the volume of outstanding loans, program changes, and the number and type of contracts awarded. While this specific award is substantial for its duration, it should be viewed within the context of the Department's overall budget for student aid administration, which can run into billions of dollars annually. To provide a precise comparison, one would need to analyze historical contract data for similar servicing functions, considering inflation and changes in loan volume. However, the amount indicates a substantial investment in ensuring the continuity and efficiency of critical financial aid operations.

What are the primary risks associated with a contract of this nature and value?

Several risks are associated with a contract of this nature and value. Firstly, performance risk is significant; any failure by the contractor to adequately service student financial aid could lead to disruptions for borrowers, impacting their ability to manage loans and potentially affecting repayment rates. Secondly, financial risk exists, particularly with the 'economic price adjustment' clause, which could lead to costs exceeding initial projections if market conditions change unfavorably. Thirdly, cybersecurity risk is paramount, given the sensitive personal and financial data handled; a breach could have severe consequences for individuals and the Department. Finally, there's a risk of vendor lock-in or over-reliance on a single provider, making future transitions or renegotiations more challenging. Effective oversight and robust performance metrics are crucial to mitigate these risks.

What does the 'Other Activities Related to Credit Intermediation' classification imply about the services provided?

The classification 'Other Activities Related to Credit Intermediation' (NAICS code 522390) is quite broad and suggests that the services provided are related to the facilitation of credit, but do not fit neatly into more specific categories like banking, credit card issuing, or mortgage lending. In the context of student financial aid servicing, this classification likely encompasses a range of activities such as processing loan applications, disbursing funds, managing repayment schedules, handling borrower inquiries, and potentially performing collection activities. It signifies that the contract supports the flow of credit to students and educational institutions, acting as an intermediary in the financial aid process. The broadness of the code means the specific deliverables and operational scope are detailed within the contract's statement of work rather than being fully defined by the NAICS code itself.

How does the fixed-price with economic price adjustment (FPEPA) contract type influence cost certainty for taxpayers?

The Fixed-Price with Economic Price Adjustment (FPEPA) contract type aims to balance cost certainty for the government with the contractor's need to manage fluctuating costs. In an FPEPA contract, the base price is fixed, but it includes a mechanism to adjust the price based on specific economic factors, such as inflation indices for labor or materials. This provides some level of cost certainty by establishing a baseline price and a defined method for adjustments, preventing unlimited cost increases. However, it introduces uncertainty compared to a firm fixed-price contract, as the final cost is not definitively known at the outset. Taxpayers benefit from the initial fixed price, which sets a ceiling and encourages efficient operations, but they also bear the risk of potential price increases if economic conditions trigger the adjustment clauses. The effectiveness of FPEPA in controlling costs depends heavily on the specific economic indicators used and the clarity of the adjustment formula.

Industry Classification

NAICS: Finance and Insurance › Activities Related to Credit Intermediation › Other Activities Related to Credit Intermediation

Product/Service Code: SUPPORT SVCS (PROF, ADMIN, MGMT) › MANAGEMENT SUPPORT SERVICES

Competition & Pricing

Extent Competed: FULL AND OPEN COMPETITION

Solicitation Procedures: SUBJECT TO MULTIPLE AWARD FAIR OPPORTUNITY

Offers Received: 6

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT (K)

Evaluated Preference: NONE

Contractor Details

Address: 633 SPIRIT DR, CHESTERFIELD, MO, 63005

Business Categories: Category Business, Corporate Entity Tax Exempt, Nonprofit Organization, Not Designated a Small Business

Financial Breakdown

Contract Ceiling: $25,329,302

Exercised Options: $25,329,302

Current Obligation: $25,329,302

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL ITEM

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: EDFSA11D0012

IDV Type: IDC

Timeline