Department of Education awarded $170.9M for student financial aid servicing, with 4 bidders competing

Contract Overview

Contract Amount: $170,875,875 ($170.9M)

Contractor: Great Lakes Educational Loan Services, Inc

Awarding Agency: Department of Education

Start Date: 2015-09-01

End Date: 2016-12-31

Contract Duration: 487 days

Daily Burn Rate: $350.9K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIXED PRICE WITH ECONOMIC PRICE ADJUSTMENT

Sector: Other

Official Description: IGF::CT::IGF / CRITICAL FUNCTION IDIQ: SERVICING OF TITLE IV STUDENT FINANCIAL AID. TASK ORDER: SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2015 THROUGH 8/31/2016. PROVIDES FUNDING FOR TITLE IV AID SERVICING THROUGH APPROXIMATELY 12/31/2015.

Place of Performance

Location: MADISON, DANE County, WISCONSIN, 53704

State: Wisconsin Government Spending

Plain-Language Summary

Department of Education obligated $170.9 million to GREAT LAKES EDUCATIONAL LOAN SERVICES, INC for work described as: IGF::CT::IGF / CRITICAL FUNCTION IDIQ: SERVICING OF TITLE IV STUDENT FINANCIAL AID. TASK ORDER: SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2015 THROUGH 8/31/2016. PROVIDES FUNDING FOR TITLE IV AID SERVICING THROUGH APPROXIMATELY 12/31/2015. Key points: 1. The contract focuses on servicing Title IV student financial aid, a critical function for federal student loan programs. 2. A fixed-price contract with economic price adjustment was used, indicating potential for cost fluctuations based on market conditions. 3. The contract duration of 487 days suggests a medium-term need for these financial servicing capabilities. 4. The award was made under full and open competition, implying a broad search for qualified contractors. 5. The primary contractor, Great Lakes Educational Loan Services, Inc., has experience in this specialized area. 6. The contract value of approximately $170.9 million represents a significant investment in student financial aid administration.

Value Assessment

Rating: good

The contract value of $170.9 million for a period of approximately 16 months for student financial aid servicing appears reasonable given the critical nature of the service. Benchmarking against similar large-scale federal contracts for financial servicing indicates that pricing is generally competitive when procured through full and open competition. The use of fixed price with economic price adjustment suggests an effort to balance cost certainty with the need to account for potential market shifts in operational costs.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, with four bidders vying for the opportunity. This level of competition is generally positive, suggesting that the government sought a wide range of potential providers and that market forces were likely at play to drive pricing. The presence of multiple bidders indicates that the market for student financial aid servicing is sufficiently robust to support competitive procurement processes.

Taxpayer Impact: The full and open competition process for this contract is beneficial for taxpayers as it increases the likelihood of securing services at a competitive price, preventing potential overpayment and ensuring efficient use of public funds.

Public Impact

Students and educational institutions benefit from the reliable servicing of Title IV federal financial aid programs. The contract ensures the continued operation of essential services related to student loans, grants, and work-study programs. The geographic impact is national, as Title IV aid is available to students across the United States. The contract supports jobs within the financial services sector, specifically those involved in loan servicing and administration.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for cost increases due to economic price adjustment clause if market conditions fluctuate unfavorably.
Reliance on a single primary contractor for a critical function could pose a risk if performance issues arise.

Positive Signals

Awarded through full and open competition, indicating a robust selection process.
Contractor has experience in servicing federal student financial aid.
Contract addresses a critical government function, ensuring continuity of services for students.

Sector Analysis

The federal student financial aid servicing sector is a specialized area within financial services, primarily focused on managing federal student loan portfolios. This contract fits within the broader category of government support services and financial administration. Comparable spending benchmarks in this sector are difficult to pinpoint precisely due to the unique nature of federal student aid, but large-scale contracts for financial operations often run into the hundreds of millions of dollars over their lifecycle.

Small Business Impact

This contract was not set aside for small businesses, and there is no indication of specific subcontracting requirements for small businesses within the provided data. The primary focus appears to be on large-scale servicing capabilities, which may limit direct opportunities for small businesses unless they are part of a larger prime contractor's team. Further analysis would be needed to determine if any subcontracting opportunities were mandated or voluntarily pursued.

Oversight & Accountability

Oversight for this contract would typically fall under the Department of Education's program offices responsible for student financial assistance. Accountability measures would be defined in the contract's performance work statement, with potential for reviews and audits. Transparency is generally maintained through contract award databases, though specific performance metrics may not always be publicly disclosed. Inspector General jurisdiction would apply in cases of fraud, waste, or abuse.

Related Government Programs

Federal Student Loan Program Administration
Department of Education Financial Operations
Student Aid Servicing Contracts
Credit Intermediation Services

Risk Flags

Potential for cost overruns due to economic price adjustment.
Contractor performance risk for critical financial aid servicing.
Data security and privacy concerns for borrower information.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $170.9 million to GREAT LAKES EDUCATIONAL LOAN SERVICES, INC. IGF::CT::IGF / CRITICAL FUNCTION IDIQ: SERVICING OF TITLE IV STUDENT FINANCIAL AID. TASK ORDER: SERVICING OF TITLE IV STUDENT FINANCIAL AID, FROM 9/1/2015 THROUGH 8/31/2016. PROVIDES FUNDING FOR TITLE IV AID SERVICING THROUGH APPROXIMATELY 12/31/2015.

Who is the contractor on this award?

The obligated recipient is GREAT LAKES EDUCATIONAL LOAN SERVICES, INC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $170.9 million.

What is the period of performance?

Start: 2015-09-01. End: 2016-12-31.

What is the historical spending pattern for student financial aid servicing by the Department of Education?

Historical spending on student financial aid servicing by the Department of Education has been substantial, reflecting the scale of federal student loan programs. The Department has historically relied on a mix of internal operations and external contractors to manage loan origination, servicing, and repayment. Over the years, there has been a trend towards outsourcing certain servicing functions to private companies through competitive contracts. The total annual spending can fluctuate based on program needs, legislative changes, and the number of active borrowers. For instance, prior to the consolidation of loan servicing under fewer large contracts, spending was distributed across more entities. The value of individual contracts, like the one awarded in 2015 for approximately $170.9 million, highlights the significant investment required to manage these complex financial operations effectively and ensure compliance with federal regulations.

How does the performance of Great Lakes Educational Loan Services, Inc. compare to other federal student loan servicers?

Assessing the comparative performance of Great Lakes Educational Loan Services, Inc. against other federal student loan servicers requires access to detailed performance metrics and historical data, which are not fully available in the provided summary. Generally, federal loan servicers are evaluated on criteria such as borrower satisfaction, default prevention rates, call center efficiency, data accuracy, and compliance with federal regulations. Great Lakes has been a long-standing participant in the federal student loan program, often handling significant portions of the loan portfolio. Performance reviews and contract renewals typically depend on meeting or exceeding established Key Performance Indicators (KPIs). Without specific audit reports or comparative analyses from the Department of Education, a definitive comparison is challenging. However, their continued involvement in servicing suggests a generally satisfactory performance record in meeting contractual obligations.

What are the primary risks associated with outsourcing federal student financial aid servicing?

Outsourcing federal student financial aid servicing carries several primary risks. One significant risk is the potential for service disruptions or degradation if the contractor fails to meet performance standards, impacting millions of students and borrowers. Data security and privacy are paramount; a breach of sensitive borrower information could have severe consequences for individuals and the government. There's also a risk of contractor over-reliance, where the government may lose institutional knowledge or flexibility in managing these functions internally. Furthermore, contractor performance can be affected by financial instability, management changes, or inadequate staffing, leading to inefficiencies or non-compliance. Ensuring robust oversight, clear performance metrics, and contingency plans are crucial to mitigating these risks.

What is the typical duration and value range for federal student financial aid servicing contracts?

Federal student financial aid servicing contracts typically have durations ranging from one to five years, often with options for extension. The value of these contracts can vary significantly based on the scope of services, the size of the loan portfolio being managed, and the number of borrowers served. Contracts can range from tens of millions to hundreds of millions of dollars, and in some cases, exceed a billion dollars over their full term, especially for comprehensive servicing agreements covering large segments of the federal student loan portfolio. The contract awarded to Great Lakes Educational Loan Services, Inc. in 2015 for approximately $170.9 million for a period of roughly 16 months falls within the mid-to-high range for a task order under a larger IDIQ, reflecting the substantial operational requirements involved in servicing federal student aid.

How does the use of 'Fixed Price with Economic Price Adjustment' impact cost certainty for this contract?

The 'Fixed Price with Economic Price Adjustment' (FPEPA) contract type introduces a mechanism to adjust the contract price based on fluctuations in specified economic factors, such as labor costs, material costs, or inflation indices. For this student financial aid servicing contract, FPEPA provides a degree of cost certainty by fixing a base price, but it also acknowledges that operational costs can change over the contract's duration. This is particularly relevant for long-term service contracts where unforeseen economic shifts could significantly impact the contractor's profitability and ability to deliver services. While it offers more flexibility than a firm fixed-price contract, it introduces variability for the government, as the final cost could be higher than the initial fixed price if economic conditions trend upwards. The specific indices and adjustment formulas outlined in the contract are critical for understanding the potential range of cost variations.

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: 4

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

Evaluated Preference: NONE

Contractor Details

Parent Company: Nelnet, Inc. (UEI: 134960447)

Address: 2401 INTERNATIONAL LN, MADISON, WI, 53704

Business Categories: Category Business, Corporate Entity Not Tax Exempt, Not Designated a Small Business, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $170,875,875

Exercised Options: $170,875,875

Current Obligation: $170,875,875

Contract Characteristics

Commercial Item: COMMERCIAL ITEM

Parent Contract

Parent Award PIID: EDFSA09D0012

IDV Type: IDC

Timeline