Department of Education awards $652.6M contract for credit intermediation services, with performance through 2024

Contract Overview

Contract Amount: $652,651,132 ($652.7M)

Contractor: Missouri Higher Education Loan Authority

Awarding Agency: Department of Education

Start Date: 2019-12-30

End Date: 2024-12-31

Contract Duration: 1,828 days

Daily Burn Rate: $357.0K/day

Competition Type: FULL AND OPEN COMPETITION

Number of Offers Received: 4

Pricing Type: FIRM FIXED PRICE

Sector: Other

Official Description: THE PURPOSE OF THIS MODIFICATION IS TO CREATE A NEW TASK ORDER FOR CONTRACT ED-FSA-11-D-0012 WITH THE PERIOD OF PERFORMANCE:01/01/2020 - 12/31/2020.

Place of Performance

Location: CHESTERFIELD, SAINT LOUIS County, MISSOURI, 63005

State: Missouri Government Spending

Plain-Language Summary

Department of Education obligated $652.7 million to MISSOURI HIGHER EDUCATION LOAN AUTHORITY for work described as: THE PURPOSE OF THIS MODIFICATION IS TO CREATE A NEW TASK ORDER FOR CONTRACT ED-FSA-11-D-0012 WITH THE PERIOD OF PERFORMANCE:01/01/2020 - 12/31/2020. Key points: 1. Contract value represents significant investment in credit intermediation services. 2. Full and open competition suggests a robust bidding process. 3. Long performance period indicates a sustained need for these services. 4. Fixed-price contract type shifts performance risk to the contractor. 5. Contractor is a state-level authority, potentially impacting market dynamics. 6. No small business set-aside noted, suggesting focus on larger entities.

Value Assessment

Rating: good

The contract's total value of $652.6 million over its extended period suggests a substantial commitment. Benchmarking this against similar credit intermediation contracts is challenging without more specific service details. However, the firm-fixed-price structure implies that the contractor bears the risk of cost overruns, which can be a positive indicator of value if the contractor performs efficiently. The pricing is likely competitive given the full and open competition.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

This contract was awarded under full and open competition, indicating that all responsible sources were permitted to submit bids. The presence of multiple bidders (4 noted) suggests a healthy competitive environment, which typically drives down prices and encourages innovation. The agency sought a broad range of potential providers, leading to a more efficient price discovery process.

Taxpayer Impact: Taxpayers benefit from the competitive bidding process, which aims to secure the most favorable pricing and terms for the government. The open competition ensures that public funds are used efficiently by leveraging market forces to identify the best value.

Public Impact

The primary beneficiaries are students and institutions of higher education who rely on credit intermediation services for financial aid and loan management. Services delivered likely include loan origination, servicing, and potentially default management. Geographic impact is national, supporting the federal student loan program. Workforce implications may involve specialized roles in financial services, administration, and compliance within the contractor's organization.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Long contract duration could lead to complacency if not actively managed.
Reliance on a single state authority for a national program warrants close monitoring of performance and capacity.
Potential for scope creep if modifications are not carefully controlled.

Positive Signals

Firm-fixed-price contract aligns incentives for cost control.
Full and open competition suggests a strong initial selection process.
Contractor's status as a higher education loan authority may indicate specialized expertise.

Sector Analysis

The contract falls within the 'Other Activities Related to Credit Intermediation' sector, a critical component of the financial services industry supporting education. This sector is characterized by complex regulatory environments and significant capital requirements. The market size for federal student loan servicing and related activities is substantial, with numerous private and quasi-governmental entities vying for these contracts. This specific award represents a significant portion of federal spending in this niche.

Small Business Impact

The data indicates that this contract was not set aside for small businesses (ss: false, sb: false). This suggests that the scope and requirements of the contract were likely geared towards larger, more established entities capable of handling the scale and complexity of federal credit intermediation. There is no explicit information on subcontracting plans, but given the nature of the work, it's possible that specialized services might be subcontracted, though not necessarily to small businesses.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's contracting officers and program managers. Accountability measures are embedded within the firm-fixed-price contract terms, requiring the contractor to meet specific performance standards. Transparency is facilitated through federal contract databases, though detailed operational performance metrics may not always be publicly disclosed. Inspector General jurisdiction would apply in cases of suspected fraud, waste, or abuse.

Related Government Programs

Federal Student Loan Programs
Higher Education Act Programs
Credit and Lending Services
Financial Aid Administration
Government Contract Financing

Risk Flags

Long-term contract duration
Reliance on a single entity for critical services
Potential for performance degradation over time

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $652.7 million to MISSOURI HIGHER EDUCATION LOAN AUTHORITY. THE PURPOSE OF THIS MODIFICATION IS TO CREATE A NEW TASK ORDER FOR CONTRACT ED-FSA-11-D-0012 WITH THE PERIOD OF PERFORMANCE:01/01/2020 - 12/31/2020.

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 $652.7 million.

What is the period of performance?

Start: 2019-12-30. End: 2024-12-31.

What is the track record of the Missouri Higher Education Loan Authority in managing federal contracts of this scale?

Information regarding the Missouri Higher Education Loan Authority's (MOHELA) specific track record with federal contracts of this magnitude is not detailed in the provided data. MOHELA is a state instrumentality established by the Missouri General Assembly to help finance higher education. While it has extensive experience in student loan servicing and financing, its history as a direct federal contractor for large-scale credit intermediation services would need further investigation. Benchmarking its performance against other federal student loan servicers would require access to performance metrics, past performance reviews, and any documented issues or successes in prior federal engagements. Understanding their capacity and experience in fulfilling the specific requirements of this Department of Education contract is crucial for assessing long-term success.

How does the per-unit cost of this contract compare to similar federal credit intermediation services?

The provided data does not include specific per-unit cost breakdowns (e.g., cost per loan serviced, cost per dollar managed) for this contract. The total award amount of $652.6 million is for the entire period of performance and encompasses various activities related to credit intermediation. To compare per-unit costs, one would need detailed operational data from the contractor and comparable data from other federal contracts for similar services, such as loan servicing, default management, or origination. Without these granular metrics, a direct per-unit cost comparison is not feasible. The firm-fixed-price nature suggests the contractor aims for efficiency, but the actual value-for-money at a unit level requires deeper analysis of service delivery metrics.

What are the primary risks associated with a long-term (5-year) firm-fixed-price contract for credit intermediation?

A significant risk with a long-term, firm-fixed-price contract in credit intermediation is the potential for the contractor to become complacent or less innovative over time, especially if oversight is not rigorous. While the fixed price shifts cost overrun risk to the contractor, it can also disincentivize them from seeking efficiencies beyond what is necessary to meet contract minimums. Market conditions, interest rates, and regulatory landscapes in credit intermediation can change significantly over five years. If these changes impact the contractor's cost structure unfavorably, they may seek to reduce service quality or push for contract modifications. Conversely, if the market shifts favorably for the contractor, the government might be locked into paying a price that becomes uncompetitive. Robust performance monitoring and clear contract management are essential to mitigate these risks.

What is the expected impact of this contract on the federal student loan portfolio and its administration?

This contract is expected to play a crucial role in the administration and management of a significant portion of the federal student loan portfolio. By outsourcing credit intermediation services to the Missouri Higher Education Loan Authority, the Department of Education aims to ensure efficient loan servicing, repayment processing, and potentially default aversion strategies. The scale of the contract suggests it will impact a large number of borrowers and loans, contributing to the overall stability and operational effectiveness of federal student aid programs. The success of this contract is directly tied to the smooth functioning of financial aid delivery, impacting student access to education and the government's ability to manage its loan assets effectively.

How does the selection of a state-level authority like MOHELA for this contract differ from using private sector financial institutions?

Selecting a state-level authority like the Missouri Higher Education Loan Authority (MOHELA) for federal credit intermediation services often implies a focus on public service mission and potentially different cost structures compared to purely private sector financial institutions. State authorities may operate with different profit motives, prioritizing borrower assistance and program integrity over maximizing shareholder returns. This can translate into more favorable terms for borrowers or a greater emphasis on compliance and public good. However, their capacity and technological infrastructure might differ from large private servicers. The Department of Education's choice suggests they found MOHELA's specific expertise, existing infrastructure, or mission alignment to be the best fit for the contract's requirements, possibly balancing cost, mission, and capability.

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: FIRM FIXED PRICE (J)

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: $652,833,581

Exercised Options: $652,833,581

Current Obligation: $652,651,132

Actual Outlays: $1,178,727,368

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: EDFSA11D0012

IDV Type: IDC

Timeline