Department of Education awards $328.9M for credit intermediation services, with performance through 2024

Contract Overview

Contract Amount: $328,861,577 ($328.9M)

Contractor: Edfinancial Services LLC

Awarding Agency: Department of Education

Start Date: 2019-12-30

End Date: 2024-12-31

Contract Duration: 1,828 days

Daily Burn Rate: $179.9K/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-12-D-0005 WITH THE PERIOD OF PERFORMANCE: 01/01/2020 TO 12/31/2020.

Place of Performance

Location: KNOXVILLE, KNOX County, TENNESSEE, 37922

State: Tennessee Government Spending

Plain-Language Summary

Department of Education obligated $328.9 million to EDFINANCIAL SERVICES LLC for work described as: THE PURPOSE OF THIS MODIFICATION IS TO CREATE A NEW TASK ORDER FOR CONTRACT ED-FSA-12-D-0005 WITH THE PERIOD OF PERFORMANCE: 01/01/2020 TO 12/31/2020. Key points: 1. Contract value indicates significant investment in credit intermediation activities. 2. Full and open competition suggests a robust market for these services. 3. Long performance period may present risks related to evolving needs. 4. Fixed-price contract type shifts performance risk to the contractor. 5. Contractor's performance history and specific deliverables warrant further review. 6. Geographic focus on Tennessee may indicate regional service delivery.

Value Assessment

Rating: good

The total award amount of $328.9 million over a five-year period (2020-2024) suggests a substantial commitment to credit intermediation services. Benchmarking this against similar contracts is challenging without more specific service details. However, the firm fixed-price nature of the contract implies that the contractor bears the risk of cost overruns, which can be a positive indicator of value if the contractor can deliver within the agreed price. The contract's duration and total value should be assessed against the specific outcomes and efficiencies achieved.

Cost Per Unit: N/A

Competition Analysis

Competition Level: full-and-open

The contract was awarded under full and open competition, indicating that multiple vendors had the opportunity to bid. The presence of four bidders suggests a competitive marketplace for these services. A higher number of bidders generally leads to better price discovery and potentially lower costs for the government. The specific details of the bidding process and the evaluation criteria would provide further insight into the quality of competition.

Taxpayer Impact: Full and open competition typically benefits taxpayers by driving down prices through market forces and ensuring the government receives the best value from a wide pool of qualified providers.

Public Impact

Beneficiaries likely include students and educational institutions requiring credit intermediation services. Services delivered are related to credit intermediation activities, potentially involving loan processing, servicing, or financial advisory. Geographic impact is noted as Tennessee, suggesting a primary operational focus or service area. Workforce implications may involve employment opportunities within EDFINANCIAL SERVICES LLC and its subcontractors, particularly in Tennessee.

Waste & Efficiency Indicators

Waste Risk Score: 50 / 10

Warning Flags

Potential for scope creep over the extended performance period.
Reliance on a single contractor for a significant duration could lead to vendor lock-in.
Ensuring continued alignment with evolving federal financial regulations.

Positive Signals

Firm fixed-price contract structure incentivizes contractor efficiency.
Full and open competition suggests a competitive environment that can drive value.
Long-term contract allows for stable service delivery and potential for economies of scale.

Sector Analysis

The contract falls under the 'Other Activities Related to Credit Intermediation' category (NAICS 522390), which encompasses a range of financial services not elsewhere classified, often related to lending, credit, and financial management. The market for these services is diverse, including specialized financial institutions and large service providers. The Department of Education's spending in this area is critical for managing federal student aid programs and other financial initiatives. Comparable spending benchmarks would depend on the specific nature of the credit intermediation services provided.

Small Business Impact

The data indicates that small business participation (ss: false, sb: false) was not a primary set-aside consideration for this contract. While there is no explicit small business set-aside, the prime contractor, EDFINANCIAL SERVICES LLC, may still engage small businesses as subcontractors. The extent of subcontracting to small businesses would need to be assessed to understand the impact on the small business ecosystem. Without specific subcontracting plans, it's difficult to gauge the direct benefit to small businesses from this particular award.

Oversight & Accountability

Oversight for this contract would primarily reside with the Department of Education's contracting officers and program managers. Accountability measures are typically embedded within the contract's performance work statement, including reporting requirements, service level agreements, and potential penalties for non-performance. Transparency is facilitated through contract award databases like FPDS. Inspector General jurisdiction would apply if any fraud, waste, or abuse is suspected within the contract's execution.

Related Government Programs

Federal Student Aid Programs
Student Loan Servicing Contracts
Financial Management Services
Credit Services

Risk Flags

Extended performance period may increase risk of obsolescence or changing requirements.
Need for detailed review of contractor's past performance on similar contracts.
Potential for vendor lock-in due to long-term nature of the contract.

Frequently Asked Questions

What is this federal contract paying for?

Department of Education awarded $328.9 million to EDFINANCIAL SERVICES LLC. THE PURPOSE OF THIS MODIFICATION IS TO CREATE A NEW TASK ORDER FOR CONTRACT ED-FSA-12-D-0005 WITH THE PERIOD OF PERFORMANCE: 01/01/2020 TO 12/31/2020.

Who is the contractor on this award?

The obligated recipient is EDFINANCIAL SERVICES LLC.

Which agency awarded this contract?

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

What is the total obligated amount?

The obligated amount is $328.9 million.

What is the period of performance?

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

What is the specific nature of the 'Other Activities Related to Credit Intermediation' services being provided under this contract?

The provided data indicates the NAICS code 522390, which covers 'Other Activities Related to Credit Intermediation.' This broad category can encompass a variety of services such as loan origination support, loan servicing, credit reporting, debt collection, and financial advisory services related to credit. For the Department of Education, these services are likely tied to the administration and management of federal student financial aid programs, potentially including aspects of loan processing, repayment management, and default prevention. A more detailed understanding of the contract's Performance Work Statement (PWS) would be necessary to pinpoint the exact services rendered, such as whether it involves direct student loan servicing, support for loan servicers, or other financial intermediation functions critical to the department's mission.

How does the contractor's past performance and track record influence the assessment of this contract's value?

Assessing the value of this contract requires a thorough review of EDFINANCIAL SERVICES LLC's past performance. While the contract award itself signifies that the contractor met the minimum requirements during the bidding process, their historical track record provides crucial context. This includes evaluating their performance on previous government contracts, particularly those with the Department of Education or similar agencies, and their ability to meet deadlines, quality standards, and budget constraints. Positive indicators might include consistent high ratings on past performance questionnaires, successful completion of complex projects, and a history of proactive problem-solving. Conversely, a history of performance issues, contract disputes, or significant cost overruns on prior work would raise concerns about the current contract's value and the contractor's reliability. Without specific past performance data, the assessment remains preliminary.

What are the key risks associated with the long performance period (2020-2024) for this credit intermediation contract?

The extended performance period of five years (2020-2024) for this credit intermediation contract presents several potential risks. Firstly, the regulatory and technological landscape for financial services, especially in education, is constantly evolving. A long-term contract might struggle to remain agile and adapt to new federal policies, compliance requirements, or technological advancements in areas like data security and payment processing. Secondly, there's a risk of vendor lock-in, where the government becomes heavily reliant on a single provider, potentially diminishing leverage for future negotiations or transitions. Thirdly, the longer the contract duration, the greater the chance of unforeseen economic shifts or changes in program priorities that could impact the contract's relevance or cost-effectiveness. Finally, maintaining consistent service quality and contractor engagement over such an extended period requires robust oversight and proactive contract management to mitigate performance degradation.

How does the firm fixed-price (FFP) contract type impact the government's financial exposure and the contractor's incentives?

The Firm Fixed-Price (FFP) contract type significantly benefits the government by shifting the majority of financial risk to the contractor, EDFINANCIAL SERVICES LLC. Under an FFP agreement, the contractor is obligated to complete the work for a predetermined price, regardless of their actual costs. This provides cost certainty for the Department of Education, making budgeting more predictable. It also strongly incentivizes the contractor to manage their costs efficiently and to perform the work effectively to maximize their profit margin. If the contractor incurs higher-than-expected costs, their profit is reduced; if they manage costs well, their profit increases. This structure is generally preferred for well-defined requirements where cost uncertainty is low. However, it can also lead contractors to cut corners on quality if not properly monitored, or to resist necessary changes that could increase their costs, potentially requiring careful negotiation for any scope adjustments.

What are the implications of the contract being awarded to EDFINANCIAL SERVICES LLC, a company based in Tennessee (ST: TN, SN: TENNESSEE)?

The contract award to EDFINANCIAL SERVICES LLC, with operations noted in Tennessee, has several implications. Firstly, it suggests that the company has a significant presence or operational base in that state, potentially contributing to the local economy through job creation and investment. Secondly, for the Department of Education, having a contractor with a strong regional presence might facilitate easier site visits, performance monitoring, and communication, especially if the services are geographically concentrated. However, it's important to note that federal contracts are awarded based on merit, competition, and best value, not solely on geographic location. While the Tennessee connection is noted, the primary drivers for the award would have been the contractor's qualifications, proposed price, and past performance. The geographic indicator primarily informs where the contractor's operations related to this contract might be centered.

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: 298 N SEVEN OAKS DR K, KNOXVILLE, TN, 37922

Business Categories: Category Business, Limited Liability Corporation, Not Designated a Small Business, Partnership or Limited Liability Partnership, Special Designations, U.S.-Owned Business

Financial Breakdown

Contract Ceiling: $328,861,577

Exercised Options: $328,861,577

Current Obligation: $328,861,577

Actual Outlays: $526,884,783

Contract Characteristics

Multi-Year Contract: Yes

Commercial Item: COMMERCIAL PRODUCTS/SERVICES

Cost or Pricing Data: NO

Parent Contract

Parent Award PIID: EDFSA12D0005

IDV Type: IDC

Timeline