Another New Twist in the ongoing Department of Education Debt Collection Contract Saga – Two Firms Win Appeal of Denied Protest

On July 12, 2016 the Court of Appeals for the Federal Circuit reviewed two U.S. Department of Education (ED) debt collector protests over their contracts not being extended in March of 2015.

The three-judge panel determined that ED’s refusal to extend the contracts of Pioneer Credit Recovery Inc.(Pioneer) and Enterprise Recovery Systems Inc. (Enterprise) can be protested, and vacated a prior Court of Federal Claims ruling that it had no jurisdiction to hear the bid protests.

Background

This case involves the lucrative contract with ED for private collection agencies to render services related to resolving defaulted student loans through the General Services Administration (“GSA”) Federal Supply Schedule for Financial and Business Solutions.

In 2008, the parties had participated in a Request for Quotations (“RFQ”) for debt collection services under Special Item Number 520-4 seeking to issue Task Orders to contractors under the existing GSA Schedule contract. In 2009, ED awarded identical Task Orders pursuant to the RFQ to Pioneer, Enterprise, and twenty other contractors.

On February 20, 2015, Education notified Pioneer and Enterprise of its decision not to issue award-term Task Order Extensions to them. One day later, Education notified five other contractors (collectively, “the competitors”) (Editor’s Note: The five agencies were: Windham Professionals, GC Services, ConServe, Account Control Technology. and Financial Management Systems) that it intended to issue award-term Task Order Extensions to them for a period not to exceed a specified number of months. These letters, titled Notification of Award Term Extension and each signed by the Contracting Officer, expressly stated, “If the contract is extended pursuant to H.4, it will be accomplished via a contracting action, which will specifically identify all of the terms and conditions.”

On a late Friday afternoon on February 27, 2015 ED publicly announced that it would “wind down” its relationship with five private collection agencies on its student loan debt collection contract that ED says were providing inaccurate information to borrowers regarding rehabilitations. Those five agencies were: Coast Professional, Enterprise Recovery Systems, National Recoveries, Pioneer Credit Recovery, and West Asset Management.

In March 2015, Pioneer and Enterprise filed suit  against the government in the Court of Federal Claims, based on, inter alia, Education’s proposed issuance of award-term extensions under H.4 to the competitors. The complaints alleged that the Court of Federal Claims had jurisdiction over the claims under the Tucker Act, 28 U.S.C. § 1491(b)(1). The competitors intervened as defendants and they, along with the government, argued that the Court of Federal Claims lacked subject matter jurisdiction.

The Court of Federal Claims dismissed the complaints. Pioneer and Enterprise separately appealed the decision by the Court of Federal Claims dismissing their claims against the government for lack of jurisdiction. The Court of Federal Claims had concluded that these proposed new Task Orders (for the award-term extensions) should not be considered “the award of a contract” and thus not eligible for a protest.

The appellate court saw things differently and ruled that extension task orders awarded to five other companies counted as “new contracts” that could be challenged in bid protests.

The court wrote:

“Under the Tucker Act, as amended, the Court of Federal Claims has bid protest jurisdiction over “action[s] by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491(b)(1).3 We conclude that the proposed issuance of award-term extensions under H.4 to the five contractors to permit them to continue offering debt collection services under the GSA Schedule contract constitutes “a proposed award or the award of a contract” pursuant to § 1491 and thus the Court of Federal Claims has jurisdiction over the bid protest. The government’s decision to issue new Task Orders to contractors under the GSA Schedule contract falls within the plain language of § 1491.

There is no dispute that the award-term extension under H.4 requires the government to issue a new Task Order for the extension of debt collection services for the competitors. The Supreme Court recently held that issuance of a new Task Order against a GSA Federal Supply Schedule contract constitutes an award of a contract. See Kingdomware Techs., Inc. v. United States, No. 14-916, 2016 WL 3317563, at *8–9 (U.S. June 16, 2016). It is thus a protestable event under § 1491(b). (Emphasis added by insideARM)

Section 1491 gives the Court of Federal Claims jurisdiction over ‘the award or proposed award of a contract.’ We conclude that issuance of a new Task Order pursuant to a GSA Federal Supply Schedule contract constitutes the award of a contract and is thus an action over which the Court of Federal Claims has jurisdiction. We see no reason to create an exception when the new Task Orders arise from an award-term extension.”

A complete copy of the opinion can be found here.

insideARM Perspective

The Department of Education Debt Collection Services RFP is a mess! It is unclear at this time what this decision will mean to an already delayed process.

insideARM has written extensively about the process. In addition to the article links above we have written numerous other stories about the process.

See our October 7, 2014 article here.

See our December 14, 2015 article here.

See our January 16, 2016 article here.

To recap:

The five agencies (the competitors noted above) who were granted two-year extensions started receiving new placements in April, 2015. ED has also been making new placements to the agencies in the small business set-aside category since December, 2015. The RFP is still under review. This case is now remanded back to the Court of Federal Claims.

This is serious business. Companies that had the 2009 contract have had to lay off hundreds of employees as they have not received new placements, and they continue to wait to see if they will be awarded a new contract. It is not good for the industry.

It is going to take some time to sort this out. insideARM is committed to additional coverage of the story as more is learned.