Government Contracts Cancellation of Student Loan Debt Collection Solicitation Enjoined
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Tuesday, October 16, 2018

Cancellation of Student Loan Debt Collection Solicitation Enjoined

By Government Contracts Editorial Staff

A protest of the cancellation of a solicitation was sustained by the Court of Federal Claims because the government did not document a reasonable basis for its action. The post-award protest followed a Government Accountability Office ruling sustaining challenges to contract awards for student loan debt collection services (32 CGEN ¶115,512). The government subsequently took corrective action terminating the contracts and making two new awards. After the CFC enjoined the government from proceeding with the new awards, the government announced it would cancel the solicitation. The cancellation notice stated the government’s “needs and requirements for servicing student loans in delinquency and default will change significantly in the near future.” Under its “new vision,” the government would utilize “enhanced servicers” that will handle all accounts 90 days or more delinquent, and it would no longer need to use private collection agencies, which service borrower accounts that are delinquent by 360 days or more. The notice also stated the current volume could be handled successfully by 11 incumbent small business debt collectors that provided the same services as PCAs. The protesters, all PCAs that submitted an offer in response to the solicitation, contended the cancellation decision lacked a rational basis and was unlawful.

Scant Record. The administrative record supported the protesters’ position. The record was “scant; … just 33 pages long,” and it appeared to be “slipshod.” The notice was the government’s first public announcement of the enhanced servicer program, and it “flatly” acknowledged the program still needed to be reviewed for compliance with applicable laws and regulations. Further, the record was missing “critical information,” including a timeline for implementation, a request for proposals, and a source of funding, and it did not include a copy of the cancelled solicitation. Even if the record included accurate projections for small business and enhanced servicer processing capacities, the notice’s conclusion that their combined capacity will be sufficient would still be suspect because the record did not contain projected loan volumes beyond December 2018. The government “entirely failed to consider,” the interactions between future loan volumes, future small business capacity, and future enhanced servicer capacity over any timeline for implementing the enhanced servicer program. The government needed to provide a “reasoned analysis” for its “significant policy change,” but it failed to do so. The court granted the protesters’ motion for a permanent injunction and enjoined the government from cancelling the solicitation. (FMS Investment Corp., et al. v. U.S., et al., FedCl, 62 CCF ¶81,475).

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