All Parties Now Look to May 4 For Answer in Dept of ED Debt Collection Litigation Round Two

The Department of Education (ED) told the U.S. Court of Federal Claims last week that it expects to notify the parties by May 4th as to the course of action it will take in the private debt collection contract matter.

This deadline came as a result of an outcry over the Government's March 19 notice to the court, which stated,

“It appears likely that a course of action other than continued litigation of the pending protests will be pursued. ED has not completed the analysis yet and has not made a final decision as to a course of action. All options remain on the table.” (emphasis added)

Responding to the plaintiffs' March 20 reaction to the notice, ED added even greater uncertainty: 

“It is important to state that our intent with our March 19 notice was not to foster delay or to avoid anything in this litigation – indeed, as it stated, we are open to continuing with the litigation. However, once it became clear that this litigation was likely to end in the near future, the Court and the other parties deserved to know that fact. Plaintiffs complain that our confirmation that “[a]ll options remain on the table” is a sign that ED has not done any work on this issue. To the contrary, the fact that a full range of options is under consideration, which necessitates a review of the procurement, the solicitation, and the program, means that a great deal more work is required than if only a corrective action defined by elements of the complaints was under consideration.” (emphasis added)

insideARM last published about this case on March 26, and provided a comprehensive background of events. 

On March 23 the court held a status conference which resulted in the court ordering ED to file a notice by March 28 committing to a date when it will be able to produce the following to plaintiffs:

• Full evaluation records underlying the December 2016 award decision for all current protestors and awardees;
• All documents related to the 2015 Focused Review of all current protestors and the two awardees;
• All documents related to monthly call monitoring reviews for all ATE contractors since 2015;
• All documents (including non-privileged agency communications) related to the appearance of a conflict of interest between Secretary of Education Betsy Devos and Performant;
• All documents (including non-privileged agency communications) related to ED officials attempting to influence the award decision; and
• All documentation of communications between ED evaluators, “points of contact,” and “clients” identified in the past performance evaluation documents.

As ordered, on March 28, ED committed to produce the majority of these documents by April 13, which was last Friday (with some of the audio files being delivered by this Wednesday, April 18). insideARM presumes the Department met this deadline. All parties now await the May 4 milestone. 

insideARM Perspective

Nobody knows what the outcome will be on May 4. As ED has stated, the full range of options are on the table.

• It seems possible - but unlikely - that no action will be taken (which means continuing with the currently awarded unrestricted contract to two firms). This would put the decision in the hands of the Court of Federal Claims.
• ED could extend the unrestricted award to additional firms, satisfying some, but maintaining the possibility of ongoing litigation by others.
• ED could start over with the unrestricted bid process, possibly establishing new, more transparent, criteria. It's unclear whether this would result once again in a similar situation to the one we have today.
• ED could cancel the private debt collection program and move collections under the purview of the servicers... who would then likely outsource to the private debt collectors, since they do not have the expertise in this specialized area.
• ED could cancel the private debt collection program altogether -- small and unrestricted contractors -- and transfer the work to Treasury (who would then likely outsource the work to private debt collectors, since they do not have the expertise in this specialized area) under the purview of the Debt Collection Improvement Act of 1996.

Perhaps there are other options as well. We can only wait and see. Meanwhile, many jobs still remain in the balance, as do accounts in default. At the moment, there are no winners.