Department of ED and Others Respond to Responses...

There were three filings yesterday in the case of FMS v. USA (Department of Education, or ED).

1. ED’s reply in support of its motion to dismiss the case as moot and to lift the February 2018 preliminary injunction preventing the recall of “in repayment” accounts
2. An amended complaint by plaintiff Progressive Financial Services, Inc. (Progressive), asserting additional grounds of protest relating to ED’s actions
3. A reply by plaintiff Pioneer Credit Recovery, Inc. (Pioneer) to various parties’ requests for an extension of the February 2018 preliminary injunction preventing the recall of in-repayment accounts

The Department of Education Response

As insideARM reported on May 21, ten firms filed opposition to ED’s motion to dismiss the case as moot (given that ED decided to cancel the entire Solicitation for unrestricted private debt collectors). The firms all basically argued that the move – based on a new operational strategy that is as of yet unimplemented -- was irrational.

Yesterday ED responded to the opposition, saying that their arguments are premature and unfounded, and that their claims should be addressed via new protests of the cancellation. Further, ED argues that any such protests, however, cannot cure the claims that the cancellation of the Solicitation rendered moot.

ED claims that the gross data about rising student debt defaults cited by those opposing their motion is irrelevant until new protests are filed and reviewed against an administrative record specific to the decision to cancel. ED says the record supporting the decision will show that the arguments are baseless, and that the contracting officer determined that,

“[t]here is presently more than sufficient capacity, through at least 2024 to perform any Debt Collection Services that may be needed. The 11 active small business contracts are capable of handling 750,000 new accounts per month. The contracting officer estimated the current need, even excluding the eventual impact from the enhanced service provider(s), to be approximately 120,000 new accounts per month… This leaves a cushion of over 600,000 accounts per month while ED transitions to the enhanced servicer(s).”

ED further claims that the plaintiffs cite no case law, and no case law exists, to support a finding that the claims directed at the prior award decision are not moot, so those claims should be dismissed.

As to the matter of the recall of in repayment accounts, ED says it is willing to voluntarily stay any recall subject to the injunction until June 30, 2018. A notice of intent to recall the accounts on that date would be sent to the relevant PCAs on June 15, 2018.

Progressive’s Amended Complaint

Progressive argues that because it has requested leave to file a supplemental complaint, the Government’s motion to dismiss the original complaint is now moot. Although ED argues that the Court no longer has jurisdiction in the case because the subject (the Solicitation) has been cancelled and any opposition must be in the form of a new bid protest, Progressive argues that the Court does retain jurisdiction. Further, Progressive asserts that because ED’s decision to cancel the Solicitation is improper, the Court retains jurisdiction over Progressive’s entire protest. Their argument states,

“Progressive’s protest grounds concerning the evaluation of its proposal and the awardees’ proposals remain viable (Counts I-III, and VII), and should be decided by the Court in accordance with the Rules of this Court. However that determination cannot exist until the Court first determines whether ED’s cancellation decision was reasonable. If the Court grants relief to Progressive under Count IX of its Supplemental Complaint, the effect would be a return to the status quo that existed before ED made the decision to cancel the Solicitation, namely, a flawed evaluation and improper awards to Performant and Windham. If Counts I-III, and VII of Progressive’s Complaint are dismissed now, and Progressive prevails under Count IX, Progressive will have to re-file its protest to obtain full relief. 

Accordingly, it is premature to dismiss Counts I-III and VII at this time, before the Court determines whether ED’s cancellation decision was proper. Upon prevailing under Count IX, Progressive will seek relief in the form of an award to Progressive, as an offeror who offered a superior proposal, or, in the alternative, will seek an Order from the Court requiring ED to re-evaluate the proposals, proceed with the procurement, and make an award as required by the Solicitation and federal law. Thus, the interests of judicial economy and efficiency weigh against the outright dismissal of Progressive’s underlying protest grounds as moot, without further analysis regarding the proprietary and reasonableness of ED’s cancellation decision.”

Pioneer Responds to Requests for Extension of the Preliminary Injunction

First, a bit of background on Pioneer’s positioning in the case. The company was one of five contractors that was suddenly terminated by ED in February 2015. This launched the first round of litigation in the unrestricted contract debacle.

Meanwhile, the new contract decision process continued. When the first round of awards was finally announced on December 9, 2016, Pioneer did not make the list.

So, back to the wrongful termination appeal related to the old contract…ultimately, two of the five firms – Enterprise Recovery Systems, Inc. (now Alltran Education) and Pioneer -- won their appeal, and received Award Term Extensions (ATEs) on April 28, 2017.  

Now, back to Pioneer’s the current response to other plaintiff’s requests for an extension of the February 26, 2018 preliminary injunction. That injunction prevented the recall of in-repayment accounts that are with firms that received ATEs in 2015 (when the 2009 contract ended) – not the ATE held by Pioneer.

Pioneer argues that the Court should not extend the injunction, but rather should dissolve it because the protests and all relevant facts upon which they were based are no longer relevant. “The February 26 PI was based on specific alleged errors regarding the evaluation of proposals and ED's recalling of accounts in light of its new awards…The questioned data is no longer operative because ED has cancelled the procurement and made clear that it will not under any circumstances rely on the data that the Court questioned in its February 26 PI decision.”

insideARM Perspective

Judge Wheeler has typically provided swift decisions following filing deadlines. All we can do is watch.

If you want more history on the case, see our full archive here.