Motion for a permanent injunction barring the agency from canceling a solicitation for student loan debt collection services is granted, where the cancelation notice failed to demonstrate the agency no longer required the services or provide details of a purported program that would render the services unnecessary. The court also noted the agency had awarded two long-term contracts for the services at issue only a few months prior to the cancelation notice, which was issued amid a protracted bid protest case.
In the latest of numerous proceedings regarding a Department of Education procurement for student loan debt collection services, the protesters challenged the department’s decision to cancel the solicitation, arguing that Education lacked a rational basis for the decision. They moved the court to permanently enjoin the agency from canceling the solicitation. The government opposed, arguing that Education plans to implement a new debt collection program that will not require the services of private debt collection agencies.
The plaintiffs were among the disappointed offerors who protested the agency’s original award decision to the Government Accountability Office, which prompted Education to take corrective action by terminating the awards and making a new award decision. This decision also was protested in the Court of Federal Claims, which temporarily enjoined the agency from proceeding with performance.
The government announced that it would not pursue continued litigation in this second round of protests and later announced that the agency canceled the solicitation. According to the agency, it will no longer require these services because “enhanced servicers” will handle all accounts 90 days or more delinquent for the life of those accounts, and therefore the need for these services will diminish rapidly and ultimately become non-existent. The agency’s notice stated that the current volume of defaulted borrowers could be handled successfully by the eleven small business debt collectors currently under contract, which provide the same services as PCAs. The government then filed a motion to dismiss the protests as moot and lift the preliminary injunction. The plaintiffs sued to reverse.
The plaintiffs argue the agency’s decision to cancel the solicitation was arbitrary. In response, the government argued that the agency’s decision is a logical result of its plan to implement the enhanced servicer program. Further, the government argued that the AR adequately supported the policy change.
However, the court found that the record was undeveloped on this issue and appeared slipshod. The court noted that the cancellation notice constituted the agency’s first public announcement of the enhanced servicer program. Both the notice and internal memorandum discussing the program are dated May 3, 2018, and the notice flatly acknowledges that the program still needs to be reviewed for compliance with applicable laws and regulations. AR 28.
Further, the court found the administrative record lacked critical information about the enhanced servicer program, such as a plan or timeline for implementing the program, a request for proposals or any mention of what that request might look like, a source of funding, or a copy of the canceled solicitation. The cancellation notice assumed that enhanced servicers will begin processing loans “in the near future, but the court found no mention of when the enhanced servicers will begin processing loans, what the enhanced servicers’ processing capacity will be at any point in the future, or any discussion of how the agency arrived at its estimate for their processing capacity.
Further, even if the record included projections for small business and enhanced servicer processing capacities—and those projections were accurate—the court found that the cancellation notice’s conclusion that their combined capacity will be sufficient at any point in the future would still be suspect because the record does not contain projected loan volumes beyond December 2018. While the agency internal memorandum discusses an increase in its student debt holdings over the previous year, it did not address future volumes at all, despite an expectation that the portfolio would continue to increase.
The court also notedt he agency had clearly planned for private collection agencies to continue to administer defaulted student loans as recently as January 2018, when the agency awarded two PCA contracts. Yet only four months later, in a procurement cancellation notice, the department declared a new direction and an end to contracting for these services.
The court held that Education had failed to provide a reasoned analysis for this policy change and the subsequent cancellation of the solicitation. Finding that the plaintiffs had succeeded on the merits of their case and would suffer irreparable harm, and that returning to the status quo would not stop the agency from developing its new program, the court issued an injunction preventing the agency from canceling the solicitation.
The plaintiffs were represented by David R. Johnson, with whom were Tyler E. Robinson and Ryan D. Stalnaker, Vinson & Elkins LLP, for FMS Investment Corp.; Jonathan S. Aronie, with whom was Townsend L. Bourne, Sheppard, Mullin, Richter & Hampton LLP, for Account Control Technology Inc.; William M. Jack, with whom were William C. MacLeod, David E. Frulla, and Amba M. Datta, Kelley Drye & Warren LLP, for GC Services Limited Partnership; Jonathan D. Shaffer, with whom were Mary Pat Buckenmeyer and Todd M. Garland, Smith Pachter McWhorter PLC, for Pioneer Credit Recovery Inc.; John R. Prairie, with whom were Brian G. Walsh and Cara L. Lasley, Wiley Rein, LLP, for Automated Collection Services, Inc.; David T. Ralston Jr., with whom were Frank S. Murray and Krista Nunez, Foley & Lardner LLP, for Windham Professionals Inc.; Edward H. Meyers, Stein Mitchell Cipollone Beato & Missner LLP, for Continental Service Group Inc.; and Thomas Andrew Coulter, with whom was Nicole Hardin Brakstad, O’Hagan Meyer PLLC, for Progressive Financial Services Inc.
The government is represented by David R. Pehlke, with whom were Chad A. Readler, Acting Assistant Attorney General, Robert E. Kirschman, Jr., Director, Patricia M. McCarthy, Assistant Director, Civil Division, Department of Justice, as well as Sarah Falk, General Attorney, Office of the General Counsel, Department of Education. Alltran Education Inc. is represented by Daniel R. Forman, with whom were James G. Peyster and Robert J. Sneckenberg, Crowell & Moring LLP.