The Department of Education posted the following amendment to their bidding process for the Title IV Student Loan Management/Servicing Contract (this is the contract to service up to $60 billion of FFEL loans that are expected to be put or sold to the Department by September of this year) on their webpage yesterday (June 10th):
The Government has received your organization's response to the proposed common pricing and additional terms and conditions. We are now requesting your organization's Final Revised Proposal. Via email we will send updated additional terms and conditions, and the established common pricing. All other terms and conditions of the solicitation not altered herein, or by the attached, remain in full force and effect.
If you feel revisions to your organization's initial proposal are necessary, please submit only those change pages. Any revisions made should be clearly marked with text that has been bolded, underlined and italicized on the submitted change pages. The page limitations identified in the instructions of the solicitation (see Section D.2, page 19 of 35 of the document entitled, Full File Phase II Title IV RFP v6.pdf, posted on FedBizOpps as Amendment 09 on April 23, 2009) are still applicable.
Your organization's written confirmation that no revisions are necessary, or the revised change pages, shall be submitted and received (on the Government’s servers) by Friday, June 12, 2009 at 5:00PM EDT. Failure to submit a timely response will result in your proposal receiving no further evaluation and eliminate your organization from further consideration for an award. The response shall be submitted via e-mail to the Contracting Officer via e-mail at Mike.Whisler@ed.gov, with a carbon copy to Nicholas.Chung@ed.gov and Bradley.Bumgarner@ed.gov.
Please note that any submitted changes will be evaluated
(in accordance with Section D.4, page 22 of 35 of the document entitled, Full
File Phase II Title IV RFP v6.pdf, posted on FedBizOpps as Amendment 09 on
April 23, 2009) and may result in changes to your proposal’s ratings.
Hereafter, no additional proposal revisions will be requested, and no further
discussions will be required for the Government to make an award decision.
Any assumption included in your Final Revised Proposal that is contrary to the existing Terms and Conditions may result in changes to your proposal’s ratings. Your response shall confirm that any assumptions made in your organization’s proposal submissions are no longer applicable, as appropriate.
Your response shall confirm that your organization will meet the Government’s stated deadlines (see Section D.2, page 19 of 35 of the document entitled, Full File Phase II Title IV RFP v6.pdf, posted on FedBizOpps as Amendment 09 on April 23, 2009) for the Initial, Intermediate and Final Requirements of August 31, 2009, March 31, 2010 and August 31, 2010, respectively.
Any questions regarding this request shall be submitted
to the Contracting Officer via e-mail at Mike.Whisler@ed.gov,
with a carbon copy to Nicholas.Chung@ed.gov
and Bradley.Bumgarner@ed.gov.
Thank you for your continued interest in this opportunity to service Title IV obligations.
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Based on the language, the Department seems to be asking lenders if they are willing to accept the "established common pricing." Not sure how this "established common pricing" is being determined, but it would appear that the Department is saying "here is the price" and giving lenders the opportunity to indicate whether they can accept that pricing and if so, whether they would need to make any changes to their proposals. A situation like this clearly benefits the low cost providers or those servicers that are furthest down the experience curve (my former Bain manager would be proud).
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In case you were wondering who the largest FFELP servicers are, here is information, courtesy of Nelnet 10-K:
The chart below lists the top 10 servicing organizations for FFELP loans as of December 31, 2007 (the latest date information was available from the Department).
| Top FFELP Loan Servicers (a) | ||||||
| Rank | Name | $ billions | ||||
| 1 | Sallie Mae |
$ | 127.4 | |||
| 2 | PHEAA |
34.4 | ||||
| 3 | Nelnet |
32.2 | ||||
| 4 | Great Lakes |
32.1 | ||||
| 5 | ACS |
31.0 | ||||
| 6 | Wells Fargo |
11.7 | ||||
| 7 | JPMorgan Chase |
11.4 | ||||
| 8 | Express Loan Servicing |
8.7 | ||||
| 9 | Edfinancial |
7.7 | ||||
| 10 | KHEAA (Kentucky) |
5.5 | ||||
SLA Note: ACS, the current direct loan servicer, indicated in their 6/30/2008 10-K: "At June 30, 2008, we serviced a FFEL portfolio of approximately 2.8 million loans with an outstanding principal balance of approximately $39.9 billion."
| (a) | The above table does
not include information from Citibank, The
Student Loan Corporation, and CLC Servicing
Corporation as these entities did not disclose
volumes. |
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In effect, the Department is trying to to reduce the cost of the overall contract by getting certain bidders to lower their original bids to meet this "established common price," which presumably is at or slightly above the lowest bidder's price. Based on the volumes above, it isn't too difficult to determine who would be best positioned to make the lowest bid on the contract.
One other piece of news picked up through the grapevine: The number of servicers bidding on this contract appears to be down to 5: ACS, AES/PHEAA, Great Lakes, Nelnet and Sallie Mae. I had heard several weeks back that Wells Fargo had not submitted a final bid which has been corroborated from several reliable sources since then.
Stay tuned....
Related posts:
- More details emerge on Department of Education servicing contract (April 19, 2009)
- Department of Education provides Q&A to phase II of direct loan servicing RFP process (April 8, 2009)
- Direct lender smackdown: Vying for the big prize (March 5, 2009)
- Department of Education names six firms vying for the big enchilada (March 5, 2009)
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