Education reboots multibillion procurement after lawsuit

The government is looking to modernize and streamline the technology it uses for the processing and servicing of the $1.4 trillion loan portfolio guaranteed by the Education Department's Federal Student Aid office -– but it's taking a while.

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The Department of Education is rebooting a multibillion-dollar technology and services offering almost a year after an initial solicitation, to ward off a lawsuit from incumbent vendors.

The government is looking to modernize and streamline the technology it uses for the processing and servicing of the loan portfolio guaranteed by the Education Department's Federal Student Aid office, with an eye to providing borrowers a consistent experience and giving the government more transparency into lending data.

In its own solicitation, FSA noted that vendors "have built redundant technical and operational solutions, creating inefficiencies resulting in a poor experience for customers" and that "across vendors, data management and cybersecurity practices are inconsistent and siloed."

FSA issues more than $120 billion in loans, grants and work-studying funding annually to 13 million students. Their overall loan portfolio totals more than $1.4 trillion and covers more than 42 million borrowers.

The agency released a nine-part solicitation for Phase I of the NextGen Financial Services Environment solicitation in February 2018. FSA planned to review Phase I responses from vendors and select a smaller group to participate in Phase II to determine who would win the contracts.

This effort was a replacement for a scrapped Obama-era plan to build a single platform to manage the agency's vast loan portfolio. That effort was put out for bid in April 2016 before being cancelled in August 2017.

Two pieces of the 2018 contract were put out for bidding on a governmentwide acquisition vehicle managed outside the Department of Education. These covered a digital platform and a customer relations management system.

Solicitations for the remaining seven pieces -- a mix of data processing, data management, identity management, cybersecurity and the processing and servicing of borrower accounts -- were issued, and in September FSA announced it had winnowed the list of potential vendors for five of the requirements.

Not long after, Navient, which manages $300 billion in student loans, sued FSA, alleging that the scope of work in the solicitation had been altered during the course of the procurement. Many other vendors -- all longtime incumbents in the student loan processing business -- joined in the lawsuit.

On Jan. 15, FSA cancelled and replaced the disputed solicitation and, in a filing the next day, asked the Court of Federal Claims to dismiss the lawsuit.

"It's a complete mess," Colleen Campbell, associate director for Postsecondary Education at the Center for American Progress, said of the procurement. But, she said, a new system is needed because on the front end, users aren't getting a complete picture of their options, and on the back end, servicers don't have transparency about loans to create accurate risk models. Additionally, data systems are creaky and don't play well with each other, Campbell said. "People don't realize just how bad it is."

A Department of Education spokesperson told FCW that indeed changes were made to the objectives of several components of the solicitation after the first phase of the solicitation. The spokesperson said that the agency "still expects to implement major improvement associated with Next Gen FSA by mid-2019."

The replacement procurement consists of three separate solicitations. First, an enhanced processing solution looks to modernize the current experience for existing customers and provide a common platform for various legacy systems. A business process operations contract is planned for the personnel and systems to support loan processing from application through repayment or default. Finally FSA wants an "optimal solution platform" to serve as the modern system of the future -- for 10 years or more.

FSA plans to issue award to multiple vendors on each solicitation, with periods of performance for up to 15 years.