Memo to File



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Memo to File

02912 Debt Collection Services

Comments: Bart Potter

|Contract period |The initial contract term for the state Debt Collections contract will be for two years from a date to be determined|

| |upon award. Maximum term is eight years. |

|Overview |The Department of Enterprise Services, with this Solicitation and resulting Contract, seeks to meet its customers’ |

| |need for effective debt-collection services that are performed fairly, respectfully and in accord with the spirit |

| |and letter of State and federal law and ethical codes for government contracting. The awarded Contractor(s) will |

| |embrace the professional standards and guidelines of the debt-collection industry. |

| |Managing a debt portfolio |

| |The State of Washington established this contract to help State and other public-sector accounts-receivable staff to|

| |manage debt portfolios for the best return of public debt to public coffers. The State intends to award to multiple |

| |Contractors to allow Contract users (State agencies and members of the Washington State Purchasing Cooperative) to |

| |choose a preferred Contractor based on the company’s particular qualifications or the specific type of debt assigned|

| |for collection. Using the information from regular reporting by the awarded Contractor(s), customers will be able to|

| |build spreadsheets that track the age, size and source of debt and the progress toward collecting it. Using these |

| |tools, customer agencies can adjust the ratio of debt being directed toward or away from a given Contractor based on|

| |performance. |

| |This is a performance-based Contract (Appendix B). Contract customers will be asked to report superior or poor |

| |performance to the State’s Contract Coordinator. |

|Estimated term worth |$2 million |

| Date |Project developments and milestones |

|Nov. 7, 2011 |Bart Potter was assigned responsibility for administering the solicitation for 04911 (later renumbered 02912), |

| |replacing Corinna Cooper. |

|Nov. 16, 2011 |As part of the research for the debt collections rebid, Potter and Dale Colbert met with Debbie Youngquist and |

| |Robert Matter of Conserve Accounts Receivable Management, a nationwide debt collection firm based in Fairport, N.Y. |

| |Ms. Youngquist represents the Northwest from her office in the Seattle area. |

| |OSP’s representatives heard the firm’s ideas for what should be mandatory certifications and/or capabilities in the |

| |solicitation evaluation. |

|Nov. 17, 2011 |Initial invitations for the sourcing team were sent to representatives of the departments of Licensing, |

| |Transportation, L&I, Agriculture, Liquor Control Board and Health Care Authority. |

|Dec. 5, 2011 |Potter and Colbert met with Matt Harestad and Corey Ostby of Professional Credit Service (PCS), a collections agency|

| |based in Springfield, Ore., with Washington offices in Bellevue and Vancouver. The firm is among the 12 vendors on |

| |the Oregon debt collections contract, awarded last year. |

| |The discussion touched on several topics: |

| |The 12 collection companies on the Oregon contract might be a “few too many”; the single company on the current |

| |Washington contract might be a “few too few,” according to Mr. Ostby. |

| |PCS has a 23 percent rate for its collection fee, which is a blended rate encompassing both general and legal |

| |collections. |

| |Interest on uncollected debt is not being returned to the state, Mr. Ostby said. |

| |There is no requirement in the current contract for documenting audited or reviewed financials of collection |

| |companies. |

| |There is no standard for security, e.g., SAS 70 certification, in the current contract. |

| |There is no requirement in the current contract for other certifications, such as ACA (American Collectors |

| |Association). |

| |The PCS representatives would like to see bidding firms be required to demonstrate their “client tools” for |

| |transparent reporting of case status. |

| |They suggested that the language in the current contract requiring the ability to collect in all 50 states be |

| |softened to allow collection in states for which a firm is not licensed, perhaps through a licensed sub-contractor. |

|Dec. 8, 2011 |First meeting of the sourcing team. The group covered most things on a packed agenda, and offered several |

| |suggestions, including: |

|[pic][pic] |Publish a glossary of debt collection industry terminology |

|[pic] |Issue an RFI prior to posting the solicitation to get an idea of size, capacity, capabilities, certifications, etc. |

| |Clarify if there is a floor for size of collections under which agencies will not pursue collection OR possibly |

| |establish a floor |

| |New contract should require vendors to have clear and consistent contacts for customer service and case status |

| |information |

| |New contract should require a job-specific electronic interface for customer agencies to quickly see the status of |

| |collections cases |

|Jan. 12, 2012 |Second meeting of the sourcing team. Topics included: |

| |Slight tweak to the solicitation timeline (bids now due Tuesday, April 3). |

|[pic][pic][pic] |OSP’s tentative plan to award to three vendors |

| |Alternative pricing structure for bidders to propose: 1) state establishes percentage fee based on sliding scale; or|

| |2) state sets sliding scale and bidders propose a percentage fee per dollar-value range. |

| |RFI: What should we ask the debt collections industry? |

| |Clarification of when one agency can withhold state services because of debts owed to another agency. |

|Jan. 25, 2012 |RFI issued. Responses due Feb. 9. |

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|Week of Feb. 6-10 |RFI responses received. All responses were saved in the 02912 electronic file. Potter compiled a master document of |

| |answers to the RFI questions (attached). |

|[pic] | |

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|Feb. 23, 2012 |Third meeting of the sourcing team. The group discussed timing of posting the bid and the timeline leading to award;|

| |heard about common responses to RFI questions; considered the appropriate number of awarded vendors (is three the |

|[pic] |right number?); and discussed the proposed categories of debt collections (educational, legal, tolling) for |

| |evaluation consideration. |

| |The team explored possible pricing strategies: Should the state set a flat fee? Should age of debt factor into the |

| |fee? Should primary assignment or secondary assignment factor into the fee? |

|April 26, 2012 |Solicitation 02912 posted on WEBS. Bids are due May 22. |

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|May 2, 2012 |Solicitation Amendment 1. Clarified requirements in Appendix D of the solicitation. |

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|[pic] | |

|May 8, 2012 |Pre-bid conference. A consensus emerged from the 16 attendees representing 12 collections companies: educational |

| |debt collection deserved its own category for price bidding. Also re price bidding, the recommendation by attendees |

|[pic] |was to solicit bids by primary assignment, secondary assignment, and tertiary (third) assignment for general, legal |

| |and educational debt. |

| |Potter promised the subject would be addressed in an amendment to the solicitation. |

|May 15, 2012 |Solicitation Amendment 2. Extended bid due date to May 29 and included an extensive Q&A based on bidder questions |

|[pic] |since the bid was posted and from the prebid conference. |

|May 21, 2012 |Solicitation Amendment 3. Extended the period for bidders’ questions. |

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|[pic] | |

|May 22, 2012 |Solicitation Amendment 4. Extended the bid due date to May 31 and made important clarifications of bidding |

| |categories, pricing terminology and categories, and evaluation scoring and categories. |

|[pic] |The critical change brought about by this amendment reduced the number of categories from three to two. Category 1 |

| |now encompasses all general debt, including higher education debt and debt arising from legal judgments. |

| | |

| |In Category 2, candidates will bid to administer and carry forward (from Feb. 20, 2014) the comprehensive electronic|

| |interface for highway and bridge tolling collections established under special provisions of State Contract 06909; |

| |and provide for systems of similar complexity and scope to meet future collection needs of the State. |

|May 23, 2012 |Solicitation Amendment 5. Clarified bidding requirements in Appendix E, Special Requirements, for the “Educational, |

| |Legal and General Collections” category. |

|[pic] | |

|May 24, 2012 |One potential bidder (Anthony Serrano of Allied International Credit) suggested the standard indemnification |

| |language in Appendix A should be amended to be “mutual indemnification” so the entire burden of liability doesn’t |

|[pic] |fall on the contractor. He cited several examples as attachments to his email. Potter asked his unit manager if this|

| |question should be referred to the DES legal unit, and the manager (Dale Colbert) said yes. |

|[pic] |The DES legal unit did not respond with an answer (E-mail string attached). On the afternoon of May 29, in response |

| |to the vendor’s increasingly urgent requests for an answer, Colbert and Potter went in person to Risk Management and|

| |talked to an employee there. This person gave a well-reasoned answer, justifying the standard indemnification |

| |language in this (and every) master contract. Potter passed on the answer to the vendor. The vendor was satisfied |

| |with the response. |

|June 5, 2012 |Solicitation Amendment 6. Bid due date is extended to June 7. Language added to clarify DES goals for minority |

| |participation in the contract and to encourage bidders to consider this language: |

|[pic] |“In support of the State’s economic and supplier-diversity goals, although not an award factor, bidders are |

| |encouraged to consider the following for this solicitation: |

| | |

| |“Support for a diverse supplier pool, including small, minority and women-owned business enterprises. Voluntary |

| |numerical participation goals of 15 percent women-owned and 25 percent minority-owned have been established for this|

| |contract. Achievement of these goals is encouraged whether directly or through subcontractors. Bidders may contact |

| |the Office of Minority and Women’s Business Enterprise (OMWBE) for information on certified firms or to become |

| |certified.” |

|June 5, 2012 |Solicitation Amendment 7. Clarifies the participation of nonprofit corporations in the contract resulting from |

| |Solicitation 02912. |

|[pic] | |

|June 7, 2012 |Bids received. Eighteen bid packets were received by the bid-due deadline. |

| |All bids were received sealed and on time. |

| |No bids were rejected in the initial determination of responsiveness. |

|June 13, 2012 |Evaluation team kickoff meeting. Attending were Wendy Harris (DOL), Cindy Cavanagh (DOL) and Steve Hatfield (DES). |

| |Not attending were Karin Jewell (Eastern Washington University), Cindy Kay (DOT, evaluating Cat. 2 only) and Donna |

|[pic][pic][pic] |Vance (L&I). Bid packets were issued on CD to evaluators. |

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|July 24 -31, 2012 |Email interactions (attached) with Donna Vance of L&I re her inability to perform the evaluations. |

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|Aug. 3, 2012 |All evaluations received from Cavanagh, Hatfield, Jewell, Kay and Harris. |

|Aug. 17, 2012 |Bid tabs completed pending review of some anomalous elements. |

| |Top evaluated scorers in Category 1, from a maximum of 1,500 total points (non-cost factors 1,050, pricing 200, |

|[pic][pic] |references 250), were: |

| |Alliance One 1,372.5 |

| |Collection Technology Inc. 1,365 |

| |Financial Asset Management Systems 1,351.5 |

| |ConServe 1,335.5 |

| |Account Control Technology 1,307.5 |

| |EOS CCA (Collecto Inc.) 1,229 |

| |Top evaluated scorers in Category 2, from a maximum of 1,500 total points (non-cost factors 1,050, pricing 200, |

| |references 250), were: |

| |ConServe 1,397.5 |

| |Alliance One 1,377.5 |

| |FAMS 1,319.5 |

|Aug. 27, 2012 |Potter met with Colbert to discuss how many awards to make in Category 1. Potter recommended awarding to the top |

| |four scorers, which would allow the state to meet its stated goal of identifying collections vendors that are |

| |particularly strong in collecting higher education debt and debt arising from legal judgments. |

|Aug. 28, 2012 |Potter and Colbert worked through the issue of the FAMS pricing bid for Category 2. |

| |All bidders were instructed to make their pricing bids as a percentage fee to be charged to debtors on top of the |

| |principal amount assigned for collection. FAMS populated the pricing columns for Category 1 properly, with |

| |percentages proposed for each pricing category. For Category 2, however, FAMS placed “$7.50” in the fee column. |

| |Expressing the bid amount as a dollar value makes it difficult to correlate to a percentage for comparison to other |

| |bidders. Potter’s best estimate of a $7.50 flat fee per single collection transaction is 14.7 percent, based on the |

| |minimum cost of $51 to a debtor failing to pay a toll. Assigning the best-estimate percentage of 14.7 to the FAMS |

| |pricing bid makes FAMS the low bidder and earns all of the 200 points for pricing. |

| |Colbert questioned whether a $7.50 flat fee per collection transaction is high enough to cover the cost of |

| |collection actions a contractor would be expected to perform to adequately pursue collections for the state’s |

| |customers. The original 02912 solicitation document contains this language (repeated in Solicitation Amendment 4 of |

| |May 22, 2012): |

| |“The State reserves the right to reject outright any Bids deemed to be clearly outside the normative range |

| |(significantly lower or higher) of the current, generally understood debt-collection marketplace.” |

| | |

|Award recommendation |Category 1: Potter recommends award be made to Alliance One, Financial Asset Management Systems, ConServe, and |

| |Collection Technology Inc. |

| |Category 2: Potter recommends award be made to ConServe. |

|Notice of Intent to Award |Notice was sent to all bidders of the State’s selection of Apparent Successful Bidders: Alliance One, Financial |

|Sept. 7, 2012 |Asset Management Systems, ConServe, and Collection Technology Inc. |

|Award |Notification was made through WEBS of official award of the contract to Alliance One, Financial Asset Management |

|Sept. 14, 2012 |Systems, ConServe, and Collection Technology Inc. |

|Signatures | |

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|Date: |Contract Administrator: _____________________________ |

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|Date: |Unit Manager: _____________________________________________ |

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