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ACS contract extension to shrink

The extension to a major U.S. Department of Education deal unveiled last week by Affiliated Computer Services will be shorter than the company announced, according to the agency.

Tech Industry
The extension to a major U.S. Department of Education deal unveiled last week by Affiliated Computer Services is slated to be shorter than the company announced, according to the government agency.

On Friday, ACS said the Education Department had confirmed that it would extend the contract to process student loans until September 2007. The deal, which was set to expire in September 2003, is the Dallas-based computer services company's single largest contract.

But on Monday, Roscoe Price, an Education Department contracting officer, said the agency is planning to negotiate for an extension of only up to 36 months, through September 2006. The time frame is intended to allow the department to make the transition to a broader system of handling loan-related tasks. A contract for the new system has not yet been awarded.

ACS's loan-servicing contract with the Education Department represents 4 percent of the company's revenue, which totaled $3.1 billion in the year ended June 2002. Under the deal, the services company handles tasks such as customer service and some payment collection for roughly five million borrowers.

The differing statements stem from an agency notice posted at a Web site for federal government business opportunities last Thursday. The notice, which addressed ACS' loan-servicing contract, said that "the extension to the Direct Loan Servicing System with ACS contract is appropriate."

ACS interpreted the notice as affirmation of an agreement that it inked with the agency in November 2001, the company's chief marketing officer, Lesley Pool, said on Friday. The 2001 pact extended the loan-servicing contract, which was initially signed in 1994, through September 2007. But that extension deal had come under review by the department after it was challenged by student loan services provider Sallie Mae, which argued that a competitive bidding process was required.

ACS did not immediately respond to a request for comment on Monday.

The notice said the "single source extension is required to allow for a reasonable transition period" between Affiliated and whoever wins a contract known as the "Common Services for Borrowers," which will cover all the Department's loan-servicing requirements, including loan consolidation.

Thursday's notice also indicated that the transition period would take a minimum of two to three years, and that the broader contract is slated to be awarded later this year.

Price conceded that the notice on Thursday was ambiguous. "I think I confused everybody," he said Monday.

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