Talk Back Live Maximizing Your Collection Agency Partnership

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Talk Back LiveMaximizing Your Collection Agency
Partnership

• J. Christopher Lang
• Linebarger Goggan Blair and Sampson, LLP
• Carl Perry
• ACS Aman Collection Service
• Don Taylor
• Account Control Technology, Inc

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RFP Process

• Writing your RFP.
• Allow sufficient time - 6-9 months
• Canvas the marketplace for new ideas and
  concepts. Seek input from others.
• Define your objectives and goals.
• Clear simple format, easy to read.

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RFP Process

• Scheduling
• Allow a minimum of 45 days for the response.
• Allow a minimum of 15 days after questions are
  answered.
• Set the due date at the end of a week to allow
  for mailing

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RFP Process

• Prequalify potential bidders
• Pro Con of this recent trend
• Limits response to qualified firms
• Financial stability of bidder and all parent
  companies.
• Third party servicer requirements.
• Determine minimum experience requirements.
• State Licensing - require proof
• Industry Involvement - memberships

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RFP Process

• Question and Answer Period
• Set a deadline for the questions and when the
  response will be provided.
• Anticipate the questions in advance and include
  data in the RFP.
• Allows clarification to receive the best quality
  response.
• Require standard format for the questions.

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RFP Process

• Pre-bid Conference
• Pro - Con of timing.
• Mandatory or optional
• Request questions in advance
• Allows clarification to receive the best quality
  response.

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RFP Process

• Fee Structure -
• Fixed vs. Bid fees
• Fixed - determine market rate and incentives to
  perform
• Bid - set range as to what will get the desired
  result
• Assess your internal effort vs. what volume and
  quality will be outsourced.
• You get what you pay for.

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RFP Process

• Reference Data
• Request reference data in desired format
• Limit the number of references
• Talk to the references to discuss performance.

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RFP Process

• Staffing and Experience
• Individual vs. Corporate Experience.
• Sufficient staffing to service the contract.
• Reputation of the staff.
• References on the key individuals

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RFP Process

• Other Suggestions
• Limit the number of pages in the response.
• Standby awards in case winners fail
• One bidder per entity or parent
• Address mergers or acquisitions
• Capability of the bidder to succeed - review
  other business commitments
• Require association membership

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RFP Process

• What about the proposal content?
• Know your audience, do they want
• fluff or fact?
• Do they want graphs or answers,
• color or clarity?
• Did I answer the question? If I cant answer the
  question, what do I do? Add puffery?

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RFP Process

• Who can win?
• Who are the incumbents?
• What are the current recoveries?
• What is the current level of service?
• What are the current rates?
• What are the requirements?
• Who is going to review?

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RFP Process

• What do we win?
• How many placements? How often?
• Are there performance bonuses? What
• are the bonuses?
• What do we win? Is there a reward for working
  all categories?
• FFELP consolidation
• Direct consolidation
• Rehabilitation
• Front line collections
• Administrative wage garnishment

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RFP Process

• When do we start? End?
• What is the contract period?
• Are there renewal provisions?
• What about inventory that is repayment at the end?

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RFP Process

• Why would they choose me?
• Have I dotted the is and crossed
• all the ts?
• Have I answered all the questions?
• Is the bid easy to read? Does it
• look professional?
• Do you hand deliver?

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RFP Process

• How can I set myself above the competition?
• References are key in this area.
• Current performance if you are an incumbent
• Customer service provided to the guarantor and
  the student
• Recovery rate and netback collections percentages
• Rate? This is one of the weakest evaluations,
  and yet it is used too often.

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Rates Why are rates so important?

• Rate structures are a primary factor in overall
  performance.
• Contractors must invest resources up front with
  no monetary assistance from clients.
• Rates are the single source of revenue for
  Collection contractor.
• Rates are a blend of Regular, AWG, Consolidations
  and Rehabilitations.

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Rates Speaking of Performance, what do you
really get with a low bid?

• Rates are a major factor that drives performance.
• Revenues generated permit contractors to continue
  to invest in personnel and tools for the success
  of the contract.
• Rates can be a self-fulfilling prophecy of
  success or failure.

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Rates The Net Back Principle

• LOW BID
• Placement 1,000,000
• Recovery 17
• Total Collected 170,000
• Retention 24
• GA Revenue 40,800
• Rate (Fee) 10
• CA Revenue 17,000
• Net Back to GA 23,800

• REALISTIC BID
• Placement 1,000,000
• Recovery 23
• Total Collected 230,000
• Retention 24
• GA Revenue 55,200
• Rate (Fee) 13
• CA Revenue 29,900
• Net Back to GA 25,300

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Rates OK, but what about State Agencies that
must use low bid?

• Evaluation criteria can place heavier emphasis on
  Technical portion of proposal. 80 Technical
  points and 20 pricing instead of 50 50.
• Set Ranges so that pricing does not go below a
  level that impact performance.
• ED sets target rate.

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Rates How would you suggest a fair rate be
established?

• Review past history
• Recovery percentage compared to rate charged
• Survey like agencies to see what they charge
• Determine Recovery Strategy
• Consolidations vs. Rehabilitation vs. Regular
• Consider the numbers
• Contractors to receive awards
• Size of portfolio
• Account distribution

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Rates What are the differences between In-house
and Outsourcing?

• COSTS
• Hiring salary, benefits, incentives
• Training
• Management
• Overhead equipment, space, etc.
• CASH FLOW
• Up front costs vs. no upfront costs
• Capital outlays
• Return on investment

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Rates Cont. (differences between In-house and
Outsourcing?)

• Tools
• Personnel
• Turnover
• Experience
• Hours of operation
• Staffing levels
• Performance

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Rates Cont. (differences between In-house and
Outsourcing?)

• Considerations
• Volume, Quality, Age and previous effort directly
  impact rates.
• The greater portion of the portfolio taken
  in-house, expect higher rates from Vendors
• Reducing the quality of accounts and increasing
  age also will increase rates.
• Conversely, reducing the portfolio kept in-house
  opens opportunity to reduce rates.

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Performance Evaluation Use the KISS Method

• This is a collection contract, so recovery rate
  should be your primary consideration.
• Make sure you have an apples-to-apples
  comparison.
• Assign accounts randomly.
• Ensure that equal numbers of accounts with
  similar characteristics (age, balance) are
  assigned initially.
• Consider using a minimum work period that a
  contractor must hold an account before returning.
• Allow more time to work accounts initially on
  large placement contracts.
• Use a time interval (quarterly, tri-annually) to
  measure results.
• Measure what is important to you (e.g.
  Rehabilitations.)

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Performance Evaluation Use the KISS Method

• Implement a rewards and penalty system
• Give most of your business to the companies that
  give you the greatest rates of return and give
  the least amount of you business to the companies
  that give you the lesser rates of return.
• Assign more accounts and possibly pay bonuses to
  your top performers, thereby creating incentives
  to produce the maximum results.

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Performance Evaluation Use the KISS Method

• In order to better maximize your results, you
  could also use a contract-to-date measurement to
  determine who your consistent top performers are
  over time (similar to the Education contract).
• Long-term performance could be rewarded with
  additional bonuses.

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What To Evaluate and The Reward You Get

• Measure what is important to you.
• Rewards and Incentives need to be consistent with
  what you want.
• Frequently share and distribute evaluations to
  maximize competitive results and performance.
• Periodically review performance measurements to
  validate they are consistent with overall goals
  and objectives.

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AWG What are some of the benefits to using
Collection Agencies to assist in AWG?

• Provides continuity in the collection process
• Risks associated with AWG diligence are shared by
  the contractor.
• Cost of hearings are borne by the contractor.
• Administrative cost reduced to GAs

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AWG What are some of the benefits to using
Collection Agencies to assist in AWG?

• Improved performance
• Prompt follow through with enforcement lends
  credibility to process.
• Encourages borrowers to keep repayment
  commitments to contractors.

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Default Aversion How can a Collection Agency
assist in Default Aversion?

• Supplement GA Activities
• Improve Performance
• Provide additional services
• Extended hours
• Personnel incentives for performance
• Skiptracing assistance
• Expand GAs ability to contact
• Performance based pricing

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Default Aversion (cont.) Are there any other
benefits?

• The same benefits can apply between in-house vs.
  outsourcing
• COSTS
• Hiring salary, benefits, incentives
• Training
• Management
• Overhead equipment, space, etc.
• CASH FLOW
• Up front costs vs. no upfront costs
• Capital outlays
• Return on investment

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Default Aversion (cont.) Are there any other
benefits?

• Tools
• Personnel
• Turnover
• Experience
• Hours of operation and Staffing
• Performance

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Special Acknowledgments to the following
Ken Player, NCHELP for moderating the
session Rick Sykora, Oklahoma Guaranteed Student
Loan Program for coordinating the session Chris
Crissman, Diversified Collection Services, Inc
for providing additional information for the
session

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THANK YOU From Our Panel!
J. Christopher Lang Linebarger Goggan Blair and
Sampson, LLP Carl Perry ACS Aman Collection
Service Don Taylor Account Control Technology,
Inc