MAJORITY MEMBERS: PETER HOEKSTRA, MICHIGAN, Chairman CHARLIE NORWOOD, GEORGIA, Vice Chairman BOB SCHAFFER, COLORADO THOMAS G. TANCREDO, COLORADO ERNEST L. FLETCHER, KENTUCKY

MINORITY MEMBERS TIM ROEMER, Ranking Member ROBERT C. "BOBBY" SCOTT, VIRGINA RON KIND, WISCONSIN HAROLD E. FORD, JR., TENNESSEE MAJORITY-(202) 225-4527 (TTY)-(202) 226-3372 MINORITY-(202) 225-3725 (TTY)-(202) 226-3116

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

COMMITTEE ON EDUCATION AND THE WORKFORCE
U.S. HOUSE OF REPRESENTATIVES
2181 RAYBURN HOUSE OFFICE BUILDING
WASHINGTON, DC 20515-6100

February 25, 1999

VIA FACSIMILE: 202-708-7970

Mr. Greg Woods
Chief Operating Officer
Office of Student financial Assistance (OSFA) Programs
Department of Education
400 Maryland Avenue, SW
ROB-3, Suite 4004
Washington, DC 20202

Dear Mr. Woods:

Thank you for meeting with me on February 10, 1999. I am hopeful that in your new capacity as head of the Department of Education?s (Department) Performance-Based Organization (PBO), your private-sector experience and enthusiasm will enable you to make positive changes in the federal student aid delivery process. I look forward to working with you on this important issue.

It is the responsibility of the Subcommittee on Oversight and Investigations (Subcommittee) to ensure that the Department expends its resources in an efficient and cost-effective manner. Thus, I was concerned by the General Accounting Office?s (GAO) announcement two weeks ago that the Office of Student financial Assistance (OSFA) remains on GAO?s "High Risk" list of the federal programs most subject to waste, fraud and abuse.

In our discussion last week, you noted that the operation of the existing student aid delivery system relies extensively on outside (contract) personnel. These contracts cost the Department about $370 million annually. By all accounts, the Department has historically failed to manage these contracts with great efficiency. One recent example is the $50 million cost overrun on the National Student Loan Data System (NSLDS) contract that occurred between 1993 and 1997. Another is the $40 million loss that resulted during 1996-97 when three direct loan-servicing contracts were cancelled. The cancellations occurred after the Department paid the contractors? start-up costs, but before any serviced a single direct loan.

I think you will agree with me that, unless and until the Department integrates the various systems and reduces the number of contractors, the effective management of outstanding contracts must remain a priority of both the PBO and of the Subcommittee?s oversight efforts.

Therefore, in order that the Subcommittee can better track existing student aid contracts, I request that you provide the following information:

1. A list of all Department contracts and task orders of $100,000 or more, which have been entered into in the last five years and all contracts entered into prior to that date which are still in effect and funded through the Office of Student financial Assistance (OSFA). The list shall include:
1. the name of the person or company with which the contract was entered (please provide the list in alphabetical order so the Subcommittee can see how many contracts are entered into with each contractor);
2. the original dollar amount of the contract;
3. a brief description of the contract?s purpose;
4. a brief description of the contractor?s performance to date;
5. the current period of performance of each contract;
6. the cumulative amount of disbursements made to date;
7. any modifications to the contract which have effected the dollar amount of the contract, including the new dollar amounts;
8. the name and phone number of the Department employee responsible for the identified contract; and
9. the number of full-time equivalent staff personnel utilized by each contractor in fulfilling the terms of the specified contract.

I understand that a task order is being prepared by the Department in order to bring aboard a contractor to perform the role of Student Account Manager (SAM) for the Department?s Access America pilot project this fall.

How much money does the Department plan to spend this year on the Access America pilot? When the PBO releases its budget in April, will this sum be included? Can you explain why the Department?s Fiscal Year 2000 budget proposal does not mention Access America, even though it has stated that this fall?s pilot project will be expanded considerably in 2000?

The Department?s Inspector General?s Office has determined that the Department?s staff lacks the information technology expertise necessary to effectively manage the various student aid contracts. Under the PBO legislation, the Chief Operating Officer of the PBO is permitted to hire up to 25 technical and professional employees exempt from GS pay rates.

Do you intend to use some of these new hires to bring aboard information technology experts who can help draw up and negotiate contracts? Do you intend to use outside consultants to assist in contract management?

Please respond to these inquiries in writing by March 12, 1999. If you require further information in order to prepare your response, contact Peter Warren at 202-225-7101.

Thank you in advance for your prompt attention to this matter.

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