Government Collections and What a Government Contract Can Mean for Your Collections Agency

According to ACA International’s website, the U.S. Government obtains the help of private collection agencies to collect on non-tax debts that are owed to the Federal Government.  The agencies that use PCAs for collections purposes include the U.S. Department of Education, the Department of Health and Human Services and Department of Treasury’s Bureau of Financial Management Service. 

According to the site, “in fiscal year 2010, PCAs under contract with the departments of Education, HHS and Treasury had referrals of $35.9 billion in delinquent federal debt. PCAs collected $777 million in FY 2010.” (Source: Department of Treasury Fiscal Year 2010 Report to the Congress—U.S. Government Receivables and Debt Collection Activities of Federal Agencies)

The government seeks private collections agencies and collections attorneys to assist with its debt collection and aid in establishing repayment agreements with debtors.  The government also hires private collections agencies and collections attorneys to help determine whether a debtor is deceased, disabled, bankrupt, or out of business.  In addition to the Federal Government, state governments also use private collections agencies to collect on delinquent taxes and other debts owed to the state. 

Can collection agencies acquire government contracts?

How do Government contracts figure in to the collections industry and should I apply for one?

Are Government Contracts the Next Big Wave for Collection Agencies and Attorneys

When the economy faces uncertain times, government contracts can prove to be a lucrative and steady income for your collections business.  Beyond the increased business and stable pipeline of income, one of the biggest pros to securing a government contract is that you can be assured of prompt payment—often in as little as 15 days. 

Some of the cases for which both local and state governmental agencies hire outside collections firms include motor vehicle violations, parking violations, and court-mandated alimony.  On a federal level, student loans are becoming a hot commodity for collections as many people are defaulting on them, and can prove to be extremely lucrative for any collection agency that manages to secure the contract. 

The best way to apply for a government contract if you are a collection agency is to look on the Federal Business Opportunities website.  In order to do this, you will need your firm’s North American Industry Classification System (NAICS)code—this can be acquired from your accountant or you can find it through a search of the U.S. Census Bureau’s website. 

The process to apply for a government contract isn’t an easy one, however, and many small businesses fail to secure one simply because they don’t spend the time and effort required to make sure they are familiar with the process and have the funds needed to start.  Experts estimate that obtaining a government contract for your collection agency will cost approximately $3,500 and take approximately eight months to achieve.  And this is only if you follow the rules carefully and pay due diligence to deadlines and certification requirements in order to get priority bidding status for your collections firm. 

Many Chambers of Commerce and Small Business Association chapters offer workshops and informational sessions to help small businesses cover their bases in obtaining a government contract.  Use these resources that are available to you, or you can hire a private consultant who will guide you through the process.