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July 2008

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This article is in the news archives --- for current news go to the Third Branch News.


BNC Performance-Based Contract Awarded

A new contract to mail more than a billion bankruptcy notices over ten years will save the Judiciary millions of dollars, even while it provides financial incentives for the contractor to offer new features, more efficiencies, and improved customer service.   

Beginning in October 2008, BAE Systems Information Technology, Inc. (BAE) will run the Judiciary’s extensive Bankruptcy Noticing Center (BNC) program under a performance-based contract.

“This type of performance-based contract is not new to the federal government,” said Bill Redden, bankruptcy clerk of court for the Eastern District of Virginia. Redden chaired the BNC Technical Evaluation Board that oversaw the contract’s development. “But the new BNC contract is very innovative for the federal Judiciary. The end result is a mechanism to encourage ongoing innovation and the adoption of new technology and processes by the BNC contractor.”

The BNC electronically retrieves data from the bankruptcy courts’ case management systems and prints, addresses, batches and mails over 120 million bankruptcy notices annually. An Electronic Bankruptcy Noticing (EBN) program also sends electronic notices directly to recipients, eliminating paper notices and their postage costs. As of May 2008, over 16 percent of all BNC-produced notices were transmitted electronically. Every bankruptcy court in the country uses the BNC program.

BAE has successfully operated the BNC program nearly from its inception in 1994, but the new contract is a significant departure from any previous agreements. Based on the Judiciary’s evaluation of BAE’s effectiveness, innovation and quality of performance, the contractor will be eligible for up to $2.3 million per contract year in award fees.

“While the BNC contractor has an additional measure of encouragement through the Award Fee Plan to institute improvements,” said Redden, “the Judiciary also shares in the financial benefits. The return on investment to the federal courts will greatly exceed any award fees paid.”

To earn an award fee under the plan, the BNC contractor will be evaluated on, among other categories, customer service responsiveness, the timely and correct retrieval, preparation and mailing of paper notices, growth of the EBN program, and the introduction of operational and economic efficiencies. Conversely, failure to meet performance standards results in deductions from payments.

Through this performance-based contract—which is priced approximately 36 percent below current contract rates—and a series of scheduled price reductions over the next decade, the Judiciary could realize, assuming a 10 percent annual increase in BNC program usage, a ten-year reduction in contract rates of over $50 million. This is on top of the approximately $67 million the Judiciary has saved since 1994 for combined salaries, supplies, postage, and equipment savings over court-based noticing.

Additionally, a number of new features and enhancements will be made in BNC program operations. Although the new contract begins October 1, 2008, some features are expected to debut this summer. Significant cost savings will be realized when BAE improves address matching for higher EBN and U.S. mail notice delivery rates, and when joint debtors at the same address are sent one notice, eliminating duplicate notices. BAE will provide a complete online sign-up process for creditor registration of preferred e-mail and/or U.S. mail address, reducing barriers to program participation.

“We are encouraging the contractor to more vigorously pursue increased participation in EBN,” said Redden. “We see a number of savings, including postage savings, with more notice recipients who accept notices in electronic form.”

The BNC contractor will add text alert messaging to notify court staff of problems with data retrieval and implement an intrusion detection system to monitor activity and prevent theft of proprietary information, financial fraud, insider network abuse, virus and worm attacks, denial of service incidents, and system penetration by outsiders.

“The process in the development of this contract was a lengthy one,” said Redden, “and we’re very pleased with the outcome.”