- The coronavirus pandemic has been devastating to the economy, with 19.4 million Americans in September saying their joblessness stemmed from the coronavirus.
- Tax and audit firms Deloitte and EY have found business opportunities by contracting with state governments to provide technical support, staffing for unemployment claims centers, and more.
- In 10 contracts with four states, the two firms have netted more than $63 million.
- The contracts were awarded without a bidding process.
- Do you know more about how professional services firms are working with government agencies to handle the coronavirus pandemic? Get in touch with the reporter via email [email protected] or Signal 646-389-7866.
- Visit Business Insider's homepage for more stories.
During the last seven months, the coronavirus pandemic has been devastating for the US economy, impacting sectors like travel, hospitality, and retail and pushing the latest unemployment rate to 7.9% in September.
Professional services firms haven't been immune to hardship: the consulting industry pandemic shrunk the size of the consulting market from $160 billion to $132 billion, while firms like KPMG and Accenture have laid off employees.
But the pandemic has also created a business opportunity for some tax and audit firms that are now making money aiding state governments in handling coronavirus response measures. Deloitte and EY have earned at least 10 contracts with four states and are wracking up $63.2 million in fees to help with COVID-related work like managing unemployment claims, updating technology, and more.
The work is on top of the many other contracts state governments award to the Big 4 each year to handle technology, audits, and more. For example, Deloitte just won a $135 million contract to overhaul Florida's Medicaid data system, according to a report from the Tampa Bay Times.
Deloitte and EY declined to be interviewed about their work with California, Colorado Illinois, and Kentucky. A spokesperson for Deloitte said in an email that the firm is currently working with "several state clients" to help navigate increased demand for unemployment services due to the pandemic.
"The IT systems we have developed, and continue to maintain, have helped deliver more than $110 billion in benefits to millions of unemployed workers and their families throughout the United States," the Deloitte spokesperson said.
An EY spokesperson in an email the firm has been hired by some states to help them modernize their technology and expand call center and claims processing capabilities.
"The enormous surge of unemployment claims brought on by the COVID-19 pandemic has created a large backlog of claims which has come on the heels of record-low unemployment before the pandemic," the EY spokesperson said. "This has resulted in the immediate need for states to modernize overloaded websites, understaffed call centers, and outdated legacy systems."
Each of the 10 contracts awarded to Deloitte and EY was approved through a no-bid process.
Read more:Layoffs, pay cuts, and dialed-back recruiting: Here's how the biggest accounting and consulting firms are cutting costs and shrinking headcount
For many state contracts, departments invite multiple companies to submit work proposals for projects in order to vet the best contractor for the job, spread work around and obtain a competitive price. Companies can win no-bid contracts when they are the only company able to complete the work or the work needs to be done quickly, because the normal bid process can last weeks or months.
Deloitte and EY were exempted from the bid processes due to the emergency nature of the pandemic or because they were the only companies that could complete the work, according to the contracts.
Business Insider took a look at each state's procurement system to identify Covid-related contracts awarded to the four firms collectively known as the Big 4 — Deloitte, EY, PwC, and KPMG — after March 15. Contracts were also potentially awarded by New York state and Tennessee, but the public records were unavailable at the time of publication due to public-records processing timelines.
California contracted Deloitte for $17.6 million
Deloitte is set to net $17.6 million for its work with California's Employee Development Department and Department of Public Health.
California is paying Deloitte $5 million for the work it has done between April 1 and March 21 this year updating the state's Employee Development Department online unemployment insurance system.
The contract also breaks down pay for the IT consulting staff working with the department. These are discounted hourly-rates that the firm has provided for these roles.
- Deloitte senior technical leads charge $155-$175 per hour;
- technical leads charge $130-$160 per hour;
- senior programmers charge $135 per hour;
- senior enterprise architects charge $190 per hour; and
- delivery managers charge $165-$190 per hour
In another contract with the Employee Development Department, worth $11.1 million, Deloitte provided 500 full-time employees from April 20-June 20 to staff an insurance claims call center.
Deloitte also earned $1.5 million for work with the state's Department of Public Health in April to create an app with Pegasystems, a cloud-based customer relationship management software, to document employee information such as physical health and teleworking status.
Representatives for the state's Employee Development Department, the Department of Public Health, and the Governor's Office of Emergency Services, which is managing pandemic-related contracts, did not respond to requests for comment.
Read more: 'Big 4' salaries, revealed: How much Deloitte, KPMG, EY, and PwC accountants and consultants make, from entry level to executive roles
In Colorado, EY is making $1.6 million to resolve unemployment claims
EY earned one pandemic-related contract from the Colorado Department of Labor and Employment's Division of Unemployment Insurance to validate and prepare employer premium billings. According to the contract, EY worked from May 26-June 30 to resolve about 64,500 claims and earned $1.6 million.
Representatives for the Department of Labor did not respond to requests for comment.
Illinois has shelled out $23.4 million to both Deloitte and EY
Illinois awarded contacts to both Deloitte and EY for help with the state's COVID response. Deloitte earned a $12.7 million contract in May to work with the Department of Employment Security to provide "additional technical resources" for benefits claim filings at call centers from the end of April through the end of the year.
The Department of Employment Security in August again contracted Deloitte, this time for $3.2 million to implement and maintain a cloud-based version of its Unemployment Framework for Automated Claim & Tax Services solution to meet federal CARES Act and state Disaster Unemployment Assistance claims.
In all, Deloitte has earned nearly $16 million in work from the state. Representatives for the Department of Employment Security did not respond to requests for comment.
The Illinois Department of Healthcare and Family Services Division of Medical Programs awarded work to EY in August to provide "medical technical services," analyze and review COVID-related medical information, and make sure federal guidance from the CARES Act, DHHS, CDC, and FEMA is followed. The contract, which started on August 6 and runs through March 31, 2022, is for $7.4 million.
Read more: A state-by-state look at unemployment in America: 50 people share how they're getting by — and what's next
A spokesman for the Department of Healthcare and Family Services, said in an email that the department contracted EY to quickly and efficiently manage the "swift and unprecedented distribution" of CARES payments to Illinoisans.
They also said that through the contract the firm will help the department "gather provider data, documentation, and affirm eligibility for CARES funds; assist with funding recommendations; assist with compliance and documentation on provider's use of CARES payments; and assist with final reports and wrap-up at the conclusion of the funding period."
Kentucky has also contracted both Deloitte and EY and has so far spent $20.6 million
Kentucky also awarded contracts to both EY and Deloitte to track the virus and process unemployment claims.
Deloitte earned $3.3 million of work on May 12 to provide "COVID-19 Response and Recovery" to develop a contact-tracing program, although the contract language was vague and the scope of the work was not made public.
In a second contract that went into effect nine days later, Kentucky tasked Deloitte with contact tracing and tracking of positive Covid cases. The contract, which originally ran from May-October, was extended through the end of 2020 and is netting Deloitte $5.2 million. Some IT errors in August caused the state's daily case count to be "artificially low" and needing adjustment, the Courier-Journal reported.
The state also contracted EY for $12 million to work through the state's unemployment claims backlog. The original contract, which was awarded in July for $7.6 million, was originally for work to be performed from July 1-26, but it was extended to the end of August for an additional $4.5 million.
Representatives for the state's Finance and Administration Cabinet, which handles purchasing and procurement, did not respond to requests for comment.
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