Administration Turns to Private Firms to Help Process Small Business Aid

WASHINGTON — The Small Business Administration doled out tens of millions of dollars in contracts in recent days — including $50 million for a contract linked to the firm of a friend and donor to President Trump — to help it deal with the deluge of loan applications from businesses ravaged by the coronavirus-triggered economic collapse.

The flurry of contracts came as the S.B.A. was straining to quickly disseminate hundreds of billions of dollars through banks to millions of small businesses. It is a logistical and technical challenge that people who have worked with the traditionally low-profile agency say is unlike any it has faced previously, and one that the agency acknowledges requires private sector expertise to execute.

The Trump administration is leaning heavily on the private sector to help it carry out elements of the $2 trillion coronavirus relief package signed by President Trump last month.

On Thursday, the Treasury Department, which is overseeing $500 billion in assistance, announced that it had tapped a trio of Wall Street firms — PJT Partners, Moelis & Company and Perella Weinberg Partners — to advise the government in its bailout of the airlines, cargo carriers and companies deemed critical to national security.

The New York Federal Reserve retained the investment firm BlackRock to run bond-purchasing programs connected to federal efforts to revive the economy, and Mr. Trump listed the firm’s chief executive, Laurence D. Fink, as among the Wall Street executives consulted about disseminating stimulus funds to corporations.

The contracts and consultations have raised questions about favoritism, especially for the financial industry, which critics hold responsible for the last big economic crisis in 2008.

Along with the Treasury Department, the Small Business Administration has been given the job of holding off the worst of the economic damage in this crisis. The S.B.A. has been tasked with spearheading the small business side of coronavirus recovery.

In addition to administering a $349 billion loan program created by the stimulus package, which began accepting a flood of applications on Friday, the agency had already been struggling with a surge in coronavirus-related loan applications through other programs, including its disaster loan program. The stimulus bill included $562 million for disaster loans “to prevent, prepare for, and respond to coronavirus.”

But last week, the website for business owners to apply for disaster loans related to the coronavirus reportedly was shut down because of security issues.

Jennifer Kelly, a spokeswoman for the S.B.A. said in a statement that “this unprecedented global pandemic requires an unprecedented public-private response, and every hurdle that impedes, slows, or otherwise frustrates that response is being cleared in consultation with legal and ethics officials.”

The agency has turned to a range of companies to buttress its ability to process the disaster loans as well as the new $349 billion loan program for small businesses that opened on Friday.

On Sunday, the agency’s Office of Disaster Assistance issued an emergency $50 million contract to support its processing of coronavirus disaster loans to a Virginia-based government contractor called RER Solutions. It is partnering on its S.B.A. work with Rocket Loans, a Detroit-based company that provides consumer loans online.

Rocket Loans is part of a family of companies founded by the billionaire Dan Gilbert, who also co-founded Quicken Loans, which donated $750,000 to Mr. Trump’s inauguration and $67,000 to the committee that hosted the 2016 Republican convention. Mr. Gilbert has visited the White House, where Mr. Trump singled him out as “a great friend of mine, a supporter and great guy.”

Quicken Loans last year paid $32.5 million to settle a years-old lawsuit in which it was accused by the Justice Department of making hundreds of improper loans through the Federal Housing Administration’s lending program, costing the agency millions of dollars.

The S.B.A. contract with RER Solutions, which is for “data analysis and loan recommendation services for Covid-19,” appears to be related to a $10-million-per-year contract that RER signed with the S.B.A. in late 2018 for similar services related to processing disaster loan applications. Rocket Loans was a subcontractor on that work.

“We are stepping up to help solve problems under an existing contract,” said Aaron Emerson, a spokesman for Rocket Loans, adding “we were tapped to help the S.B.A. process applications.”

Mr. Emerson and Errin Green, the chairwoman and chief executive of RER Solutions, said their firms had nothing to do with the disaster-loan website that reportedly experienced problems last week.

Neither RER, nor Rocket Loans, would say how much of the money from the work would go to Rocket Loans.

Representatives from Rocket Loans have reached out in recent days to outside law firms and others for help in expanding the company’s operations to handle the government work, according to a person with direct knowledge of the effort.

Frank Taylor, whose company, The First Choice, bid against RER Solutions for the S.B.A. contract in 2018 and unsuccessfully challenged the decision to award it to RER, said that the systems created by RER and Rocket Loans “were not set up to take the volume of S.B.A. loans” likely to flood the system from businesses and people affected by coronavirus.

“And now it’s biting them in the butt,” he said.

Mr. Taylor asserted Rocket Loans did not have a track record in government contracting sufficient to warrant trusting it with the S.B.A. contract, and suggested that Mr. Gilbert’s political connections may have played a role in his company landing the work.

“I’ve learned in this business that politics plays a role in every aspect of the federal government, so it would not surprise me,” said Mr. Taylor, who described himself as a Democrat.

Mr. Emerson, the Rocket Loans spokesman, pointed out that Mr. Gilbert’s companies had donated to Democratic committees, as well, though those donations pale in comparison to donations by Mr. Gilbert and Quicken to Republicans.

“Our support of both Republican and Democratic parties is wholly irrelevant,” Mr. Emerson said. “We build great products and deliver unmatched service.”

S.B.A. has issued contracts to other firms to provide other services related to processing applications from businesses hit by coronavirus.

Late last month, its Office of Disaster Assistance hired a company called Liveops to help with customer service related to its coronavirus response. Last week, the office signed a $5.3 million deal for Salesforce software licenses “to support Covid-19.” The next day, it had hired a firm called Agility Technologies for more than $2 million dollars to work on a replacement for its Disaster Loan Application Portal, according to contracting records.

The private sector influence goes beyond the disaster loans system, as the agency becomes the hub for an additional $349 billion in loans to small businesses that are trying to make payroll.

On Sunday, the agency inked a $95,000 deal for “social media support services” related to the virus from a Washington, D.C., public relations firm. The next day, it signed a contract worth more than $9 million dollars for an “emergency CAFS hardware refresh,” a likely reference to its Capital Access Financial System.

Other companies are likely to be involved in the agency’s response to the crisis. A spokesman for Microsoft said in a statement that it was “actively discussing how we can extend our support further with additional agencies including the S.B.A.”

Jo Becker contributed reporting from Los Angeles.

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