Articles · Contractors who ran the programs
Reported article
Dan Gilbert's Subcontract Chain
The public award record for the federal government's largest COVID-19 EIDL processing contract shows one company: RER Solutions of Herndon, Virginia, which told Congress it assigned six employees to the work. Two names do not appear on it. They belong to companies in the business empire of Dan Gilbert, the Quicken Loans and Rocket Mortgage founder and Cleveland Cavaliers owner. Between them they built the software that recommended approval or denial on EIDL applications and supplied most of the people who ran it.
The compliance findings are about RER, the small-business prime, and SBA, which priced and expanded the contract. No authority has charged, faulted or found the Gilbert companies to have done anything unlawful.
SBA to RER to Rocket Loans to Rapid
The contract ran in a straight line: SBA to RER to Rocket Loans to Rapid Financial Services. RER held the prime award. RER subcontracted to Rocket Loans, a Gilbert company. Rocket subcontracted to Rapid Financial Services, which the House report calls a Rocket affiliate, "not a subsidiary." Rapid was brought in because SBA's application portal and the Rocket-built system RER already used could not handle the volume of COVID-19 EIDL applications.1
Rapid built the decision engine: a platform that took in an EIDL application and returned an approve, deny, or refer-to-manual-review recommendation, with fraud alerts and credit checks, in under a second. Rocket kept the funding-and-disbursement side it already knew, pushing approved loans through SBA's E-Tran payment system.1
Who owns it: Rockbridge and the Rock family
Rapid Financial Services (Bethesda, Maryland, doing business as RapidAdvance and later Rapid Finance) was acquired in 2013 by Rockbridge Growth Equity, the Detroit private-equity firm Dan Gilbert founded in 2007 with two partners, Brian Hermelin and Kevin Prokop.2 At the acquisition, Rockbridge managing director Kevin Prokop called RapidAdvance "a great addition to our family of companies"; the release placed Rockbridge in the Rock Ventures family of companies, whose flagship was Quicken Loans.2 Rockbridge's own case study calls it the "Rock Family of Companies."3 Rocket Loans, a subsidiary of Rocket Companies, and Rapid Finance sit in that family as affiliates.1 Under SBA's subcontracting rule, because neither is a small business, neither qualifies as a "similarly situated" subcontractor to RER, the small-business prime, so payments to both count against RER's half of the work.
Rockbridge's case study later wrote that "Rapid and Rockbridge were able to leverage Rocket Loans' relationship with the United States Small Business Association (SBA)" to stand up the EIDL program, which "administered more than $400 billion of loans and grants" (the firm's figure, not the COVID-EIDL total), and that "Rapid Finance stood up the EIDL loan program in four weeks."3 Rapid's public account is similar: that it delivered a loan-origination system capable of handling the COVID-19 EIDL application volume for SBA in 2020.4 The House investigation found that Rapid supplied 163 of the 189 people on the contract and the proprietary software.1
Who runs it: Tumulty, Hermelin, Prokop
Rapid Finance's chief executive is Will Tumulty, who joined RapidAdvance as CEO in July 2015. He spent five years as a U.S. Navy SEAL before moving into banking and payments roles at Capital One and elsewhere.5 On February 11, 2021, the House Select Subcommittee on the Coronavirus Crisis and the House Small Business Committee sent Rapid Finance a document-demand letter addressed to Tumulty, one of three sent that day to RER, Rocket, and Rapid.6
Above Tumulty sit the Rockbridge principals. Dan Gilbert is the majority figure and the public name. Brian Hermelin and Kevin Prokop are his co-founders at Rockbridge, and Prokop was the managing director who fronted the 2013 RapidAdvance acquisition.2
What the invoices show
The House Select Subcommittee obtained the contract's invoices and staffing, and its June 2022 staff report is the source for the split. By the Subcommittee's account, of the roughly $738 million SBA had paid through early February 2021, Rocket Loans received $232,931,265.65 (about thirty-two percent) for twenty assigned employees, and Rapid Financial Services received $148,024,480.79 (about twenty percent) for 163 assigned employees and contractors plus the proprietary software.1 RER, the prime whose name was on the award, retained about $357.3 million for six people doing contract administration.
| Party | Role | Assigned staff | Share of payments (through Feb. 2021) |
|---|---|---|---|
| RER Solutions (prime) | Contract administration | 6 | ~$357.3M |
| Rocket Loans (subcontractor) | Disbursement via E-Tran; prior SBA relationship | 20 | $232,931,265.65 |
| Rapid Financial Services (sub-subcontractor) | Decision-engine software; majority of labor and data | 163 | $148,024,480.79 |
The Inspector General's finding
RER, the small-business set-aside prime, passed more than half of what SBA paid it down its chain of two large subcontractors. SBA's Inspector General found in April 2022 that SBA did not ensure RER's oversight of the subcontracting limitation, "which exceeded the 50 percent ceiling by $13 million."7
Notes
- House Select Subcommittee on the Coronavirus Crisis, Idle on EIDL Fraud, June 14, 2022, Source document. The report describes the SBA→RER→Rocket Loans→Rapid Financial Services chain; Rapid's sub-second approve/deny/refer recommendation engine with fraud alerts and credit checks; Rocket's disbursement role through E-Tran; and the payment and staffing figures cited in the table (Rocket $232,931,265.65 for 20 staff, about 32%; Rapid $148,024,480.79 for 163 staff and contractors plus proprietary software, about 20%; RER about $357.3 million for six staff). ↩1 ↩2 ↩3 ↩4 ↩5
- "Detroit-based Rockbridge Growth Equity Acquires RapidAdvance", PR Newswire, 2013 Sept. 16, 2013, original. ↩1 ↩2 ↩3
- Rockbridge Growth Equity, "Rapid Finance Case Study", original. ↩1 ↩2
- Rapid Finance company materials describing delivery of a loan-origination system for the SBA's COVID-19 EIDL program in 2020. ↩
- "Will Tumulty, RapidAdvance", The Daily Record, July 13, 2015, https://thedailyrecord.com/2015/07/13/will-tumulty-rapidadvance/; Rapid Finance, "Executive Team," original. ↩
- House Select Subcommittee on the Coronavirus Crisis and House Committee on Small Business, letters of February 11, 2021 to RER Solutions, Rocket Loans, and Rapid Finance; the Rapid letter, addressed to CEO Will Tumulty: Source document. ↩
- SBA Office of Inspector General, Evaluation of SBA's Contract for Disaster Assistance Loan Recommendation Services, Report 22-10, April 14, 2022, Source document. ↩
Primary sources used in this article
- House Select Subcommittee on the Coronavirus Crisis, Idle on EIDL Fraud staff report, June 14, 2022 (subcontract chain; Rocket and Rapid payment and staffing figures; February 2021 document demands).
- "Detroit-based Rockbridge Growth Equity Acquires RapidAdvance," PR Newswire, 2013 (Rockbridge founded 2007 by Dan Gilbert, Brian Hermelin, and Kevin Prokop; 2013 acquisition of Rapid Financial Services / RapidAdvance; Prokop quotation).
- Rockbridge Growth Equity portfolio/case materials on Rapid Finance and the EIDL program; Rapid Finance company materials on its SBA EIDL loan-origination system.
- "Will Tumulty Joins RapidAdvance as New Chief Executive Officer," PR Newswire, 2015; Will Tumulty executive biography.
- SBA Office of Inspector General, Evaluation of SBA's Contract for Disaster Assistance Loan Recommendation Services, Report 22-10, April 14, 2022 (subcontracting-limitation findings against the prime).