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RER Solutions, Inc.

Vendor or contractor

EIDL
Type
Company or group
Role
Vendor or contractor
Programs
EIDL
Updated

The profile

Individuals and companies whose conduct was challenged or called into question during or after the pandemic. See sources: Select Subcommittee staff report, June 14, 2022 Clyburn letter, July 30, 2020

  • Type: Federal services contractor, Herndon, Virginia. A July 30, 2020 congressional letter describes it as a minority-owned and women-owned business in SBA's 8(a) program.1
  • Pandemic role: Prime contractor on SBA's disaster loan recommendation services contract (No. 73351019D0001), the vehicle SBA used to process COVID-19 Economic Injury Disaster Loan applications. Not a lender.
  • Subcontractors: RockLoans Marketplace LLC, doing business as Rocket Loans, and its affiliate Rapid Financial Services.2
  • Executive named in the record: Errin Green, Chairman and Chief Executive Officer, the addressee of both congressional letters.1
  • Record: SBA Office of Inspector General Report 22-10 (April 14, 2022), a House Select Subcommittee staff report (June 14, 2022), and four congressional letters (2020–2021).

Pandemic-role map

  • Reader shorthand: the small-business prime on the EIDL processing contract.
  • What the contract bought: a system that received loan application data and returned a recommendation to SBA. SBA "retained the role and responsibility of approving EIDL loans and advance grants."3
  • Who was paid: SBA paid RER. RER subcontracted with Rocket Loans, which further subcontracted with Rapid Financial Services.4
  • What the two reviews examined: the Inspector General evaluated how SBA awarded and monitored the contract. The Select Subcommittee examined how the money was divided among the three companies and how SBA ran loan review.
  • What the record does not contain: neither document reports a criminal charge or an enforcement action against RER, Rocket Loans or Rapid Financial Services. Both are oversight findings.

Before the pandemic

In early 2018 SBA solicited proposals for services to help its Office of Disaster Assistance process loans, after application volume rose following hurricanes Harvey, Irma and Maria. SBA limited the competition to small businesses and said it preferred a contractor that could return recommendations within 10 minutes.2 SBA received 10 proposals and awarded an indefinite-delivery, indefinite-quantity contract to RER Solutions Inc., with Rocket Loans as subcontractor. The Inspector General describes Rocket Loans as an affiliate of Rock Holdings and Quicken Loans.2 The award date was December 17, 2018, and the ceiling was $100 million.5 RER and RockLoans Marketplace LLC had signed a teaming agreement on September 7, 2018.6

The Select Subcommittee's staff report describes RER's earlier federal work as professional services support: a Department of Energy contract of about $1 million a year for "general and business management support services," and a $165,000 contract with the Department of Housing and Urban Development to support underwriting 2,460 loans.7

The contract's estimated volume was 65,000 loans a year, and SBA estimated that catastrophic events could generate more than 300,000 applications.8

What the Inspector General found about the 2018 award

The Inspector General's table of the 10 offers puts Team RER-Rocket 55.7 percent above the independent government cost estimate, in a field that ran from 75.7 percent above it to 88.1 percent below.9 SBA's acquisition standard treated a variance above 30 percent as significant, and the report says the contracting officer "did not analyze or address any of the significant variations."10 The award decision memo, as the report quotes it, said of the team's pricing: "It is hard to tell what we are paying for or what the level of effort is for the first 6 months."9

The Inspector General's first finding is that SBA "did not ensure fair and reasonable prices or contractor compliance with size standards for the 2018 contract."11 The size standard for the award was $15 million in annual revenue. The report says SBA did not evaluate whether RER's relationship with Rocket Loans made the two companies affiliates under the ostensible subcontractor rule, and that "RER on its own may have been a small business, but RER relied on Rocket to perform vital contract requirements."11 It records that the teaming agreement asserted the prime contractor would perform the primary and vital requirements and would always control the prime contract, while also specifying the use of the subcontractor's commercial software.6 The report's conclusion on this point is that "RER and Rocket Loans circumvented the subcontracting rule."12

During the pandemic

On March 31, 2020, SBA reported 680,000 COVID-19 EIDL applications in a single day, and more than 4.5 million over the next 10 days.8 SBA issued a $50 million task order under the RER contract on March 29, 2020.5 It then raised the contract ceiling without competition, under emergency contracting authority: from $100 million to $600 million in April 2020, and to $850 million in August 2020, according to the Inspector General.13 The House staff report and the February 2021 letters give the later figure as $750 million.14 The staff report says then-SBA Administrator Jovita Carranza approved the April modification and calls the modified contract the largest the federal government awarded in response to the pandemic's economic impact.14

Who did the work

Under the second task order SBA relied on the Rapid Finance Portal, the system of RER's second-tier subcontractor. Rapid Financial Services began processing loan recommendations in late March 2020 through a subcontract with Rocket Loans.8 The staff report says Rapid's system "reviewed COVID-19 EIDL application information in less than a second to provide fraud alerts, credit checks, and approval or denial recommendations," and that SBA agreed to pay RER more than $40 for each application reviewed.15

The staff report gives this division of the $738 million SBA had paid through February 2021: RER $357 million (48 percent), Rocket Loans $233 million (32 percent) and Rapid $148 million (20 percent).4 Rapid had 163 employees and contractors on the work and paid $39 million to third-party data providers. Rocket Loans identified 20 employees. RER told the Select Subcommittee it assigned six.416 According to the report, RER's staff "largely performed 'contractual administrative duties'" such as negotiating with SBA and sending invoices and application counts, along with high-level "project management."16 SBA also paid a flat fee of at least $2.3 million a month, more than $25 million in total, on top of the per-recommendation fee.17

RER represented to the Select Subcommittee that it paid 51 percent of the "hard costs" Rocket Loans invoiced for credit checks and other third-party data. The staff report says those costs came to $31.7 million in the invoices RER produced and that, after subtracting them and the payments to subcontractors, RER "still received more than $340 million for the work of six employees in less than a year."16 The report's word for the result is "windfall."4

The Inspector General's payment figures

The Inspector General worked from SBA's accounting system and subcontractor invoices obtained from RER. Its table shows total contract payments of $756,229,307.76 across three task orders, of which the prime received $365,115,454.31 and the subcontractor $391,113,853.45. The COVID-19 task order accounted for $740,506,022.40.18 Small-business set-aside rules bar a prime from subcontracting a majority of the work to larger businesses. The report identifies $13,046,124.50 paid to the subcontractor above the 50 percent limit and lists it as a questioned cost.1819 SBA asked RER in December 2020 to confirm it was following the limitation. "The prime contractor asserted it complied and SBA accepted the response without any supporting analysis or evidence."18

The report's second finding is addressed to the agency: SBA's use of emergency contracting procedures "did not ensure fair and reasonable prices or contractor compliance with subcontracting limitations," and because it did not consider alternatives, "SBA likely overpaid to obtain these services."20

The congressional inquiry

The House Select Subcommittee on the Coronavirus Crisis and the House Committee on Small Business wrote to RER on July 30, 2020, asking for the contract, its modifications, the agreement between RER and Rocket Loans, and written answers about how the work and revenue were split.1

A second letter followed on February 11, 2021. It said RER had answered a request for "a complete list of all fraud checks conducted on EIDL applications" with "a single document with brief guidance from SBA," and that RER had declined to hand over unredacted proposals, "asserting that the documents contain 'highly sensitive commercial information that could jeopardize RER's competitive interests if the documents were to be made public.'"21 The letter records RER's own account of staffing: its personnel were a "small percentage of overall staffing," perhaps "15-20%" of a project team of "a couple hundred people." It also records RER's position on the set-aside rule: "RER asserts that it is complying with this subcontracting requirement by paying Rocket less than 50% of the overall value of the contract."22 The companies, the letter says, had told the Committees they did not track headcount or keep hourly records for the project.22 Letters went the same day to Rocket Loans and to Rapid Finance.23

By June 2022 the Select Subcommittee had received 17,000 pages of documents from SBA, RER, Rocket Loans and Rapid, and had held two briefings with RER and Rapid.3

RER's defense of the price

The staff report records RER's argument and answers it. RER compared the $41 it received per application with the higher fees banks charged to originate Paycheck Protection Program loans and with SBA's own costs in smaller disasters. The report calls the comparison "faulty," on the ground that RER and Rapid provided automated processing "with no manual review of applications," while SBA separately employed about 8,000 loan officers, team leads and other staff to review applications after Rapid's system had processed them.24

After the pandemic

The Inspector General made six recommendations, all addressed to SBA. SBA agreed or partially agreed with each one, and agreed with the questioned costs.25 Two recommendations were unresolved when the report issued. One of them asked SBA to request a formal size determination "to evaluate whether the loan processing contractor exceeded the size standard." SBA management answered that RER had self-certified as a small business at the time of award and that a formal size determination "is not appropriate at this point." It proposed instead to request a size representation from RER before issuing new task orders or exercising options. The Inspector General maintained its position.26 Its semiannual report for the six months to March 31, 2023 still listed three of the six recommendations as open, the size determination among them, with $13,046,125 in potential cost savings attached. SBA had reached a management decision on the size determination on March 15, 2023, with final action due March 31 (SBA OIG, Spring 2023 Semiannual Report to Congress). The report for the six months to September 30, 2023 no longer lists Report 22-10 among reports with open recommendations (SBA OIG, Fall 2023 Semiannual Report to Congress). Neither report says whether a size determination was made or what it found.

USAspending.gov records seven task orders under the contract, with $928,860,279.13 obligated and $926,083,978.73 paid (task-order totals). Two were COVID-19 orders. The first, issued March 29, 2020 and running to September 30, 2021, shows $800,000,000 obligated and the same amount paid (task order 73351020F0071). The Inspector General, working from SBA's accounting system for its 2022 report, had counted $740,506,022.40 paid on it. The second, for $80,000,000, covered October 1, 2021 to June 30, 2022 (task order 73351021F0230). The other five orders account for the remaining $48.9 million; one of them ran from March 4, 2023 to March 3, 2024, for $6,746,180.87 (task order 73351023F0038). USAspending gives the contract itself an end date of March 17, 2024 (contract 73351019D0001).

The staff report adds a figure from the public filings of Rocket Loans' parent company: Rocket Loans' revenue rose from less than $25 million in 2019 to more than $393 million in 2020, then fell to $95 million in 2021. The report quotes the parent's explanation of its 2021 results: "mainly as a result of a reduction in revenues earned from processing economic injury disaster loans offered by the Small Business Administration in response to the COVID-19 pandemic."27

Source notes

Primary documents in this archive

External references

Notes

  1. Letter to Errin Green, Chairman and Chief Executive Officer, RER Solutions, Inc., July 30, 2020, pp. 1–3. The address block reads 950 Herndon Parkway, Suite 410, Herndon, VA 20170. The same letter cites Dun & Bradstreet for a count of 40 employees. ↩
  2. SBA OIG Report 22-10, PDF p. 5 (report p. 1); contract number at PDF p. 23, Table 4. ↩
  3. House Select Subcommittee staff report, Idle on EIDL Fraud, June 14, 2022, PDF p. 10. ↩
  4. Staff report, PDF p. 21. ↩
  5. Letter to Errin Green, February 11, 2021, p. 1. OIG Report 22-10, PDF p. 6, describes the same ceiling as options to extend for up to four years with a price cap of $100 million. ↩
  6. OIG Report 22-10, PDF p. 11 and its note 12 (RER Solutions Inc. and RockLoans Marketplace LLC Teaming Agreement, September 7, 2018, p. 3). ↩
  7. Staff report, PDF p. 6. ↩
  8. OIG Report 22-10, PDF p. 6. ↩
  9. OIG Report 22-10, PDF p. 10, Table 1 and the text below it, quoting the SBA Award Decision Memo, Solicitation No. 73351018R0010, December 7, 2018, p. 27. ↩
  10. OIG Report 22-10, PDF p. 9. ↩
  11. OIG Report 22-10, PDF p. 8, Finding 1. ↩
  12. OIG Report 22-10, PDF p. 12. ↩
  13. OIG Report 22-10, PDF pp. 6–7. ↩
  14. Staff report, PDF p. 7; letter of February 11, 2021, pp. 1–2. ↩
  15. Staff report, PDF p. 5. ↩
  16. Staff report, PDF pp. 21–22. ↩
  17. Staff report, PDF p. 20. ↩
  18. OIG Report 22-10, PDF p. 16, Table 3 and the text below it. ↩
  19. OIG Report 22-10, PDF p. 15 and PDF p. 23, Appendix II, Table 4. ↩
  20. OIG Report 22-10, PDF p. 13, Finding 2. ↩
  21. Letter of February 11, 2021, pp. 2–3. ↩
  22. Letter of February 11, 2021, pp. 3–4. ↩
  23. Letters of February 11, 2021, to Rocket Loans and to Rapid Finance. ↩
  24. Staff report, PDF pp. 20–21. ↩
  25. OIG Report 22-10, PDF p. 2 (executive summary), PDF p. 17 and PDF p. 20 (Recommendation 5). ↩
  26. OIG Report 22-10, PDF p. 12 (Recommendation 3) and PDF p. 19 (status and management response). ↩
  27. Staff report, PDF p. 22. ↩
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