Amid California’s EDD crisis, a tech gold rush – Silicon Valley
Stacy Lira was nearly a year into her unofficial job as an unemployment detective when things went from bad to worse.
The 46-year-old mother of three, who lost her job managing a Victorville convenience store last spring, was rushed to the hospital in mid-February. She was struggling to breathe after testing positive for COVID-19. But Lira was adamant that she couldn’t leave home without one thing: She needed her carefully filed unemployment records so she could keep calling from the hospital about the nearly $20,000 she says the state owes her family.
“If you miss one day,” Lira explained, “that could have been the day that it all worked out.”
As the ranks of desperate California workers like Lira swell, the state’s Employment Development Department insists that it’s getting things under control. It has help from an ever-expanding roster of private contractors that are staffing up call centers, modernizing tech systems and rooting out fraud, officials stress on social media and at political hearings in Sacramento — an effort that, all told, has so far cost the state at least $236 million during the pandemic, the agency told CalMatters.
The contracts are part of a nationwide unemployment gold rush, as tech companies and consultants pitch overwhelmed public agencies new solutions for fraud and outdated claims systems. One Bloomberg Law report last summer tallied $173.8 million in pandemic-era unemployment contracts for consulting giants Accenture, Deloitte and EY alone.
But in California, it’s not easy to track who’s getting paid for what, because there is no easily accessible public list of all state unemployment contracts. The state and its contractors stress that both the demand for benefits and volume of fraud are unprecedented. Still, ongoing confusion adds to what state lawmakers have called the Employment Development Department’s “very poor history”of paying outside entities to patch holes in the safety net as workers try to survive in financial limbo.
The $236 million in contracts that the department has signed since last March pay for outside companies to help track jobless claims, verify worker identities, analyze records for potential fraud, assist with customer service and more.
CalMatters requested and analyzed detailed contract records for five vendors working on key customer service and anti-fraud projects — Deloitte, Maximus, Thomson Reuters, ID.me vendor V3Gate and Salesforce vendor Outreach Solutions as a Service — which total at least $103.8 million and have ballooned in cost over time, but which the state says were crucial in a crisis.
“The volume of work was staggering,” Employment Development Department spokesperson Aubrey Henry said in a statement. Calls from the public jumped 3,400% to 48 million in April 2020 as the state scrambled to process more than 20 million claims, he said, up from 3.8 million claims at the peak of the Great Recession.
“Vendors, mass hiring, redirecting workers from within the department, and borrowing workers from other departments, and continued staffing up, were all part of an effort to respond to the historic demand for benefits,” Henry said.
The majority of these new contracts went to consulting giant Deloitte, but several other vendors have also signed major deals in recent months, according to the contracts provided to CalMatters:
- At least $69 million went to Deloitte in no-bid emergency contracts for call center and IT services.
- Government contracting giant Maximus signed on to provide up to $11.5 million worth of phone staffing services.
- The state paid $9.5 million to IT firm V3Gate to obtain ID.me identity verification services.
- Outreach Solutions As A Service, a Sacramento consultancy, sold the state $9.4 million worth of services and software, mostly from Salesforce.
- Thomson Reuters signed $4.2 million in contracts for analytics related to fraud.
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