AUGUSTA, Maine — Maine paid millions to a massive and controversial consulting firm for help improving an unemployment system that has struggled to keep up with benefits during the coronavirus pandemic.
McKinsey & Co. helped the state pay out claims more quickly, combat fraud and improve communication with unemployed workers, the Maine Department of Labor said. But the $6.3 million no-bid contract, which was recently extended through March, highlights the high cost of fixing Maine’s unemployment system, which has faced challenges since a revamp a few years ago. It comes at a time when McKinsey has seen scrutiny over its advice to governments and companies as many Mainers still struggle to access benefits.
Maine joined a multistate unemployment consortium in 2017, which was billed as an adoption of technology that was successful elsewhere. A labor department employee alleged that the software included features from Mississippi that did not apply to Maine and accused department leaders of destroying records, the Morning Sentinel reported in 2018.
Many Mainers describe the platform, ReEmployME, as difficult to use, and say they have struggled to reach the department when they need help. The pandemic magnified those challenges as tens of thousands of workers applied for benefits in a span of a few weeks last spring. While the state grappled with the volume and worked to implement new federal programs, some applicants saw their benefits delayed for weeks or months.
The labor department began working with McKinsey in June, said spokesperson Jessica Picard. After Maine and other states were hit with a wave of fraudulent claims that slowed benefits further, the firm helped the state implement a fraud review process to flag and filter initial claims, she said, helping save the state from paying millions of dollars in fraudulent benefits.
“McKinsey quickly supported, and then transformed our approach to the backlog and fraud-prevention efforts during the initial months of the pandemic crisis,” Picard said.
Consultants also helped the state speed up processing, Picard said, using data analysis to help the department allocate staff and increase daily decisions. The firm also surveyed 600 applicants, according to internal documents. Consultants worked on changes including simplifying letters sent to claimants and employers, redesigning webpages and setting up a confirmation email that applicants receive when they successfully submit a claim, Picard said.
She noted that a report by the Century Foundation, a progressive think tank, put Maine ahead of all but a handful of states in terms of the speed of claims paid. As of this fall, about two-thirds of applicants were getting paid within two weeks, according to the think tank, while about eight percent were still waiting after seven weeks.
McKinsey’s assistance was pricey. Under the initial contract, Maine paid the consulting firm a weekly rate of $178,000, with most of that funding coming from $1.25 billion in federal relief funds. In exchange, the consulting firm offered five employees to work on the state’s issues full-time, with other, specialized groups supporting on a part-time basis.
Picard said the department opted not to go through the bidding process due to the urgency of the unemployment situation. The agency considered one other vendor, she said, but ultimately chose McKinsey, which had previously reached out. A McKinsey spokesperson declined to comment, referring questions back to the department. Several other states, including California and Washington, also hired McKinsey last year to consult on their unemployment systems.
Rep. Mike Sylvester, D-Portland, the chair of the Legislature’s labor committee, said it was good for the labor department to bring in people with expertise in redesigning systems, saying the agency was tasked with coming up with a way to “fix the plane while it’s in the air.” He said the Legislature is committed to revamping the unemployment system this year.
The contract is not McKinsey’s first in Maine, nor the only large no-bid contract issued in recent years. The Maine Department of Health and Human Services paid the global consulting firm $2.1 million for assistance with the state’s Medicaid rollout in 2019 and 2020. The contract was also issued without a bid, with the Bureau of General Services concluding that McKinsey was the only source providing the service, according to a waiver form.
Under former Gov. Paul LePage, the department paid more than $32 million to a children’s nonprofit for a visitation program without a competitive process. Gov. Janet Mills’ administration selected the same nonprofit to fulfill those services through a competitive process last year.
McKinsey has faced pushback in recent years, including over allegations that it advised opioid manufacturers to aggressively market addictive painkillers, which became the basis of a lawsuit filed by Maine and nearly every other state. That suit was resolved last week, with Maine set to receive $3.1 million as part of a settlement.
Sen. Rick Bennett, R-Oxford, questioned why the state was pursuing a contract with McKinsey as it was involved in a lawsuit against the company. He doubted the effectiveness of the changes, saying he was still hearing from constituents unable to get unemployment help.
“Eight months later, we still don’t have the problem solved,” he said. “My constituents can’t get a phone call returned, they can’t get answers to their questions, and yet we paid McKinsey $6.5 million.”
Allison Cronkite of Easton is among the Mainers frustrated with the unemployment system in recent months. She applied for benefits in November after her work hours were reduced. Cronkite, who received unemployment when her job was briefly shut down at the start of the pandemic, got benefits for a week but then found out her account was locked.
It took her several weeks to reach the labor department by phone, she said, at which point she was told she would need to upload identifying documents. She did that twice — the first time she was told her drivers’ license looked fraudulent — but waited weeks without knowing whether the department had received her second upload.
She received assistance this week, several days after messaging the Department of Labor on Facebook, but is worried that she may not get back pay going back to November.
“It is super frustrating to try to deal with,” Cronkite said.