OLYMPIA — In early June, as Gov. Jay Inslee oversaw a phased reopening of the state amid the spread of the new coronavirus, his budget office signed a contract with the elite international consulting firm McKinsey & Company to provide access to a “Governor’s Decision Support Tool.”
That data-visualization tool, meant to aid Inslee’s decision-making as he gradually unlocked the economy, didn’t come cheap. Under the contract, the state agreed to pay for eight weeks of McKinsey’s services. The cost to taxpayers: $1.3 million.
The deal is one of three no-bid contracts McKinsey has landed totaling $5 million to help Washington officials respond to the pandemic and related problems, according to a review by The Seattle Times and the public radio collaboration Northwest News Network.
McKinsey’s trio of contracts — for the data tool, for help in detecting and flagging unemployment insurance fraud and work on Medicaid data — doesn’t add up to much for a state awash in $2.2 billion in federal virus aid.
But the contracts — two of which are funded by those federal dollars — show how a global consulting firm has gotten into the coronavirus response business while government agencies at every level spend billions in a scramble to contain and adapt to the pandemic.
Typically, no-bid contracts are prohibited by state law. But after Inslee declared a state of emergency in early March, the director of Washington’s Department of Enterprise Services waived the competitive solicitation requirement “for goods and services that are directly related to the state’s response to the coronavirus.”
As part of the chaotic dash to respond to the once-in-a-century pandemic, Washington officials spent hundreds of millions of dollars on such contracts to secure scarce medical gear to respond to COVID-19.
Without a coordinated national response for supplies, state officials had to figure out how to contract with foreign companies. One effort, a $37 million order for Chinese-made KN95 masks, resulted in delays and poor quality. The state ultimately canceled more than half that order.
Spokespeople for Inslee’s office — as well as the Employment Security Department, which also has contracted with McKinsey — say the company’s services have been valuable in their response to unprecedented problems.
While the contract with Inslee’s office is technically in place through the end of the year, the governor’s office hasn’t immediately renewed its $165,000-per-week subscription to McKinsey’s data service after the initial eight weeks.
“We are not planning at this time of entering into any subsequent statements of work,” Inslee spokesperson Tara Lee wrote in an email.
McKinsey’s work on the virus has drawn attention elsewhere. An investigation published last month by ProPublica found that by then the company had made more than $100 million in advising governments — local, state and federal — on their pandemic response. The report concluded the contracts so far have yielded “mixed results” and it wasn’t yet clear what governments have “gotten in return.”
In response to an inquiry from The Seattle Times and Northwest News Network, a McKinsey spokesperson said the company gave Inslee’s office a discounted rate and is doing its part “in helping governments fight this pandemic.”
“With teams that include supply chain experts, data scientists, program managers, colleagues with clinical and public health backgrounds, and many others with relevant experience, our firm has the capabilities to support leaders and public servants who are navigating this humanitarian and economic crisis,” the spokesperson said.
State Sen. John Braun, who has been frustrated that the Legislature has been largely sidelined during the response, questioned the cost.
“It sounds to me like, once again, kind of the high-end, high-tech folks of the world are making out like bandits during this pandemic at the expense of everyone else,” said Braun, a Republican from Centralia.
Lawmaker questions cost
McKinsey was one of many consultants or aspiring contractors that reached out to state officials earlier in the pandemic, according to David Postman, Inslee’s chief of staff.
The company ultimately offered the state the ability to look at the effects of COVID-19 in three ways, according to Inslee officials: the virus’s impact on people’s health, to the state’s economy and on vulnerable individuals.
The tool included a data dashboard that incorporated those streams of data in a map of Washington’s 39 counties.
For example, the dashboard could combine the number of daily COVID-19 cases with the number of unemployment claims, weekly data on suicide attempts and overdoses, and applications for food assistance.
Officials said it allowed them to take a nuanced look at what was happening across Washington while different counties reopened with different levels of restrictions based on how they were faring with combating the virus.
The company also provided detailed comparisons of Washington’s virus restrictions versus those in other states. That data could broadly compare Washington to states like New York, New Jersey and Massachusetts — all of which had seen a sustained decline in cases.
That information was one of several factors that led Inslee to recently restrict alcohol service in bars and restaurants after 10 p.m., according to Sheri Sawyer, a senior policy adviser with Inslee. That restriction was one of several Inslee imposed late last month as cases ticked up.
“We certainly can’t say, ‘Oh we came up with these things because of the McKinsey tool,'” said Sawyer. “But it did show us a broader picture of what interventions other states were taking and showed us … perhaps a correlation for why their numbers were trending downward with the more stringent interventions.
“And that’s in part why the governor chose to roll back some of these activities,” Sawyer added.
The dashboard was fed by some state data, as well as public data found elsewhere and proprietary information supplied by McKinsey, she said.
The proprietary data includes information that McKinsey compiled on other states’ virus restrictions, Sawyer said, as well as other information purchased by the company.
As part of the contract, McKinsey supplied several staffers to work with the state, according to a copy of the contract.
But Braun, the Republican senator who is that chamber’s top GOP budget writer, expressed concern about the lack of competitive bidding or legislative oversight of McKinsey’s work. He described the cost of the contract with Inslee’s office as “quite steep.”
Work with Medicaid, unemployment
Meanwhile, Washington was among the hardest hit of multiple states targeted by cyber theft rings intent on siphoning off a portion of the billions of dollars in federal jobless benefits made available in response to the pandemic.
In May, the state’s embattled Employment Security Department (ESD) agreed to pay McKinsey up to $2.4 million to help it respond to a massive unemployment-insurance fraud scheme.
Inslee’s office recommended McKinsey to ESD as “having experience specific for this contract need,” according to a summary of the contract.
ESD Commissioner Suzi LeVine reached out to the company, according to agency spokesperson Nick Demerice, which led McKinsey to offer a proposal.
McKinsey was tasked with, among other things, developing a “rough sizing of the potential fraud problem” and coming up with ways to detect fraud, according to a copy of that contract.
The company was also hired to design “treatment options” for unemployment actions that were being flagged as potentially fraudulent.
“Their team brought subject matter expertise, data analysis skills and best-practice knowledge that was critical in helping the department stop fraudulent payments from going out, preventing future fraud, recovery of funds and getting rightful claimant’s benefits paid as quickly as possible,” Demerice wrote in an email.
ESD also contracted with another company, Deloitte, according to Demerice, “to do a cybersecurity assessment to verify our system was not hacked.”
Meanwhile, Washington’s Health Care Authority (HCA), which runs the state’s Medicaid program, also inked a $1.2 million contract with McKinsey. That work was to help match positive coronavirus tests with people on the state’s Medicaid rolls, with the goal of faster contact tracing and case management for those individuals.
McKinsey’s work, according to HCA, was part of a longer-term project that involves a health and human services master database project. That task — which did not use federal coronavirus aid money — has been completed, according to HCA.
The McKinsey spokesperson credited the company’s work on this project as having “potentially reduce(d) the spread of the disease.”
Data in “pretty formats”
Founded in 1926, McKinsey last year was ranked the 11th largest global consulting firm, with $8.8 billion in revenues, according to Consulting.com.
But the company has at times faced scrutiny regarding some of its choices of clients and work.
This year, the federal General Services Administration (GSA) ended a long-running contract with McKinsey after an inspector general in 2019 concluded a change in the company’s pricing resulted in the cost being 10% higher than initially proposed to the government, according to news reports.
That inspector general report estimated the federal government could have paid up to $69 million extra over the contract’s option period, and it recommended termination of the agreement.
In response, the McKinsey spokesperson said in a statement that the company was disappointed with that decision, and they “look forward to potentially returning to the GSA schedule in the future.”
The recent ProPublica investigation detailed how McKinsey reached out to local, state and federal governments starting in March to offer services related to the virus.
The consulting company had earned more than $100 million advising local, state and federal governments on their pandemic response, according to that report published in July.
One contract for up to a month of work in Florida cost as much as $568,000, according to ProPublica.
“Basically, they are compiling data for us,” one high-ranking Miami-Dade County official wrote in an email obtained by ProPublica and featured in its report. “And putting it in pretty formats.”
Duff McDonald, author of “The Firm,” a history of McKinsey & Company published in 2014, said offering data is one of the company’s specialties.
“It’s a brilliant business model; McKinsey doesn’t make a static product, like a pair of shoes or whatever, because it’s a business and consulting type of product,” said McDonald, adding later: “McKinsey sells what you are buying.”
Especially during the pandemic, “Money needs to go from the public purse to those in great need,” McDonald said. “And McKinsey has found a way to latch on to that flow of money and take some of it.”
This story was produced in conjunction with Northwest News Network, a collaboration of public radio stations in Washington and Oregon.