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Consulting giant becomes a State House fixture

Hired to help revamp technology, Deloitte wins millions in contracts

Two years into his first term, Governor Deval Patrick launched a sweeping initiative to modernize technology across the state’s agencies. To plot the road map, a dozen people met regularly in an office near the State House through 2009. Half worked for the state, half were employed by Deloitte Consulting.

For Deloitte, the $4.3 million contract was relatively small. But it put the New York-based consulting giant at the center of the conversation about moving government operations online, merging data centers, and cutting staff, while forging relationships that would lead to future business.

The approach is just one piece of a strategy that has helped Deloitte win public contracts across the country and become a virtual arm of Massachusetts government. Its work here is so diverse and sprawling, cutting across so many agencies, that Patrick administration officials could not provide a precise tally of Deloitte’s contracts and their value.


But public record requests, interviews, and other research by the Globe show the company has won at least $330 million in consulting and technology contracts in Massachusetts over the past decade. State officials could not name a firm that has won more business. Deloitte is currently working on at least 12 contracts here, accounting for about $215 million of its business with the state.

Deloitte’s Massachusetts presence has come under scrutiny in recent months because of serious and costly problems with the multimillion dollar software systems it built to manage state unemployment claims and tax collections. The company stands by its work.

The firm’s reach extends from the labor department to human services to transportation. Its projects range from a new child support enforcement system to disaster recovery at a new Springfield Data Center. Among Deloitte’s current jobs: redeveloping the very system the state uses to award contracts.

“When they get the lead-in engagement, they know this is an opportunity for them to manage the majority of the projects that come out of that plan,’’ said Cushing Anderson, worldwide analyst for business consulting services at International Data Corp., a Framingham-based research firm. Armed with an insider’s sense of these projects, Deloitte has an advantage, he said, “because they wrote the plan.’’


Deloitte insists it is careful to follow state rules that prohibit consultants from bidding on certain jobs that result from a prior consulting project.

But Deloitte has often been involved in officials’ early thinking about projects. In 2001, it was hired to perform a $6.8 million assessment of the Department of Unemployment Assistance’s antiquated computer system. The conclusion: “Pursue replacement with full attention,” according to a description in the governor’s capital budget.

Five years later, Deloitte bid on the system overhaul it recommended, but lost out to a higher bidder. Deloitte wound up with the project in the end, however, after acquiring the rival consultant, which went bankrupt.

In 2007, the state hired Deloitte to help plan a major reorganization of the transportation system and cut costs. Last year, the firm won a $77 million contract to build an online licensing system for the Registry of Motor Vehicles. Only one other firm bid on the job.

The IT consolidation project that Deloitte worked on in 2009 led to numerous other jobs, including business from the Executive Office of Health and Human Services and a contract that appears to be its largest ever in Massachusetts, a $114 million makeover of the state tax system. The Department of Revenue fired Deloitte from that project last summer because it was riddled with errors, after paying the firm $54 million.


Gary Lambert, the state’s purchasing chief, said the company’s proposals have always been assessed based on their own specific merits.

“In each instance where Deloitte has been awarded a contract by the state, it was determined, using established evaluation criteria, that they put forward the best response to the solicitation,’’ Lambert said in a statement.

A Deloitte spokesman said the company wins projects because it comes “highly recommended by IT managers inside and outside the Commonwealth based on our years of high quality public sector work.”

In Massachusetts, Deloitte is one of 70 preapproved IT consulting contractors, yet it wins far more business than other firms. Size, without question, is one of the main advantages, providing deep financial resources and a large workforce that few competitors can match. It also has the ability to wait for slow-moving bureaucracies to make decisions, a factor that makes state business unattractive to smaller firms.

As the consulting arm of one of the big-four accounting giants, Deloitte reports nearly $14 billion in annual revenue and has 61,000 US employees. It has 2,000 people in Massachusetts and the financial capacity to respond to complex government proposal requests.

Deloitte also devotes significant resources to state and federal governments, from lobbying to research. It churns out books and white papers — Deloitte calls this “eminence” — aimed at positioning the firm as an expert on everything from US health care reform to banking in Afghanistan. One of those books, “Letting Go of the Status Quo: A Playbook for Transforming State Government,’’ lays out ideas for using technology, cost cutting, and other strategies to make state governments more efficient.


The firm has spent $754,530 on lobbying in the Commonwealth since 2009, far more than its chief competitors. IBM, for example, spent $431,736 during that period.

Deloitte says it goes further than other companies in disclosing its employees’ contacts with state officials to discuss possible business. In recent years, the company has simultaneously registered as many as three of its top consultants as lobbyists in Massachusetts.

One of those consultants, Michael Marino, oversaw Deloitte’s Massachusetts government work while the firm won contract after contract. Recently relocated by Deloitte to Raleigh, N.C., Marino did not appear at a State House hearing in October, where he had been asked to testify on Deloitte’s troubled technology projects. He did not respond to requests for comment.

Marino’s successor, Mark Price, defended the firm’s work at the hearing. He said publicity about recent problems unfairly overshadowed Deloitte’s successes in Massachusetts and elsewhere, including some national awards the company has received.

The governor is seeking approval for $800 million in borrowing to finance more technology spending. In October, state representative Antonio Cabral, a New Bedford Democrat who chairs the House Committee on Bonding, added an amendment to the bond legislation to create a seven-member commission to investigate how the state’s technology contracts are awarded and managed.


But Patrick administration officials convinced House leaders to kill the measure and replace the commission with a consultant, according to a lawmaker and legislative staffer briefed on the matter. They asked not to be named because of the sensitivity of the process.

Alex Zaroulis, a spokeswoman for the office of Administration and Finance, said the agency supported the change to a consultant because “it provides a streamlined approach to delivering a thoughtful report on a very tight timeline.’’

Patrick administration officials say they have been working behind the scenes for a year to improve the way IT is procured. As old contracts expire, “we will be rebidding services under a new model, which will create more competition and disqualify underperforming vendors,’’ said Jesse Mermell, a spokeswoman for Patrick.

That new model is scheduled to take effect in July.

Beth Healy can be reached at beth.healy@globe.com. Megan Woolhouse can be reached meghan.woolhouse@globe.com.

 Correction: Because of a reporting error, an earlier version of this story mischaracterized the circumstances under which the firm originally lost out on an unemployment claims contract. Deloitte lost to a higher bidder.