Bob Bloom, second-generation owner of Bloom Brothers Supply, stands in his showroom between the clothes washers and an electric heat-pump water heater. Ohio’s rebate program helped him sell 45 refrigerators, 91 dishwashers, 112 washing machines and 12 water heaters in four months, and hire two more workers to help handle the extra business.
A Texas company that administered Ohio’s $11 million appliance rebate program used hundreds of workers in El Salvador to process applications and answer customers’ calls.
Parago Inc. never told state officials that it would handle the rebates from an offshore call center, Lisa Patt-McDaniel, director of the Ohio Department of Development, said.
State officials never asked, either. The state’s application doesn’t specifically require companies to say where call centers are situated.
State officials learned of the El Salvador arrangement on the day the program began, after a customer asked a call center employee where he was and then complained to the state.
“We were very disappointed, and Governor [Ted] Strickland is very disappointed,” Patt-McDaniel said.
“I’ve certainly learned a very important lesson in not asking the question about that call center.”
Several calls and e-mails to Parago and its executives were not returned. In a letter to Patt-McDaniel’s office, the company said U.S. workers would have cost up to $125,000 extra, meaning fewer rebates would have been available.
Patt-McDaniel said her staff recommended Parago after evaluating nine bids, including two from companies in Columbus. “Parago demonstrated best the ability to handle the size of our rebate program with the experience and efficiency that we needed,” for the nation’s seventh-largest rebate program, she said.
Parago received the highest score of the nine companies, and its $171,300 proposal was the second-cheapest.
The Ohio companies, Twenty First Century Communications and Focus on Ohio’s Future, were the most expensive, at $467,238 and $493,763, respectively. Neither company could be reached for comment.
Parago, which dubs itself “the nation’s leading provider of rebate processing services,” has an A+ rating from the Dallas Better Business Bureau.
Parago said in its proposal to Ohio that its data entry facilities employ 379 people, can handle 45,000 calls per day and have “the lengthiest call center hours in the industry,” as well as “complete language support in Spanish.”
Ohio’s rebate program, part of a $300 million U.S. Department of Energy initiative, offered residents checks of $100 to $250 to buy Energy Star dishwashers, refrigerators, clothes washers and water heaters from Ohio retailers and recycle their old appliances.
So many callers jammed the rebate hot line and tried to simultaneously log onto the website the first day that people spent hours trying to get their rebates.
At least one Ohioan who got through to the call center asked the person on the other end, “Where are you located?” The response came back: “El Salvador.”
“We were horrified,” Patt-McDaniel said.
She immediately sent Parago Senior Account Executive Keith Bruns a letter asking the company to “pull your call center from outside the United State as soon as possible and facilitate calls . . . at a call center located within the United States.”
Bruns wrote back a week later, saying that using “near-shore call centers” saves money and lets the state give out more rebates.
“In a program the size of Ohio’s, the cost difference between domestic and near-shore support is estimated to be between $50,000-$125,000. On a $100 rebate, that means that an additional 500-1,250 rebates can be paid out,” he wrote.
At that point, residents had grabbed more than two-third’s of the state’s nearly 90,000 rebates. And state officials couldn’t change the fact that Parago had a signed state contract and no domestic call centers. Morever, all the data for those who had claimed rebates was on Parago’s computers, not Ohio’s.
“To mitigate it would’ve been expensive and would’ve taken away rebates from Ohio consumers,” Patt-McDaniel said. “Because the money was [being claimed] so quickly, it was important to make sure that Ohio consumers” got their rebates.
As rebates go, retailers say Ohio’s program went rather smoothly. With more than 96 percent of the money claimed by 6 p.m. Thursday, less than 12 percent of the 80,502 rebate submissions had been declared invalid.
Parago had issued 51,527 checks as of Thursday afternoon.
“For a government-run program, with all due respect, it’s running very, very smoothly,” said Bob Bloom of Bloom Brothers Supply in Chesterland, who hired two more workers to handle the extra sales. They will keep their jobs after the program ends.
In four months, Bloom sold 45 refrigerators, 91 dishwashers, 112 washers and 12 water heaters.
Gerald and Rhonda Harrison of Cleveland Heights, who bought a dishwasher from Sears and a refrigerator from HH Gregg, said: “We had absolutely no problems with filling out the paperwork and getting our rebate when they said we would. I would not change anything.”
Patt-McDaniel said the rebate program achieved its goals of encouraging residents to upgrade to energy-efficient appliances and spend money at Ohio retailers. Whirlpool expanded capacity and added jobs at its Ohio appliance factories and added a third shift to its workforce, she said.
But U.S. Rep. Steven C. LaTourette, a Republican from Bainbridge Township, issued a news release Thursday after learning of the Parago situation. He said he can’t believe the governor, a Democrat, hired a Texas company that outsourced the work to Central America.
“When you’re talking about taking money from Ohio taxpayers to stimulate the Ohio economy, I would think you would give preference to Ohio companies,” he said.