By Yuka Hayashi

WASHINGTON -- A federal small-business pandemic emergency loan program that has been criticized for delays and fraud has focused attention on the role of a small consulting firm that earned nearly $800 million in fees and subcontracted the work to a unit of the nation's largest mortgage lender.

Federal government contracting records show the Small Business Administration has awarded at least $770 million to RER Solutions Inc. of Herndon, Va., to process loans and grants for small businesses affected by the coronavirus pandemic under the SBA's Economic Injury Disaster Loan program, or EIDL. That is a steep increase from a $10 million contract the company initially signed with the SBA in 2018.

The bulk of that loan-processing work was then subcontracted to Rocket Loans, a unit of lending giant Rocket Cos., which also owns Quicken Loans, according to both Rocket and federal officials, though its name doesn't appear in any of the publicly available documents on the federal contracts awarding the work to RER.

Under the EIDL program, more than 3.6 million loans worth $188 billion have been issued to date since the pandemic, in addition to $20 billion in grants to 5.8 million companies, according to the SBA.

The SBA is the administrator of the program, which is separate from the SBA's better-known $670 billion Paycheck Protection Program, where banks and other financial services companies act as intermediaries in assessing applicants and processing loans.

Groups representing small businesses say the EIDL loan program has been plagued by delays. Karen Kerrigan, who heads Small Business & Entrepreneurship Council, an advocacy group, told House lawmakers in June the execution of EIDL went badly, leaving hundreds of thousands of small-business owners "demoralized, confused and angered." She says the program has improved since.

The EIDL program also came under criticism from the SBA's inspector general, which in a July report cited "pervasive fraudulent activity," pointing to more than 5,000 instances of suspected fraud from banks where EIDL funds were deposited in customer accounts.

The IG estimated that about $250 million in loans and grants have gone to businesses that could be ineligible.

Errin Green, chairman and chief executive of RER, declined to comment.

A spokesman for Rocket Loans confirmed the company has been working with RER since 2018, the year RER was first awarded a contract for processing EIDL loans. The program expanded dramatically as small businesses reeled from the economic impact of the pandemic.

"At a time of great need, our team responded quickly to assist the SBA in overhauling the pre-existing EIDL lending platform, which allowed the administration to process an extraordinary influx of applications," spokesman Aaron Emerson said in a statement. The company declined to comment on how much it has earned through its subcontract.

The work being done by both companies has attracted congressional scrutiny. The House Select Subcommittee on the Coronavirus Crisis, along with the House small business panel, have been reviewing the RER contract.

"Recent reports about the EIDL program raise questions about whether RER Solutions and Rocket Loans have provided adequate services to SBA and the millions of small business seeking EIDL funds," Rep. James Clyburn (D., S.C.), chairman of the select panel, and Nydia Velazquez (D., N.Y.) wrote in a letter to SBA Administrator Jovita Carranza on July 30.

Sen. Josh Hawley (R., Mo.) said in a June letter to Ms. Carranza that many of his constituents were "waiting for months now, with no updates" about the status of their applications, calling the delays "unacceptable."

RER Solutions was originally given a $10 million contract by the SBA in 2018 to upgrade the EIDL program as loan demand rose following the 2017 hurricane season. It was awarded the contract under the SBA's 8(a) program designed primarily to assist small minority-owned firms.

The agency requires such firms to perform at least 50% of personnel costs stipulated in a contract. RER, which has 40 employees, is certified as an "economically disadvantaged" firm, according to Dun & Bradstreet Corp., a data company.

The SBA contract is by far the largest RER has received. In the 10-year period ending in fiscal 2019, the company had received federal government orders totaling $62 million, according to USAspending.

As of June, the firm's arrangement with the SBA was ranked the eighth largest of all federal government contracts used in pandemic response, according to the General Accounting Office.

To help meet their goals to hire disadvantaged firms for federal contracts, agencies encourage contractors to work with large firms serving as subcontractors, said Steven Schooner, an expert on government procurement law at George Washington University Law School.

The SBA's Ms. Carranza on April 17 approved raising the RER's original $10 million contract to $600 million -- without competitive bidding -- as millions of EIDL applications flooded in.

In an SBA internal document justifying the contract modification without open bidding, senior SBA officials said that without such an increase, the SBA would "suffer serious injury" and negatively impact "millions of Americans and the economy as a whole." They also said outsourcing saves the cost of hiring thousands of workers. The document was posted on GovTribe, a private database on government contracting.

Ms. Carranza in August approved further increasing the contract's potential limit to $850 million, of which $770 million has already been approved for payment to the company.

RER and Rocket declined to discuss the terms by which Rocket took on the bulk of the work. In an appearance before a House panel last month, James Rivera, SBA's associate administrator for disaster assistance, said RER's partner -- which he didn't identify by name -- had taken over much of the loan underwriting process, including analyzing borrower data and using its lending portal.

"This work has been crucial in allowing the agency to approve more than 3.5 million loans and 5.7 million advances through its EIDL program," said the Rocket spokesman.

In expanding the RER contract, the SBA relied on a tool known as an "indefinite delivery, indefinite quantity" contract, or IDIQ, which allows agencies to award an unspecified amount of future work to a contractor during a fixed period. The contract was originally awarded to RER through open bidding in 2018, and designed as a one-year contract renewable for the next four years, with a potential maximum order limit of $100 million.

Authorities on government contracting say such expansions are common in points of crisis, but also raise the potential for problems.

"These are the ones that carry the most risk, because you are not competing," said Trevor Brown, professor of public management at Ohio State University.

Write to Yuka Hayashi at yuka.hayashi@wsj.com