Bloomberg's Technology Pit
September 29th, 2011
Another day, another disturbing revelation about the city’s handling of its technology contracts.
This time it’s the latest chapter in the scandal involving computers at the Department of Education. The company the department paid $75 million to do technical work on its purchasing, payroll and finance systems – Future Technology Associates — bilked the city out of at least $6.5 million, according to a report by Richard Condon, the city’s special commissioner of investigation.
Among other things, Future Tech set up shell companies and then vastly inflated its claims of how much those companies charged. So the Department of Education was being charged between $55 and $110 an hour for work that actually cost Future Tec $10 to $14 an hour.
Concerns about Future Technology have been circulating for some time.
According to a letter-report from the city comptroller’s Bureau of Audit, given to Gotham Gazette today (posted here), in 2005 the department submitted a request that Future Tech get a no-bid contract. (No-bid contracts at the Department of Education have raised concerns in the past.) “This request appears to have contained inaccurate and misleading statements from FTA, which, if DOE had known, should have precluded FTA from being awarded this contract,” says the report from the comptroller’s office, which went to Schools Chancellor Dennis Walcott and Condon’s office.
The executive director of the department’s Division of Finance “provided an unsupportable vote of confidence for FTA, indicating that it had the ability and integrity to provide the specific services,’ the letter report by Deputy Comptroller Tina Kim says. But, it continues, the department did not do proper research, which would have shown FTA was a new company with “no prior business record by which it could be judged.”
In addition, the reports says, the city did not follow standard business practice in letting Future Tech use Tier Technology employees who were then working as consultants at the Department of Education. And it found Future Tech did not submit time sheets as required by the agreement between the company and the city. Because of this, Kim writes, “we could not verify that time records were accurate and concluded that time records totaling $1.7 million (pertaining only to billing invoices provided) were paid in contravention of the board’s stated policy.”
All of this becomes less surprising than it might otherwise be when one learns, as Juan Gonzalez of the Daily News reminded readers today, that the chief of financial operations during this time was one Judith Hederman, who, investigators say, was romantically involved with Jonathan Krohe, one of the two owners of Future Tech. Investigators in Condon’s office believe that Hederman tipped off Krohe whenever the department seemed to be having doubts about the cost of the project.
Hederman resigned in May.
But Hederman, Gonzalez notes, was not the only department of education official involved with Future Tech. Vincent Giordano, now retired, reportedly engineered the no-bid contract. And when Gonzalez first questioned what Future Tech was up to – noting the company had not track record or even, apparently, an office, Photeine Anagnostopoulos, who was the Department of Education’s chief of operations, defended the company’s arrangement with the city. “Their rates are better than competitive,” she told the reporter. “You don’t have to bid every plumbing job in your house because you know what [the] rates are.
Anagnostopoulos resigned last year, the day after Cathie Black was appointed chancellor.
Condon has referred his findings to prosecutors.
Prosecutors have already turned their attention to another city technology project, the CityTime computerized timekeeping system for city employees. Last December, federal prosecutor charged four consultants to the city with operating a fraudulent scheme that ended up bilking the city of $80 million as CityTime’s cost soared by more than tenfold.
Only a few days before, discussing CityTime on his radio show, Mayor Michael Bloomberg said, “We actually did a pretty good job here, in retrospect.”
And there may be further problems on the horizon. Last week, the Times reported that a $66 million project to computerize city personnel information had already mushroomed to cost $363 million and, according to the Times, “the work is far from done.”
“It was a runaway project,” Raj Agarwal, the city official who once tried to mange it, told the paper.
And in this case, too, there were warning signs about the New York City Automated Personnel System or Nycaps. In March 2003, the administration’s own contract monitors warned, “No sense of economy, efficiency or value is evident in any area of the project,”
On Monday, the City Council announced it would investigate cost overruns on the project, and a number of officials expressed dismay that a major technology project had once again been over budget and underperforming. In additional to probing Nycaps, the council will reportedly consider a bill that would require the administration to tell City Council when a project is over budget – and explain why.By Gail Robinson on September 29, 2011, 4:24 pm
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