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Managing Billions in City Contracts

by Glenn Pasanen, Nov 15, 2007
 In the fiscal year that ended June 30, 2007, the City of New York completed over 50,000 procurements worth a total of $15.7 billion. Through contracts and purchase agreements with 49,674 for-profit and non-profit vendors, the city used this enormous sum to buy goods and services and undertake capital projects. In human services alone, the city in 2007 had contracts worth $3.8 billion with various firms.

In addition, the city contracted for $3.5 billion in construction services, $3.7 billion in so-called standardized services (security, transportation, food services, etc.), $3.4 billion in professional services (legal, accounting, auditing, consulting, etc.) and $1 billion in goods. This information comes from the Mayor’s Office of Contract Services latest report, Agency Procurement Indicators for Fiscal 2007.

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The contracting report was previously part of the semi-annual Mayor’s Management Report, but under Mayor Michael Bloomberg it has become a stand-alone document that gets even less attention than the MMR (see the October Finance column). One reason for its obscurity is that, like recent management reports, it is essentially a collection of statistics and program descriptions. Another is that it has even less analysis of management matters than the Mayor’s Management Report. Arguably, only three of the contract report’s 99 pages measure recent performance over time.

Worse, one of the two measures of performance celebrated in the three pages – the timeliness of human services contracting – is contradicted in several instances by statistics published by the city comptroller’s office, the office that, under the City Charter, registers contracts.

The other positive performance indicator – evaluations of service contracts – is cryptic. It notes that only 47 of 4,603 vendors evaluated – 1 percent -- were deemed unsatisfactory. Another 138 vendors (3 percent) were deemed in “need of improvement.” Thus 96 percent of all vendors evaluated performed satisfactorily or better in 2007. That’s all we get, since agency-specific evaluations were dropped from the report after 2005.

What the Report Says

The bulk of the contract report describes recent and forthcoming projects, including preliminary efforts to expand opportunities for businesses owned by minority-group members and women and for environmentally friendly purchasing.

It also throws a spotlight on new major areas of city investment:

--Technology, where the city plans to put out over $1 billion in contracts to develop a citywide mobile wireless network and citywide local and long-distance voice and data telecommunications services for all city agencies.

-- Solid waste management, where the report cites over $1 billion of recent and future contracts for truck purchases, disposal and new facilities.

-- The mayor’s ambitious PlaNYC2030 for a more environmentally sustainable city.

All of these programs underscore the fact that big contracts dominate the procurement system: The biggest 25 contracts represent about half of the $15.7 billion of procurements. The top seven contracts in 2007, for instance, each ranged from $500 million to $1.2 billion.

What the Report Does Not Say

These new programs raise an old question: How do we measure results? As presented in the report, there are no publicly announced base lines for big new, or old, investment programs, no specific performance goals, no performance measures for these huge dollar commitments. Yet the need for such performance indicators is reflected in the trouble the city has had fulfilling technological goals in a social services information system and improving police/fire communications, as cited in the 9/11 Commission Report.

The one section of the report that attempts to measure recent performance looks at the timeliness of contract registration. Without prompt registration, providers cannot get paid, and delays can be a sore point, particularly for non-profit organizations. But the performance methodology is narrow. A table in the appendix looks only at one year, and the text offers only few comparisons to the previous year. This ignores the five-year data in the Mayor’s Management Report.

In addition, the timeliness information in the contracts report is inconsistent with the results of similar measures used by the comptroller. The contracts report analyses retroactive contracts – those where the start date for services comes before the contract is registered -- at six human service agencies: aging, youth and community development, children’s services, homeless services, health and social services. According to the contracts report, the Department for the Aging for the second straight year had no contracts that were more than 30 days late. But the comptroller’s report says that 99 contracts – or 32 percent of the agency’s total -- were registered more than 90 days late in fiscal 2007.

Similarly, the contracts report says only 34 percent of contracts in the Department of Youth and Community Development were retroactive in 2007. But the comptroller says 76 percent of all youth department contracts were retroactive in 2007, and 87 percent of those were late for more than 90 days.

At children’s services, the results are much more positive. The comptroller says only 7 percent of children’s services contracts were retroactive, down from 32 percent in 2005. In this case, the contracts office records a higher percentage (16 percent) of retroactive contracts in 2007.

In another comparison more favorable to the city, the comptroller’s report notes a lower percentage (27 percent of late contracts in homeless services in 2007 than does the contracts report (53 percent) does

The inconsistencies between the findings of MOCS and comptroller reports are perhaps most troublesome in their recordings of the average number of days retroactive contracts were late in 2007: MOC says the range was 17 days late at the aging department to 107 days late in the health department) the comptroller says the range was 140 days (homeless services) to 230 days (youth).

Retroactive contracts in all six agencies are late by an average of 52 days, according to the contracts report, 196 days, according to the comptroller. In other words, with some exceptions, the comptroller paints a much bleaker picture of agency management than the Mayor’s Office of Contract Services.

A Case in Dispute

With so little information available about how city agencies deal with contractors, it’s useful to look at the city comptroller’s most recent audit of an agency’s management practices. The comptroller’s audit of the department’s oversight of the Ferry Point golf course project in the Bronx finds many deficiencies in its management system. Although it is only one, rather small vendor deal (less than $10 million of city funds originally), the problems raise questions about oversight and management that are ignored in the Office of Contract Services report.

The $22 million privately funded project, on the site of a former landfill, was conceived during the Giuliani administration in the late 1990s, but most of the project has evolved during the Bloomberg administration. The city entered into an agreement with a firm that would build the golf course.

The city agreed to pick up the costs of correcting the environmental problems at the site, up to about $8 million. The audit argues that the city mismanaged oversight of the project, overpaid for reimbursements to the concessionaire (Ferry Point Partners) by nearly $6 million, lost more than $3 million in anticipated revenue and permitted a construction company to get fees from acquiring fill for the golf course that could have produced as much as $10 million for the city.

The city recently canceled the agreement with Ferry Point Partners and the project, originally slated for completion in January 2003, remains unfinished.

The parks department has rejected most of the criticism in the audit. “The audit reflects numerous errors in both fact and law and a fundamental misunderstanding of a highly complex project and its associated regulatory permitting process,” commissioner Adrian Benepe said. The commissioner blamed the state department of environmental conservation for much of the delay.

In an unusually testy exchange, the comptroller’s auditors repeated many of their original charges. “The [parks] department’s response attempted to obfuscate the serious issues raised in the report,” the office said. ”Clearly, the department has failed to understand the salient conclusion of this audit report – that the department has not properly overseen and managed the administration of the Ferry Point concession.”

The most serious charge in the audit is that there was no effective management system. The report says, specifically, there was no scope for the remedial work to be done on the contaminated site, no breakdown of the costs of remediation, no written procedures for oversight and no full-time project manager for the oversight work. The administration rejects all these charges.

The volatile exchange between the comptroller’s audit office and the parks commissioner underscores how little the Mayor’s Office of Contract Services report includes that would help measure performance. Glenn Pasanen, who teaches political science at Lehman College, has been in charge of Gotham Gazette's finance topic page since 2001. 




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