Gotham Gazette

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Promising Projects Faster and Cheaper, Adams Administration Pursues Capital Construction Reforms

Mayor Adams hails housing construction (photo: Ed Reed/Mayoral Photography Office)

New York City’s infrastructure construction process is broken and Mayor Eric Adams wants to fix it. 

The city’s capital budget funds infrastructure projects across the five boroughs, including new construction, maintenance, and repairs to everything from parks, schools, hospitals, and libraries to mass transit, sewers, courts, jails, police precincts, and more. But as New York City is in desperate need of sweeping infrastructure upgrades, there’s broad and begrudging acceptance that capital projects are inefficiently managed, leading to years-long delays and millions, if not billions, in cost overruns.

Having been elected in part on promises to fix how city government functions, Mayor Adams is attempting a comprehensive effort to reform the capital process through a series of internal improvements and a package of proposed state legislation that the administration projects would cut years off project timelines and save tens of millions of dollars each year. Some experts, however, question whether the proposals will make the kind of change that's really needed to deliver more projects more efficiently, considering that the city’s capital budget is roughly $16 billion annually. 

The mayor’s preliminary budget proposal released in January includes a ten-year capital strategy of $159.3 billion, the largest-ever allocation in the city’s history. It includes $31.3 billion for transportation infrastructure, $29 billion for environmental protection, $18.7 billion for housing preservation and development, $17.2 billion for education and school construction, $8.8 billion for parks and recreation, $6.3 billion for resiliency and efficiency, $6.1 billion for economic development, and $3.8 billion each for health and hospitals and sanitation, and $34.3 billion for other purposes. The city is also expected to receive billions of dollars in federal infrastructure funding from the $1.2 trillion Bipartisan Infrastructure Law, which will send New York State $27 billion overall.  

While the capital budget grows every year, so do the delays and costs associated with it. An independent portal launched in 2021 by a group of civic technologists, led by Devin Balkind, a former candidate for public advocate, showed the extent of delays and cost overruns for the city capital projects. Out of 5,095 projects analyzed, 2,950 were over budget, 2,871 were running long, 983 were starting late and 3,117 were ending late. Originally projected to cost $86.7 billion altogether, the projects had ballooned to an estimated $141 billion, $54.7 billion over budget.

Last year, in April, Adams created a Capital Process Reform Task Force, led by then-First Deputy Mayor Lorraine Grillo, which included Comptroller Brad Lander and stakeholders from the construction industry, labor unions, Minority- and Women-Owned Business Enterprises (M/WBEs), and others. That task force issued an initial set of 17 recommendations in October, followed by another 22 proposals in its final end-of-year report, released January 4. 

“There is a covenant between government and the people of our city: New Yorkers pay taxes, and they expect that we deliver for them. For far too long, we have betrayed taxpayers when it comes to building public infrastructure,” Adams said in a statement accompanying the report’s release. “Now is the time to overhaul the slow and expensive process we go through to build public facilities so we can ‘Get Stuff Done’ for all New Yorkers — reconstructing streets, repairing bridges, bringing water to people’s homes, creating parks and libraries, and more. I am proud that our administration is advancing these recommendations today and look forward to advocating for needed changes at the state level in the upcoming session in Albany.” 

In all, the task force’s 39 recommendations include 30 internal reforms that are within the power of the Adams administration and 9 legislative proposals that will require state approval. 

“I have devoted my career to bringing New Yorkers the best public assets possible, but the existing capital process has not made it easy,” said Grillo — now the former first deputy mayor who previously led the city’s School Construction Authority (SCA) and Department of Design and Construction — in a statement when the report was released. “The task force’s 39 recommendations represent a real reform agenda, backed by the experts in the industry, and I am confident that the support of these leaders with different vantage points will translate into achieving real change.” 

Administration officials said in a background briefing that the proposals will altogether modernize and streamline the capital process, cut redundant regulations, speed up projects and maintain accountability. They emphasized that though many of the current rules in place were originally well-intended – to ensure adequate oversight and prevent corruption and misuse of public funds – they have become barriers to an efficient capital process. Eliminating some of those rules, just as the state did during the covid emergency, will not completely do away with safeguards, they said, since oversight mechanisms continue to exist even in emergency situations.

Comptroller Lander also echoed that point. “This is a problem of a system that over time has gotten calcified by far too many bureaucratic steps, many of which were adopted for thoughtful reasons at the time, but which have collectively proved to be just extraordinarily slowing weights on the system,” he said in a phone interview. “Part of the challenge, that means, is that there's no silver bullet, no easy fix — there's a lot of steps that have to be taken to transform the system.”

When Lander was a member of the City Council, he successfully sponsored legislation that was approved in 2020 to create an online capital projects tracker to allow the public to view progress of projects across the city. That tracker is set to launch this Spring, and may be the most crucial aspect of the reform agenda, Lander said. “Today, we would not be able to meaningfully measure the timeliness or expenditure of projects from start to finish – essentially what it was expected to cost in the beginning and how it’s shifted over time, across agencies in a comparable way,” he said. 

After the tracker and the reforms are implemented, however, “I think we can save billions of dollars and I think we could probably cut 20% off the time that projects take,” he predicted. 

“This is arguably the least sexy issue in public policy but one that is so well-positioned to help New York City for the long-term,” said Eli Dvorkin, editorial and policy director of Center for an Urban Future, a nonprofit urban policy think tank. CUF’s landmark infrastructure report, “Caution Ahead: Overdue Investments for New York's Aging Infrastructure,” from March 2014 helped shape the ongoing discussion around the city's infrastructure woes, and the think tank has issued several follow-ups that point to solutions, including a recent report in 2021.

“This has been a problem decades in the making, with a combination of challenges of the city's own making, and barriers or issues that stem from state law and rulemaking,” Dvorkin added. “And the combined effect is a capital construction process that costs hundreds of millions of dollars more than it should and takes months, if not years longer than it should.” 

Many of the recommendations are technical, but in sum the Adams administration believes they would have an enormous impact. 

Specific Recommendations
Among the state proposals are changes to procurement and M/WBE policies, insurance, and alternative delivery methods. They would allow the city to solicit electronic bids instead of paper and allow the Procurement Policy Board to issue public notices instead of requiring a public hearing for a project, which is currently set for procurements above $100,000 and adds about three weeks to the process. 

Other proposals would enhance support for M/WBE contracting by increasing the M/WBE small purchase threshold from $1 million to $1.5 million (which allows contracts to be awarded without a competitive bidding process beholden to other laws), on par with public entities like the MTA. Another bill would expand M/WBE mentorship programs, currently run by the School Construction Authority and the Department of Design and Construction (DDC), to all city agencies.

Another two bills would make it easier for M/WBEs and smaller contractors to obtain insurance for projects, which is otherwise exorbitantly costly.

In 2019, seven city agencies were given design-build authority, which combines the design and construction procurement processes into one, lowering cost and time. Under a new proposal, the city is now pushing for what the industry calls progressive design build, which allows even earlier collaboration between city agencies and design and construction firms, and improves the speed and design of projects. 

The city is also pushing for two project delivery models – Construction Manager-Build and Construction Manager-at-Risk – that are only currently allowed during a state of emergency. The models were crucial to projects during the pandemic, allowing DDC to build COVID-19 testing facilities in “an average of seven days with 55% M/WBE utilization” and “three permanent healthcare facilities in an average of 192 days with 46% M/WBE utilization,” according to the task force’s report.

These “alternate delivery methods” have also been utilized more recently in the building of the city’s controversial Humanitarian Emergency Response and Relief Centers (HERRCs) to house thousands of migrant asylum seekers who have arrived in the city over the last year. 

Arguably the most important reform the city is seeking is converting the Department of Design and Construction from a city agency into a public authority like the SCA, under the purview of the state Public Authorities Control Board. That move would reduce bureaucratic red tape for the body, cut down on redundant oversight, and streamline projects without sacrificing transparency and accountability, according to the city officials who spoke to Gotham Gazette. 

The administration expects that some of the state legislation will require a home rule message from the City Council. "The Council is a valued partner and we hope they will play an important role in advancing this reform agenda. The determination of which bills are flagged for home rule is entirely up to the Legislature through their respective home rule counsels," a City Hall spokesperson said in an email. 

Along with the state proposals, the internal reforms include a series of technical changes that would ensure that projects begin quicker, more projects fall under already standardized rules, contractors are paid faster, M/WBEs can be placed on pre-qualified lists for certain types of projects, invoices are standardized across city agencies, invoices are efficiently tracked, and more. 

Potential Impact
“There are really practical, concrete recommendations in there…and if they are implemented, they will be, in my view, highly effective in making progress on both the cost overruns and the exorbitantly long timelines for these projects,” Dvorkin said.  

“When you look at the procurement reform process, cutting red tape, streamlining approvals, it's a no-brainer,” said Carlo Scissura, President and CEO of the New York Building Congress, a membership association of the construction industry. Scissura and his fellow industry leaders have advocated for capital reform for years, and are optimistic about the reforms proposed by the Adams administration. 

“It's an impact on not just construction and the trades. It’s on everyday New Yorkers,” he said. “It takes too long to build a wing on a hospital or a sewer line or a road. It is hurting everyday New Yorkers.”

Currently, under state law, the city is required to award contracts to the lowest bidder, which the administration is trying to change under one of its proposals. Though it seems counterintuitive – awarding higher bids that could cost more – experts say that the lowest bids are not always the most efficient, since firms with more experience and expertise may be rejected because of costlier bids. “If you look specifically at design-build, it can't always go to the lowest bidder,” Scissura said, 

One key part of the internal reforms is to make it easier and quicker for government and contractors to handle change orders, which can often delay projects that are underway and make them costlier in the process.

“New Yorkers would benefit from having parks and libraries that are offline for shorter periods of time, and they come back better than ever, faster than ever,” Dvorkin said. “I mean, these are really meaningful improvements in the lives of everyday New Yorkers.” 

Members of the City Council have spent years attempting to reform the capital budget and construction process. Staten Island Council Member Joe Borelli, the Republican minority leader, introduced legislation last year that would increase transparency around capital projects, their costs and timelines, after being frustrated by the previous administration’s failure to address inefficiencies in the capital process. When he introduced the bill, he cited the construction of a bathroom (comfort station) in Seaside Wildlife Nature Park – a project that he secured for his district and which was meant to cost $6 million, but saw its projected costs increase to more than $10 million. “This has come to a critical point, where so much of our capital debt is going to pay for projects that exist only on paper,” he said in a statement to Gotham Gazette, when asked about the Adams administration’s reform proposals. “We have paralyzed ourselves and this reform is badly needed. Full speed ahead.” 

Council Member Shekar Krishnan, a Queens Democrat who chairs the Council's parks committee, has taken his own targeted approach, proposing a new Parks Construction Authority, modeled on the School Construction Authority, to reduce delays on parks projects. The proposal is part of his five-point plan to improve and maintain parks, plant more trees, make waterfronts more accessible and upgrade playgrounds across the city.  

Citizens Budget Commission, a nonprofit watchdog group, has spent years arguing for capital process reform. CBC’s Ana Champeny, vice president for research, and Sean Campion, director of housing and economic development studies, praised the Adams administration for addressing the big-picture issues and the nuts and bolts reforms together. “It's a nice balance in that way,” Champeny said. 

Campion noted that the city showed that it could deliver on projects when it received emergency authorization during the pandemic, as DDC officials highlighted. And that could help the city’s argument for other reforms presented to the state. “They've had some track record of getting this authority and using it…,” he said. “I think as you see the progress from some of what's already happened, it may give some momentum to some of the other stuff.”

Champeny expressed concern over what she called an unexpected proposal to make DDC a public authority. “I think it's sort of an interesting idea that would require more details…to figure out if that’s really the best way to address some of the challenges that the city is facing,” she said, noting that public authorities like the School Construction Authority and the New York City Housing Authority (NYCHA) aren’t as transparent about their budgets as city agencies. 

“I think, for us, the main thing is not doing this merely to sidestep the procurement rules which the city has, which, yes, they are onerous, but many of them are also put in for some very valid reasons,’ she said. 

Campion and Champeny did make several recommendations as well. They noted that the reform report did not address the city’s scaffold law, which contributes to higher costs. And they urged the city to be more transparent about reporting on agency performance and tracking capital project delivery. “It's not that it's something they omitted, it's something that I would like to see more of a focus on,” Champeny said of the tracking process. 

Stephen Smith, executive director of the Center for Building in North America, a research nonprofit he founded last year, said that “tens of millions of dollars every year” are paltry savings for a capital budget that runs into tens of billions every year. “They don't seem to have any faith in their own ideas,” Smith said in a phone interview. “Tens of millions is so low that it's totally swamped by just ordinary inflation…Whether they actually save any money or not, it's impossible over the next few years to go back and look and see if it is, because what they're claiming is being overwhelmed.”

“They're claiming that they're going to do it imperceptibly faster, imperceptibly cheaper, which, well, it's not perceptible so no one can really judge them on it. But fundamentally, it seems like they've given up before they’ve even started,” he added. 

Smith was particularly not convinced by the proposal to establish DDC as a public authority. “Public authorities in New York have the same exact issues. The Port Authority, the School Construction Authority, have all of the same issues if not worse, so on its face, I don't see why that would change anything,” he said. 

Smith did share the criticism that others have levied, that state rules have made the capital process overly onerous for contractors, effectively limiting competition in the public contracting field. He also cited the scaffold law and noted its exclusion from the administration’s proposals. “Quite obviously,” he said, “they're not proposing anything that is going to substantially alleviate the compliance burden of working for government, especially.”

Smith said that a key part of the problem is Adams’ administration being staffed with too many top officials who have been in city government for many years, overseeing the very problems they are now supposed to solve. “So I don't know what would change things,” he said. “That's like a big, difficult question, but I would say probably start with new leadership.”

by Samar Khurshid, senior reporter, Gotham Gazette

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