Public Employee Press

Making progress
Reining in the waste of contracting out
Part one in a series on DC 37's campaign to bring good government to New York City

By GREGORY N. HEIRES

For DC 37 activists, March will be a good time to run a victory lap.

There's still a long way to go in the union's battle to save jobs and tax funds from unbridled contracting out, but the amended Local Law 35, which should curb the practice, takes effect in March.

The City Council's 48-0 enactment of the law in December over Mayor Michael R. Bloomberg's veto represented a milestone in the union's long campaign to draw public attention to the waste, inefficiency and corruption in the city's contracting out.

"We have hammered away on this issue for nine years," DC 37 Executive Director Lillian Roberts said. "The union has played an important role in exposing the waste and corruption - and we have offered solutions."

"We are not where we want to be yet, but we have succeeded in making privatization a central issue in the debate over public policy," said DC 37 Associate Director Henry Garrido, who heads the union's project on limiting contracting out and increasing city revenue. "The city has begrudgingly recognized that privatization has its problems, and it has conceded that keeping work in-house has its advantages."

"The revised law reflects the public's growing concern that their tax dollars are not being used properly," said DC 37 Political Action Director Wanda Williams, who coordinated the lobbying effort to pass the bill. "The City Council heard our message that this legislation is important for protecting the public purse and public service workers."

The amended law tightens oversight of city contracting and closes loopholes that let the city evade the old law. It protects civil servants by requiring the city to perform cost analysis on major contracts, and it allows municipal employees to submit alternative proposals.

Looking back, DC 37 Associate Director Oliver Gray said he believed the union's research and political action have succeeded in focusing the debate about contracting out on good-government practices, rather than just the union's interest in protecting members' jobs.

DC 37 began the campaign shortly after Roberts became executive director in 2002.

The union-with its hands already full with important bread-and-butter issues, such as grievances, layoffs, contract negotiations and politics-persisted with the campaign while its recommendations fell on the deaf ears of the administration. But little-by-little, the issue captured the attention of the media and political insiders. Then, when the CityTime scandal exploded, contracting out became front-page news.

Contracting out corruption

The cost of the automated payroll project had already mushroomed from $63 million to over $700 million when the federal Dept. of Justice charged a dozen City-Time consultants with bilking the municipal project out of $80 million. The work is now being turned over to information technology workers represented by Electronic Data Processing Employees Local 2627.

"CityTime really raised public awareness about contracting out," said Local 375 Secretary Jon Forster, who years ago helped expose problems with the project.

"Contracting out has now become an issue we can use at the bargaining table," he said. "The city can no longer credibly take the position that it can't afford to compensate its employees fairly, not when there is this checkered history of wasteful spending and corruption, not to mention uncollected revenue, all of which we have pointed to."

Not long after the CityTime indictments came down, former Deputy Mayor Stephen Goldsmith wrote an op-ed column that recognized the value of keeping work in-house and admitted that civil servants often have the institutional knowledge and skills to do many jobs more efficiently than outsiders.

That concession was quite significant, because Bloomberg had hired Goldsmith partly on the basis of his record of contracting out as a Republican business-minded mayor of Indianapolis.

"People are more skeptical now about contracting out," said Elliott Sclar, a professor at Columbia University who has studied privatization extensively, written a book on the economics of privatization and advised unions. "But there is still a long way to go. The forces are still aligned with the other side," he said.

"The union's campaign on contracting out has been very effective," City Council member Charles Barron told PEP. "It put the issue on the front burner." Barron was one the five council members who spoke in favor of strengthening Local Law 35 before the City Council voted Dec. 8 to override Bloomberg's veto.

"The white papers are a salvation," said Barron, who called controlling contracting out and progressive taxation key public policy tools for addressing New York City's perennial deficits. "The white papers are a prescription for cutting back on contracts and taking a more fair and balanced approach to the budget."

The union started the campaign on contracting out in 2002 with a report on the city's "shadow government" of unaccountable consultants with bloated salaries. A series of other white papers followed. "Massive Waste in a Time of Need" showed how the city could save hundreds of millions of dollars by eliminating wasteful contracting and bringing work in-house, and "Public Health Care Under the Knife" analyzed the consultant-driven restructuring plan at the Health and Hospitals Corp. and suggested alternatives to downsizing and contracting out.

Besides issuing white papers, fighting contracting proposals and protesting at budget hearings, the union spread the word in public forums last year. Garrido and Williams organized a hearing on contracting out and waste and a second hearing on the city's uncollected revenue. In December, the union held a briefing on both subjects for the city's Congressional Delegation.

While the fight against contracting out continues, the research has led to concrete progress, helping the union convince the Dept. of Housing Preservation and Development to cancel a cleaning contract; the Dept. of Education to bring pest control work in-house; and the Health and Hospitals Corp. to scale back some contracting-out plans. More than 300 computer consultants have been moved into positions represented by Local 2627, and the cancelation of contracts with temp agencies has prevented the possible layoffs of hundreds of clerical workers.

The mayor's ideological rigidity

Comptroller John C. Liu worked out an agreement with the Bloomberg administration to eliminate millions of dollars from the CityTime contract and have city employees take over the work. The comptroller negotiated $93 million in savings on information technology contracts and tossed out a $2.7 million contract for computer services with a company overseen by former Schools Chancellor Joel Klein.

As a result of contracting scandals like CityTime, "There has been a trickle of hiring and some in-sourcing, but the people they've brought on are provisionals without job security who haven't been given the opportunity to take civil service exams," said Local 2627 President Robert Ajaye. "Unfortunately, Bloomberg continues to be totally committed to privatization. He's only stopped when unions and others fight him on privatization schemes."

The Dept. of Education's decision to lay off 642 low-paid school employees last year was a bitter reminder of how reckless and ideologically-driven contracting jeopardizes the work and jobs of public employees. The Dept. of Education accounts for more than half of the city's $10 billion spending on contracts each year. The union believes that the DOE could have avoided the layoffs by eliminating waste in its contracting budget and accepting suggestions for productivity improvements.

Last year, Roberts wrote Bloomberg to demand that funds recovered from illegal contracting schemes like CityTime should be used to rehire laid-off workers.

"Because of all the noise we have made, we have brought greater accountability to the procurement process," said Dept. of Education Employees Local 372 President Santos Crespo Jr. He noted that Local Law 35 now covers contracting out at DOE, which will make it easier for the union to monitor privatization there. The union hopes future legislation will provide greater accountability for information technology contracts.

But Crespo agreed with Ajaye that the mayor is the principal obstacle. More substantial progress will only come when a mayor truly devoted to good government practices comes to City Hall, he said.

Institutionally, the union's anti-contracting out campaign has had a positive effect, Garrido said, by encouraging members to get involved.

Garrido's research team has relied heavily on information from rank-and-file activists and local leaders about agency contracting practices. Several of those activists arrived at a November meeting of the Mayor's Office on Contract Services - a little-known municipal body responsible for approving contracts-to protest against $300 million worth of contracts. The committee later rejected $100 million of the contracts.

"Our presence at the meeting was great," said Ajaye, pointing out that the union hadn't come out in force for earlier hearings. "I hope we are going to pick up the volume on this."

Sclar, an economist, applauded DC 37's work. But he said the fight against contracting out will be a long one. Right-wing think tanks have promoted privatization for three decades, and most people still simply assume privatization is cheaper and more efficient than public-sector work, he said.

"Bloomberg is everybody's paradigmatic idea of a competent public servant, but if he can't succeed with privatization, that should give us pause," he said.

"DC 37's effort has shown a bright spotlight on egregious cases of fraud and misspent taxes," said James Parrott, deputy director and chief economist at the Fiscal Policy Institute. "By exposing some of the bad privatization deals and underscoring how public-sector workers in most cases can provide work more efficiently, DC 37 has reinstilled confidence in government and public-sector workers."