Public Employee Press

DC 37 hearing exposes
Massive waste and fraud in contracting out

By GREGORY N. HEIRES
A union hearing exposed the Bloomberg administration's vast waste of taxpayer dollars on contracting out and underscored how the out-of-control use of contractors and consultants threatens the jobs of municipal workers, encourages corruption and damages public services.

Speakers at the Feb. 25 hearing called contracting out a key weapon in the arsenal that anti-government interests are using to undermine public employee unions from Wisconsin to New York.

"We are in a desperate battle to save the middle class in this country," said former Assembly member Richard Brodsky. He charged that the right-wing effort to defund and dismantle government services is part of "a broad assault on the standard of living of working people."

"The rich have gotten together to say, 'We want to get rid of labor unions because they are the only impediment to what we want,' " said DC 37 Executive Director Lillian Roberts. "But we are prepared to do whatever it takes to protect the workers we represent."

Roberts and DC 37 have waged the battle against contracting-out waste for eight years. She called for the hearing in an effort to focus public attention on the waste and build support for reform efforts.

Participants at the hearing, facilitated by DC 37 Political Action and Legislation Director Wanda Williams, expressed deep concern about what's occurring in Wisconsin, which has become Ground Zero in the war against workers. Scott Walker, the state's Republican governor is using a budget crisis caused in part by his own tax giveaways as an excuse to try ending public employees' bargaining rights and gut education and otehr services.

New York City Mayor Michael R. Bloomberg's proposed service cuts and thousands of layoffs could be averted by reining in contracting out and capturing lost revenue, said DC 37 Associate Director Henry Garrido. Much of the pain in Gov. Andrew Cuomo's proposed budget could be avoided by extending the millionaires' tax on wealthy New Yorkers, instead of letting it expire at the end of 2011.

All told, the Bloomberg administration plans to spend about $10.5 billion on more than 17,000 outside contracts in fiscal year 2012.

"We need to make sure our money - the public's money - is used in our best interest," said New York City Central Labor Council President Jack Ahern. The "staggering" amount of money spent on contracting, he said, would be better used for public employees, who can do the work more efficiently and better than consultants.

The union campaign against contracting out achieved a major victory late last year when Comptroller John Liu forced the mayor to agree to give the work on the CityTime payroll project to union members and the Manhattan federal prosecutor charged four of its consultants with an $80 million fraud scheme.

Democracy at risk

For years, DC 37 and Local 375 denounced the long-delayed project to computerize the city's payroll system, where the budget skyrocketed from an initial $68 million 12 years ago to more than $700 million today.

While mainstream media and politicians largely ignored contracting out before, has now become a sore point for the administration and a subject of concern for good government advocates.

Garrido, who heads the union's white paper project on contracting out, said DC 37 has identified at least 10 other scandalous projects like CityTime. He expressed outrage that the mayor refuses to scrap those wasteful contracts while he continues to lay off workers and cut public services.

"Privatization undermines our whole democracy," said Communications Workers Local 1180 President Arthur Cheliotes. "It is an attack on government." Cheliotes's remarks reflected the shared concern of the hearing's participants, who complained that contracting out funnels taxpayers' dollars to unscrupulous consultants and profit-seeking contractors with little or no oversight.

"This is all about scrutiny," New York AFL-CIO President Denis Hughes said. Over the past three decades, privateers and conservative interests have siphoned off vast sums of public monies as they converted government into a source of profit, Hughes noted.

Over its years in office, the Bloomberg administration has shown little concern about the millions of dollars the city wastes on inefficient and even corrupt projects, leaving the union to blow the whistle and stand up for the public interest. DC 37 will continue to push the city to cancel contracts for work that can be done in-house with greater cost-effectiveness, said Garrido.

Jose Davila, director of intergovernmental affairs for Public Advocate Bill de Blasio, blasted the "uncontrolled cost overruns, fraud and waste" in contracting out. The city should assign work to its own employees to save money before considering consultants and contractors, he said.

First Deputy Pete Grannis said State Comptroller Thomas DiNapoli is auditing state and city agencies and public authorities that together have more than 11,000 service contracts valued at over $22 billion. Where appropriate, agencies must limit the use of outside contracts and consultants and do cost-benefit analyses, he said.

"Contracting out doesn't lead to lower costs," said David Kallick of the Fiscal Policy Institute, who cited an FPI study showing that the state spent 30 percent less on in-house Accountants than on outsiders.

Garrido charged that the administration has "thrown the procurement rules into the garbage." The union has uncovered 3,000 contractors who are "bad actors" but still get city contracts and has found that less than half of 50,000 contractual transactions that have occurred under Bloomberg went through a bidding process.

DC 37 will promote good government practices to safeguard public funds, Garrido said, outlining a series of policy recommendations to control the fraud and waste (see box).

City Council Contracts Committee Chair Darlene Mealy and Civil Service and Labor Chair James Sanders, who spoke on a panel with Legislative Analyst Aja Worthy of Letitia James's office, urged the union to work with them to improve the city's procurement policy.

Local 1549 President Eddie Rodriguez said the City Council needs to be more aggressive on oversight. The local's vice president, Alma Roper, said the over-budget and overdue project to merge the city's three emergency communications systems shows how inefficient contractors can be.

DC 37 recommendations on contracting out

Urge contractors to cut their fees by 10 percent. As they grapple with tight finances during the recession, Los Angeles and Chicago have convinced contractors to accept lower payments. Legislation requiring city agencies to disclosure their contracts each year, including the pay of consultants. Tighten safeguards by requiring the city to conduct background checks and not use contractors with records of corruption or ineffi ciency. End the city policy of routinely granting contractors 2.5 percent increases each year. Lillian Roberts called this policy "disturbing and offensive" when the mayor demands that union employees fund their own raises through givebacks.