PEP, April 2010: Union fights growth of contracting out

Three cases exposed by DC 37 and the media demonstrate the pitfalls of doling out projects to contractors for work that union members could do more efficiently:

CityTime

Last month, after looking into contracts for the CityTime payroll system, which he described as an “endless money pit,” New York City Comptroller John C. Liu called for a freeze on city payments.

In 1998, the city budgeted $68 million to com-puterize the Office of Payroll Administration’s timesheet system for 145,000 employees. Now, 12 years later, the project covers only 46,000 workers, but the city’s contract with Science Applications International Corp. to implement the new system has mushroomed to $722 million — a 1,000 percent cost overrun.

“This is contracting run amok,” said Assistant Associate Director Henry A. Garrido, who heads the union’s white paper project on contracting out. “There are more than 300 consultants working on CityTime, and more than a dozen of them make $300,000 each, nearly triple what the most highly compensated city computer workers earn. This is a total waste.”

The city’s contract with Spherion, the company responsible for monitoring the project, is itself an example of the revolving door between government and contractors: OPA Executive Director Joe Bundy formerly worked for SAIC, a military contractor.

Mayor Michael R. Bloomberg has admitted that the long-delayed and over-budget system to replace paper timesheets is a “disaster.” Yet he has offered no plan to repair it.

“This project should be put on hold and be audited,” DC 37 Executive Director Lillian Roberts said.

Emergency Communication Transformation Project

The contracted-out project to revamp the city’s 911 emergency call-in and dispatch system is running $730 million over-budget and two years behind schedule.

Former Dept. of Information, Technology and Telecommunications Commissioner Gino Menchini and his deputy, Larry Knafo, awarded a $380 million contract to Hewlett-Packard to oversee the project. Later, they joined Northrop Grumman, one of H-P’s subcontractors. H-P consultants typically earn $375,000 a year on the project.

School Payroll System

Future Technology Associates has won no-bid contracts to develop a computerized payroll system and upgrade the financial management software system at the Dept. of Education.

The company’s administration is a bit mysterious as FTA maintains mail drop-off offices in Jackson, Fla., and Brooklyn.

The average price of the 63 full-time consultants on its payroll is $250,000 a year, compared with the less than $140,000 it would cost for city workers to do the job. Many of the high-priced consultants are in the United States under H1B guest worker visas. By eliminating contracting waste, DOE could have easily funded the jobs of 500 School Aides laid off last year.

— Gregory N. Heires

Bloomberg raises contract budget

By GREGORY N. HEIRES

With layoffs and service reductions looming, the Bloomberg administration plans to increase its wasteful spending on contractors and consultants next year.

Spending on contracts would increase from $9.2 billion in the current 2010 fiscal year to $9.5 billion in fiscal year 2011 if the mayor’s preliminary budget is adopted.

“It’s distressing to see this administration con-tinuing to spend and spend on outside contracts with no effort to curtail the vast waste in these deals or save money by keeping work in-house,” DC 37 Executive Director Lillian Roberts said. “The excessive use of contractors also denies opportunities for people on civil service lists.”

Last February, the union released “Massive Waste in a Time of Need,” a study that showed how the city could save $130 million by scrapping 10 contracts in eight city agencies.

A year later, despite the glaring examples of waste that have come to light (see article above), the administration has failed to review its 18,000 outside contracts. Yet while the unmet human needs of the city’s population soar, the mayor chooses to increase the giveaways to contractors and consultants by $250 million.

On Feb. 23, the City Council Contracts Committee met to discuss the administration’s procurement policy. At the hearing, Assistant Associate Director Henry Garrido disputed the administration’s claim that it had tightened up its procurement rules.

“It doesn’t matter how good the rules are if you don’t follow through,” said Garrido, who heads the union’s white paper project on contracting out. “In fact, we have seen a proliferation of no-bid contracts.”

Pro-privatization policy

He noted that new procurement rules allow longer personnel and professional services contracts. Such contracts used to be limited to three years, but a change in the rules now allows for seven-year agreements.

Easing city contracting out is a serious concern for the union, because the administration has apparently made a policy decision to shift more human services to the private sector.

When the Administration for Children’s Services laid off over 500 workers last year, SSEU Local 371 President Faye Moore pointed out that the move was driven more by a policy decision to shift work from public employees to contractors than a concern about saving money.

Garrido noted that contracting out is also a major issue at the Dept. of Education.

“We are seeing an increase in no-bid contracts at DOE, where they don’t have to follow the same procurement rules as other mayoral agencies,” he said. “Ironically, a few years ago, when the state approved the law to put public schools under the mayor’s control, they claimed there would be more transparency. But that’s not happening.”

Garrido called for greater transparency and accountability in contracting when he testified on Roberts’ behalf March 4 at a joint hearing of the City Council’s Finance and Contracts Committees.

“Unlike New York State, the city is not required to report how many consultants it has or how many hours they are logging,” Garrido said. “City officials don’t even consider basic business practices, such cost-benefit analyses and cost containment practices.”

Progressive new state laws foster savings through contracting in services previously performed by consultants, he said.

To control costs and increase accountability, DC 37 believes the city should reform its procurement process by tracking how many contract workers it employs and performing cost-benefit analyses on contracts worth more than $1 million.