RE-IMAGINING THE OFFICE OF NEW YORK CITY COMPTROLLER

CONTRACTS AND PROCUREMENT: STREAMLINING NYC’S $10 BILLION PROCUREMENT MACHINE + ROOTING OUT TROUBLED CONTRACTS
Under the Charter, the Comptroller must ensure that appropriate checks and balances are in place to prevent abuses in City contracting. As Comptroller, Scott will ensure that contracts deliver value for our taxpayers, provide the services our citizens depend on, and offer fair opportunities for all who wish to compete for our business. Contracting affects nearly every area of public policy. New York City uses outside vendors to provide a vast array of the goods and services it delivers to New Yorkers. Virtually all public works construction is performed by vendors, as is most architectural and engineering design and oversight work for construction projects. Nonprofit organizations deliver most of the City’s community-based health and human services programs under contracts with City agencies. Many services in City parks — from restaurants, to snack bars and some sports facilities — are operated by outside companies, as are countless other services that use City streets and infrastructure to serve their customers, from cable TV to private bus lines. Consultants provide most of the technology services upon which government depends, and of course, like any major business, the City buys all of the office supplies and products it needs to operate government agencies from outside suppliers. The contracting process touches the lives of every New Yorker, from investments in making our public buildings models of environmental sustainability and to the kinds of shelter, food and services we provide for our City’s most vulnerable residents, to the ways in which we make basic information about our government’s spending and services accessible to the public. All told, New York City procures over $10 billion — through nearly 50,000 new contracts — every year. The Mayor and the agencies reporting to the Mayor have the primary responsibility to select and approve the vendors who receive those funds and provide those services; and the City Council has some ability through its budget and through the oversight process to influence the procurement system as a whole. As Comptroller, Scott will ensure accountability, transparency and fiscal compliance. Through a process called registration, the Comptroller checks each contract to make sure the City has enough money to pay its bills and that corruption has not tainted the award process or the

vendor. Registration is an important tool, but it comes at the end of a long process, when it’s often too late to make fundamental changes. That is why Scott will work with City agencies and the vendor community to correct flaws in the bidding process early on, and root out problematic contract terms before they become the next CityTime. By participating in pre-bidding conferences and working collaboratively with City agencies, he will ensure that the office ensures our City’s contracts meet the needs of New Yorkers. Scott will also appoint knowledgeable experts to the Procurement Policy Board (PPB), to help develop rules to make our contracting process more efficient, fair and transparent. As a member of the Franchise and Concession Review Committee (FCRC), on which Scott has served for nearly 8 years, Scott will bring the same commitment to transparent governance to that often-opaque body. While on the FCRC, Scott has a track record of championing the interests of park users and others who depend on these important awards and will build upon that record as Comptroller. He will also vigilantly pursue the Comptroller’s labor law enforcement duties, to hold vendors accountable for paying their workers all required wages and benefits. Just as Scott fought to expand the use of emerging and Minority and Women-Owned Business Enterprise (MWBE) asset managers in our pension fund, so will he use the Comptroller’s power over procurement to ensure that City agencies are living up to the promise of our MWBE contracting program to ensure greater competition for City contracts and a level playing field for all businesses. Last but not least, Scott will ensure that City contracts and contracting data are made broadly available to the public, with easily understandable reporting tools that make the information accessible. WHY CONTRACTS AND PROCUREMENT ARE IMPORTANT FOR NYC RESIDENTS Contract Registration City agencies must submit all new contracts, as well as all renewals and changes to contracts, to the Comptroller for registration before vendors can be paid. The Comptroller’s Office of Contract Administration performs this function. The Comptroller first verifies that there is money in the City budget to pay for the contract; then the contract is reviewed to ensure that neither the contract award process, nor the vendor itself, has been tainted by corruption. The Comptroller has 30 calendar days to complete this review and either register, reject or object to registration. If the Comptroller believes that there are indications of corruption and rejects a contract for registration, the City Charter still allows the Mayor, if he or she disagrees, to require the

Comptroller to register the contract anyway. If the Mayor disagrees with the Comptroller’s complaint of corruption, the Comptroller has to quickly register the contract within 10 days. In those instances when a Mayor and a Comptroller have disagreed about contract registration, the courts have been clear that the Mayor’s “override” power must prevail, even where the Comptroller believes that there is evidence of fraud. The Comptroller provides an important independent voice for improving contracts and the delivery of City services but faces limits of power with the registration function. As Comptroller, Scott will use the registration power strategically and will collaborate with the City administration not only to find the flaws, but also to find solutions that protect the interests of all New Yorkers. Registration gives the Comptroller critical leverage, bu t it’s equally important to bring a creative, collaborative approach to the table, not just a hammer. As Comptroller, when Scott finds serious problems with a contract at the time of registration, he will, when necessary, urge the Mayor to stop the contract. He will also seek to negotiate changes, such as shortening the length of the contract and conducting a new competition, or changing the terms of the contract to lower its costs. And if the problem is with a particular vendor, Scott will insist that City agencies (including the Department of Investigation, if appropriate) impose tight conditions to ensure that the vendor fully complies with the contract and applicable laws. But it is not enough simply to seek improvements on a contract-by-contract basis during the registration process. As Comptroller, Scott will evaluate the contracts that come through registration on a more systemic basis, identifying substantive errors that often lead to contracts running off the rails with cost overruns, and working to reform the process so that such errors can be prevented before they result in wasted dollars, unfair competitions or shoddy work. While Scott will work with City agencies and City vendors to make the procurement process as efficient as possible, the reality is that billion dollar projects—whether to safeguard the City’s water system or build new schools in communities throughout the five boroughs —are not the sorts of decisions that can (or should) be rushed. As Comptroller, Scott will make sure that his voice is heard, not only at the end of those long and convoluted procurements, but up front when the action begins and key decisions are made. Specifically, he will become involved early in the contracting process by strategically identifying contracts with high impact, participating in pre-bid conferences and working collaboratively with City agencies to develop solutions for better efficiency and performance. Scott will take advantage of newly available information about contracting plans to influence the process. Because of technological advances and contracting reforms sponsored by the Mayor, the two most recent City Comptrollers and the City Council, agencies now post a huge amount of information about their contracting plans on the City’s we bsite. Agencies post lists of planned contracts – for construction projects, concession awards, all types of professional

services and community-based health and human services programs – months and sometimes a year in advance. As Comptroller, Scott will comb through that information early on to identify critical procurements and will then bring the diverse expertise and resources of the office to bear in an effort to ensure that City agencies structure those contracts carefully and correctly. Using the Comptroller’s website, as well as pre-contract bidders meetings and other publiclyopen meetings, he will conduct outreach to vendors and other stakeholders before bid packages and RFPs are set in stone, so that we do not end up wasting years of time and millions of dollars with flawed contracts. In addition, Scott will work with the Mayor’s Office to reform VENDEX, the City’s Vendor Information Exchange System used by City agencies to vet a vendor’s background for problems of integrity and past performance, to reduce the unnecessary burdens of the system for vendors and nonprofits in particular and also strengthen the ability of the system to fully evaluate the responsibility of vendors. . Procurement Policy Board (PPB) The PPB, which is the policy and rule-making governing authority for the contracting process, consists of five members, three appointed by the Mayor and two by the Comptroller. While the Board is thus controlled by Mayoral appointees, the Comptroller’s appointees need not wait and react to the proposals made by the administration. As Comptroller, Scott’s PPB appointees will be aggressive and pro-active in their approach, reaching out to all parties in the contracting process and to civic organizations that track the process, helping craft new rules to solve problems, and working diligently to obtain support from the administration to adopt those reforms. One area that Scott will ask his appointees to focus on will be common-sense reform of the rules for prompt payment to City vendors. After a lengthy contract award process, many vendors face confusion and impenetrable obstacles as they try to secure payments from City agencies to meet their payroll obligations. As Comptroller, Scott will continue to expect vendors to fully comply with their reporting obligations, but will push to make the invoice and payment process as clear and workable as possible, so that payments flow in a timely fashion. City taxpayers know that if we do not pay our household bills on time, the cost of those services goes up and we are at risk for having services cut off. We cannot expect the hard-working vendors who serve City agencies to continue operating when payments slow to a crawl – and we know that delays in invoice and payment practices add costs to everything the City buys. This is a problem that the PPB rules can and should address. In human services, advocates and the nonprofit organizations that provide much-needed services to our most vulnerable residents have worked closely with the administration and the City Council to enact many important legislative and regulatory reforms. But there are still

many instances when the lengthy procurement process creates great challenges for our vendors, especially the smaller community-based organizations whose work is so important to New Yorkers in every neighborhood. As Comptroller, Scott will conduct financial audits to make sure that nonprofit vendors meet their obligations. At the same time, he will seek to streamline the audit process for nonprofits to lessen the burden of compliance and reduce unnecessary duplicative audits for resourcestrapped organizations. In addition, Scott will launch program audits to make sure that City agencies administer their contracts fairly and sensibly, and that those contracts actually meet the public policy objectives they are supposed to fulfill. Scott will work with the Mayor’s Office to develop procedures that centralize financial and program audits while maintaining strong oversight. While the focus must be on ensuring prompt payments to nonprofits, Scott will also work with the administration to expand the “safety-net” protections for nonprofit vendors, such as interest free loans to help them survive contracting delays. Furthermore, he will develop new procurement strategies and rules that will enable organizations that serve new and emerging communities in New York City, such as new and growing immigrant communities, to obtain more City contracts in order to fulfill our mission to serve all New Yorkers. Indeed, the foreign-born population makes up nearly 40% of our city but remain underserved by City government. For example, Asian Americans, 78% of whom are foreign-born, are nearly 14% of the city’s population and have the highest rate of poverty (26.4%) among all racial groups, but less than 1% of City funding goes to social services organizations focused on Asian Americans. We must level the playing field to support nonprofits that are able to meet the needs of all communities. Prevailing Wage In areas like construction work and building services, we must guarantee that the billions of dollars we spend produce good, well-paying jobs for New Yorkers. As Comptroller, Scott will strengthen compliance with prevailing wage and living wage laws. And, to the maximum extent possible, he will take the lessons we learn in individual enforcement cases and apply them to yield improvements in the way the office awards and supervise contracts. Scott will be especially vigilant in enforcing recently strengthened wage protections for building services employees and other workers employed by companies that receive economic development and other financial assistance from the City. Our wage laws are complex and many small businesses, including MWBEs, can encounter difficulties in learning how to meet the City’s expectations. While Scott will insist on strict compliance and will step in to protect individual workers whose interests are harmed, he will also work with individual vendors, and with the advocates and associations that represent their interests, to provide more training and technical assistance to vendors. As with contract

registration, the goal of our labor law enforcement effort cannot simply be “gotcha” grandstanding – our goal will be to expand the pie for workers and businesses, offering more opportunities for new competitors to win contracts and creating good jobs for the New Yorkers who work on those contracts. Transparency of Contracts One of the crucial tools for ensuring expanded opportunity is the City’s new comprehensive subcontracting database. This first-in-the-nation effort to make public all of the information needed to monitor billions of dollars’ worth of work performed by subcontractors, is particularly important as a tool for enforcing the City’s MWBE subcontracting laws. Sc ott will implement this new tool rapidly and effectively, and will engage with all of the procurement stakeholders to use the resulting information to expand opportunities. Finally, Scott will act to make it possible for New Yorkers to actually read the contracts that we use to spend billions of their tax dollars. These documents often require lengthy legal language and attachments. However, we must take steps to make it easier for the public to see and copy the operative provisions of important agreements. As Comptroller, Scott will start by establishing centralized locations, staffed by knowledgeable experts, who can assist members of the public in accessing City contract texts. And he will develop a web-based system to make such documents more fully available to the public, while also enhancing the useful summary information that is available through the Comptroller’s Office “Checkbook 2.0” website. Minority and Women Owned Business Enterprises (MWBE) Contracting New York has by far the most minority-owned businesses of any city in America—over 403,000—accounting for over 40 percent of all businesses in the City and seven percent of minority-owned businesses nationwide. Women-owned businesses account for nearly onethird of all New York City firms. Immigrants are major contributors in New York City’s economy, making up 44 percent of all workers and 46 percent of the incorporated self-employed. Despite the successes of minority and women-owned businesses, they continue to face barriers in the marketplace. MWBEs remain underrepresented in government contracts and disadvantaged by a lack of access to capital and bonding. In an effort to spur economic growth, promote equal opportunity for MWBEs, boost innovation, and combat chronic unemployment in many of our communities, federal, state and local governments across the nation have employed MWBE programs to increase access to government contracts. New York City’s MWBE program—also known as Local Law 129—was signed into law by Mayor Bloomberg in 2005 and updated in January 2013. Nevertheless, despite significant growth in the number of City-certified MWBEs in recent years, we continue to fall short of our goals. In FY 2012, only 881 MWBEs were awarded contracts, totaling a mere 5 percent of the $10.5 billion spent.

Last year, Scott published “Growing Gotham,” a report summarizing the results of a first -of-itskind survey of 500 City-certified MWBEs. As Comptroller, he will build on many of the recommendations outlined in that report, including:     Working with agencies to streamline the process for bidding by both eliminating fees and embracing technology; Partnering with the Office of Small Business Services to bring workshops and other services beyond their offices at 110 William Street in Lower Manhattan to MWBEs in Northern Manhattan, the Bronx, Brooklyn, Queens, and Staten Island; Strengthening agency accountability by assigning each agency with an MWBE grade based on their quarterly reports; and Urging the Mayor to create a Chief Diversity Officer with broad authority to monitor MWBE compliance, promote diversity throughout city government, and hold agency heads accountable.

Franchise and Concession Review Committee (FCRC) The FCRC is a Charter-mandated public body consisting of the Comptroller, four representatives of the Mayor (two from both the Law Department and Office of Management and Budget), and all five Borough Presidents who share one seat. The Mayor thus controls a majority of four out of six total FCRC seats, though five votes are needed to approve franchises. Franchises and concessions are contracts that allow private entities to use public property (e.g., parks, streets) for either a public service or private use and to pay the City compensation in exchange for such use. As Borough President, Scott has served as a member of the FCRC for nearly 8 years, working to expand transparency in the review and decision-making process and incubate meaningful public-private partnerships. As Comptroller, Scott will continue to fight for better benefits for the City in franchises and concessions, including fair access to public parks, and ensure strong public oversight and public input in the FCRC process to produce the best contracts for New Yorkers. HOW SCOTT WILL STREAMLINE PROCUREMENT AND ELIMINATE WASTEFUL CONTRACTS Get Involved Early in the Contracting Process to Prevent Waste and Excess and Ensure City Government Meets the Needs of New Yorkers

1. Strengthen the Comptroller’s contract oversight role to root out worst -case contracts that waste money and diminish confidence in public integrity. Collaborate with the Mayor to solve problems to the greatest extent possible, and hold City agencies accountable, including through audits, when registration disputes do not yield sufficient solutions; 2. Use the registration review process strategically, identifying the systemic mistakes that agencies most often make in their contracts – mistakes that add costs, slow down the effort to obtain needed goods and services, and decrease competition; 3. Highlight issues early in the contracting process, to prevent agencies from entering into bad contracts in the first place. Participate in pre-bid conferences, track the wide array of pre-procurement information that is now available on the web, empower the stakeholders in the contracting process to use that information, and advocate aggressively to ensure that agencies make changes in their planned contracts that will ensure sound results; 4. Reform VENDEX so that it reduces compliance costs to our nonprofits, freeing them to dedicate those savings into services for working class New Yorkers. We also have to make sure the VENDEX check is better positioned to catch potential waste, fraud and abuse, and reduce inconsistencies in the system that has failed to prevent too many run-away consulting contracts. Lead the Way Forward to Innovative Public Policy Solutions for Persistent Contracting Problems 1. Appoint members to the PPB who have first-hand knowledge and expertise in City contracting, and who will roll up their sleeves and help craft rules to solve problems; 2. Audit and investigate agency delays in the contract payment process to ensure that agencies are fiscally sound, and that we keep costs down by paying the City’s vendors more quickly; 3. Advocate for continued reform of health and human services program contracting by streamlining the RFP process, reducing redundant paperwork, doubling the size of the no-interest loan program that protects these critical nonprofits against cash flow crises caused by delays in the contracting process, and developing procurement strategies to ensure emerging and immigrant communities are served by City contracts; 4. Increase audits, studies and cost benefit analyses of procurements, focusing on contracts for new technologies used to run City operations and programs. Propose legislative and public policy changes to address the resulting issues;

5. Aggressively enforce all applicable prevailing and living wage requirements, to protect the thousands of workers who depend on City contracts for their livelihoods; 6. Strengthen the City’s MWBE program by working with agencies to streamline the process for bidding, eliminate fees, and embrace technology; partnering with the Office of Small Business Services to bring workshops and other services beyond their offices at 110 William Street in Lower Manhattan to MWBEs in Northern Manhattan, the Bronx, Brooklyn, Queens, and Staten Island; strengthening agency accountability by assigning each agency an MWBE grade based on their quarterly reports; and urging the Mayor to create a Chief Diversity Officer with broad authority to monitor MWBE compliance, promote diversity throughout city government, and hold agency heads accountable; 7. Promote transparency and public oversight in FCRC decision-making processes and ensure public private partnerships deliver the best results possible for all communities and the City;

8. Assess whether important franchise agreements are providing the value agreed upon in
the contract; and 9. Identify and analyze obstacles in procurement and contracting to establish effective public-private partnerships in New York City. Expand Groundbreaking Transparency Initiatives 1. Extend and build upon Checkbook NYC 2.0, the Comptroller’s website that provides comprehensive and accessible data on City contracts, payroll and spending. Develop user-friendly, plain-English reporting tools to enable members of the public, as well as the vendors and other procurement stakeholders, to readily download information in an accessible format; 2. Ensure the swift and complete implementation of the City’s comprehensive new subcontracting database. Enforce the requirements for prime contractors to publicly report payments to subcontractors. Track the reported information closely, to detect and address potentially fraudulent billing practices, help ensure timely payments to subcontractors and enforce the requirements for MWBE subcontracting; and 3. Establish centralized locations where members of the public can view and access City contracts and develop a web-based system to make such information more readily accessible.

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