City Council Acts to Rein in Contracts

The idea that private companies can do much of what government does and do it better and cheaper has taken a battering in New York City over the past few years.

News accounts and prosecutors have detailed mind-boggling cost overruns on the CityTime project. A shadowy company whose owner was having an affair with a top Department of Education official allegedly bilked the department out of millions of dollars. And so on.

Yesterday the City Council stepped into the fray. By a unanimous vote it passed a bill sponsored by Council Member Darlene Mealy that would subject city contracts to a kind of cost-benefit analysis and require agencies to publicly disclose what services they plan to contract out in the coming year.

The Contract Boom

New York City's Commissioner of the Dept. of Investigation Rose Gill Hearn at a meeting in New York in November, 2008. Hearn's city agency is tasked with rooting out fraud and corruption among city employees and contractors. AP Photo/Richard Drew, File

Last year, according to the Council, the city spent more than $10 billion on private contractors. This amount will go up by about 6 percent this year — far more than the city budget overall. As Gotham Gazette reported this spring, the contract budget has grown by more than 70 percent during the Bloomberg administration. While social service contracts — many with nonprofits — account for the largest chunk of city contracts, the biggest increase has come in professional service contracts, which mushroomed from $357 million in fiscal year 2003 to nearly $1.5 billion projected for this year.


Against this backdrop — to say nothing of cost overruns and corruption — that contract budget became a point of contention during last spring’s contract talks. City Council Member Robert Jackson, for one, repeatedly questioned why the administration was increasing contracts at the same time it was threatening to lay off teachers.

Municipal employee unions, notably DC 37, the city’s largest municipal employee union, have balked at taking tasks away from their members and giving them to private often non-union companies.

The administration has said it needs specialized outside expertise, and some officials — notably former Deputy Mayor Stephen Goldsmith -– have argued that private contractors can deliver service more cheaply than city workers.

The Costs of Privatization

The council bill — Intro 624 — takes direct aim at that contention.

Before a city agency could extend, renew or enter into a contract worth more than $200,000 it would have to analyze whether the contract results from displacement of city workers or would displace city workers. If the study determines some city workers would lose their jobs, the agency must then look at the benefits and costs of contracting out the work and submit that analysis to the city comptroller, who reviews city contracts.

In addition, after receiving bids, the agency would have to analyze the costs and benefits of the contract and tell the council, the comptroller and union officials why the contract makes sense for the city. The council can hold a hearing on the contract in question.

More generally, every year the administration must submit a contracting plan for every city agency. Along with boosting transparency, this provision is seen a possible aid to small and minority contractors who would have more advance warning of upcoming city contracts, giving them time to prepare possible bids.

Read the full post at Gotham Gazette.

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