Comptroller Stringer Audit: DSNY Failed to Follow Procurement Guidance and Awarded $14 Million COVID-19 Emergency Food Contract to Inexperienced, Ineffective Vendor with Recent Criminal Conviction

 

Department of Sanitation awarded Cariati Developers Inc. a $14 million emergency food delivery contract without any evidence that the vendor had prior food sourcing, packaging, and/or delivery experience; CDI’s owner was previously convicted of obstructing the Internal Revenue Service

Though contract was terminated for poor performance, CDI was paid nearly $1.5 million for its three weeks of work under the contract

Mayor’s suspension of City procurement rules continues to expose taxpayers to risk of fraud, waste, and abuse; Comptroller recommends emergency procurement procedures to enable the City to quickly purchase what it needs while reducing risks of waste and fraud

 Today, New York City Comptroller Scott M. Stringer released an audit revealing that the New York City Department of Sanitation (DSNY) failed to follow City procurement guidance when it awarded a $14 million emergency food contract to Cariati Developers Inc. (CDI), a vendor with a recent criminal conviction and lack of experience. The audit showed that DSNY awarded the contract to CDI in April 2020 to provide food delivery services as part of the Emergency Adult Food Access Program – without any evidence that the vendor had prior food sourcing, packaging, or delivery experience. DSNY terminated the contract three weeks after the vendor’s first day of deliveries due to poor performance and after becoming aware that more than a month prior to CDI having been awarded the contract, the owner had been convicted of obstructing the Internal Revenue Service. CDI was paid nearly $1.5 million for its three weeks of work under the contract.

“New York City is still grappling with the economic fallout of COVID-19, and we can’t afford to waste precious City dollars,” said Comptroller Stringer. “The bottom line is that DSNY’s hasty award of a contract to a vendor with a recent criminal conviction and with no relevant experience undermined the effectiveness of the City’s food program at the expense of the most vulnerable – and that’s unacceptable. DSNY should start implementing our recommendations immediately, and I am again calling on the City to immediately restore City procurement rules to protect taxpayers from abuse by unscrupulous vendors and from costly mistakes.”

Comptroller Stringer’s audit also found that DSNY did not maintain sufficient controls over its vendor payments. To improve contract procurement and monitoring, Comptroller Stringer recommended that DSNY bolster its vendor responsibility reviews, document potential vendors’ direct experience in its bid evaluation, establish a tracking system to record vendor food delivery, billing and payment information, and consistently review information in this system prior to paying invoices.

Comptroller Stringer’s investigation uncovered the following findings:

• DSNY did not discover that the owner had been convicted of a federal felony; more than a month before it awarded the contract to the vendor, the owner had pleaded guilty to obstructing the Internal Revenue Service.
• DSNY awarded the contract to CDI without any evidence that the vendor had prior food sourcing, packaging, and/or delivery experience, even though the bid booklet called for the vendor to have had at least three years of such experience in the preceding five years.
• DSNY did not maintain sufficient controls over its vendor payments. Before DSNY made most of its payments to CDI, the agency did not obtain independent confirmation that the number of food boxes the vendor billed for had actually been received.

To address these issues, Comptroller Stringer recommended the following actions:

1. DSNY should routinely include a Google search of a vendor when conducting a vendor responsibility review.
2. DSNY should enforce its bid booklet requirement for potential vendors to file PASSPort disclosure statements or, at a minimum, require the submission of disclosure statements outside of PASSPort that cover certain basic topics, such as the criminal history of the potential vendors’ principals.
3. DSNY should consistently document the search results of its vendor responsibility reviews at the time those reviews are conducted, even when they do not show any adverse information.
4. DSNY should consider a potential vendor’s directly relevant experience when determining whether the vendor has the capabilities to provide a particular type of service and should document that consideration in its bid evaluation.
5. DSNY should consistently obtain independent confirmations of the amounts of food received from the vendors before making payments.
6. DSNY should establish a tracking system to record vendor food delivery, billing and payment information, and consistently review the information in this system prior to paying invoices in an effort to prevent double payments.
7. DSNY should recoup from CDI the double payment of $15,644.

This contract was awarded  pursuant to Emergency Executive Order (EEO) 101 that suspended laws and regulations related to procurement, including the Comptroller’s charter-mandated procurement authority. This executive order has been in effect since March 17, 2020 and has been extended over ninety times. Following two letters sent to the Administration in August and October of 2020 that yielded no response or action, Comptroller Stringer for the third time in March 2021 underscored the need to rescind the Mayor’s emergency suspension of procurement laws. The City Charter and the City’s Procurement Policy Board (PPB) Rules already provide for expedited emergency purchases but with safeguards and transparency mechanisms in place to protect the City’s interests. Under Mayor de Blasio’s emergency powers, the City has entered into 1,491 contracts totaling more than $6.7 billion since March 2020 without the crucial statutory oversight of the Comptroller’s Office.