Comptroller Lander Proposes Procurement Reforms to Fight Corruption, Improve Transparency, and Support MWBEs

 

Letter to Mayor Adams urges convening the Procurement Policy Board to close corruption vulnerabilities in the City’s contracting process, increase transparency about compensation and diversity, and raise the MWBE threshold.

In a letter to New York City Mayor Eric Adams, NYC Comptroller Brad Lander requested a convening of the New York City Procurement Policy Board (PPB) to consider changes to the rules of City procurement to fight corruption and enhance fairness. The letter details three areas of suggested reforms:

1. Raising the MWBE small purchase procurement threshold from $500,000 to $1 million, to match new State law, open up new opportunities, and address ongoing disparities.
2. Closing corruption vulnerabilities in the City’s oversight and administration of not-for-profit human service contracts, with stronger rules prohibiting nepotism and related third-party vendors.
3. Increasing compensation and diversity transparency of NYC contractors and subcontractors.

“Procurement policy often falls to the bottom of municipal priority lists, but for so much essential work, from combating homelessness to providing meals to seniors to fixing bridges to responding to disasters, procurement is how city government gets stuff done,” wrote Comptroller Brad Lander to Mayor Adams.

Comptroller Lander continued, “While the vast majority of the City’s nonprofit partners are dedicated public servants who focus on providing high-quality services and make best efforts to administer public funds responsibly, it is critical that the City have robust procedures in place to ensure integrity and safeguard City resources. Bad actors inevitably slip through cracks, mismanaging City funds at the expense of the vulnerable New Yorkers they serve. Those limited, but high-profile scandals erode public trust in City government, its use of tax dollars, and the organizations working hard to serve New Yorkers in need.”

Procurement reform has been a major area of focus and collaboration for the Comptroller and the Mayor since even before taking office. Comptroller Lander and Mayor Adams convened a task force to address longstanding delays in contracting with the city’s nonprofit human service providers starting in December 2021. Their joint “Clear the Backlog” initiative has unlocked over $4 billion of long-overdue payments, and the task force is continuing to aggressively identify ways to reduce the amount of time it takes for the City to contract with and pay its nonprofit partners. Additionally, the Comptroller’s office has been a core participant in the capital projects task force convened by First Deputy Mayor Lorainne Grillo, working to identify ways to address why the City’s infrastructure projects are so often years late and over budget.

Each year, New York City contracts with nonprofit organizations to deliver critical social services to over three million New Yorkers. In Fiscal Year 2021, New York City procured $12 billion in human services, which accounted for approximately 40% of the City’s total contracting portfolio. The vast majority of these contracts are implemented responsibly, providing early childhood education, after-school programs, affordable and supportive housing, senior services, arts and cultural programming, and much more.

However, a small handful of bad actors exploit vulnerabilities in the City’s procurement process. In November, 2021 the NYC Department of Investigation (DOI) published its “Report on Corruption Vulnerabilities in the City’s Oversight and Administration of Not-for-Profit Human Service Contracts,” reviewing its investigations over the prior seven years into corruption, waste, and fraud in nonprofit human services contracts. DOI made a series of recommendations to close corruption vulnerabilities. Comptroller Lander’s letter proposes to implement DOI’s key recommendations.

The Procurement Policy Board, made up of three appointees by the Mayor and two by the Comptroller, sets and enforces rules for how the City procures goods and services from vendors. The Board has not convened since November 21, 2019 .

The Comptroller urged the Mayor to convene the Board to consider the following reforms:

Raising the MWBE small purchase procurement threshold

The Comptroller proposed amending the PPB Rules to raise the non-competitive small purchase threshold for MWBEs to $1,000,000. On October 6, 2022 the Governor signed legislation to amend the §311 of the New York City Charter, which currently allows the PPB to adopt rules for City agencies to procure goods, services and construction not exceeding $500,000 from M/WBE firms without a formal competitive process. This amendment will double the M/WBE procurement threshold to $1,000,000. In doing so, the City will be able to significantly broaden its range of contracts with M/WBE firms.

Closing corruption vulnerabilities in the City’s oversight and administration of not-for-profit human service contracts

The Comptroller proposed incorporating into the procurement process restrictions on third-party contractors/subcontractors so they cannot be owned or controlled by related parties or relatives and adding anti-nepotism provisions to the PPB rules.  These may include but not be limited to disclosures of conflicts of interest and certifications pertaining to the competitive bidding process through which third party subcontractors are selected. These changes would help to ensure that subcontracted expenditures are paid responsibly and without potential for conflicts of interest, which can result in corrupt or otherwise suspect activities.

Increasing compensation and diversity transparency of NYC contractors and subcontractors 

The Comptroller proposed that the PPB require all City contractors and subcontractors, including both for-profit and not-for-profit contractors, to disclose key information regarding compensation and staff and board diversity:

• Compensation paid to the Executive Director, Chief Operating Officer, and/or functional equivalent of either position along with every contract submitted for registration.

• Maximum, median, and minimum compensation paid to workers employed by that contractor during the previous calendar year.
• Their federal EEO-1 reports, if they are required to file them (i.e., if they have over 100 employees, or are a federal contractor with over 50 employees)
• A board matrix, identifying race/ethnicity, and gender information of their board members

“Together, we can build a stronger post-pandemic New York,” the Comptroller’s letter concludes. “One that provides the best possible use of public resources, provides high quality services, expands opportunities, closes corruption loopholes, and strengthens trust in our City government.