05/17/2012 06:34 pm ET Updated Jul 17, 2012

Proposed Budget Cut: Private Contract Overspending!

Almost two weeks ago, Mayor Bloomberg put forth his Executive Budget for the City of New York. The budget proposed major cuts to childcare and after-school programs, mental health services, and many other vital City services and programs. As the New York City Council moves forward through the process of examining the proposed budget, I want to bring attention to the continuing public overspending on private contracts and consultants employed by the City of New York, an issue that I believe deserves greater public attention.

Last fall, I introduced legislation into the New York City Council that required New York City agencies to report cost overruns on large contracts. The legislation addressed construction and service contracts for capital projects with a minimum expenditure of $10 million by requiring disclosure when such projects exceeded the original cost by twenty percent or more. Specifically, it called on the mayor to notify the Council at at multiple points when such a cost increase is requested by the contracting agency. With strong support from my colleagues, this legislation was passed into law by the New York City Council in March 2012.

My interest in costly contracts began during my tenure as Chair of the Contracts Committee, during which time the committee held hearings on the outsourcing of public services to the private sector; as well as two oversight hearings on the Office of Payroll Administration's City Time contract, which I had criticized at the time as costly (1) and poorly managed. By December 2010, four Citytime consultants were charged with embezzling $80 million from the City through steering public funds to consulting firms who funneled the money to shell companies controlled by the consultants and their families. By the time federal investigators and the City Department of Investigation began looking into the program's payroll fraud and abuse, the list of crimes became even more unbelievable. In the end, the number of people allegedly involved in Citytime corruption reached a whopping 11, and federal prosecutors seized more than $38 million in stolen funds from over 100 bank accounts hidden in international shell companies. The Citytime disaster directed attention to the need for contract oversight, and the same day my legislation was passed in law, SAIC announced it would return $500.4 million in restitution and penalties in relation to Citytime6 to the City of New York.

Since 2010, major project cost overruns have received considerable attention -- including the Emergency Communications Transformation Program (2) (ECTP) project and what in 2011 was a $286M contract request from the City of New York; the rising costs of the NYCAPS program (3); and most recently a $1.95M NYC Health and Hospitals Corporation contract with Navigat, a private consulting company. And the attention was warranted. Overall, over the last five years contract costs have increased at nearly twice the rate of overall budget spending, reaching over 10 billion in spent public funds, with the vast majority of these expenditures going towards professional service contracts.

This is not a problem with a particularly complicated solution. We need increased oversight (at multiple levels) of private contracts and consulting costs; more meticulous vetting by the administration of the contracting companies (companies like BOVIS should not be able to contract with New York City in the future); and an administration dedicated to training current municipal employees to perform these construction and service duties when possible. That is the only way we're going to reach the overall goal of cutting unnecessary costs, and identifying real savings that can help plug cuts to needed city services.


1) The Citytime contract increased from a projected $68 million at its onset to more than $738 million

2) The Emergency Communications Transformation Program went from an initial $380 million in project costs to a total of $666 million

3) The NYCAPS contract ballooned from $66 million in 2002 to $363 million in 2011