Public Employee Press

Shadow government wastes millions
Contractors, consultants and corruption

By GREGORY N. HEIRES

The city’s growing reliance on contracting out municipal work without government oversight causes a huge waste of taxpayers’ dollars, say union and other critics of the practice.

The traditional argument for contracting out is to promote efficiency and save money. But in reality, as the city has dramatically increased its spending on contracting out, costs have increased and many services have deteriorated.

Today the story of contracting out includes criminality, waste, illegal exploitation of low-paid workers, excessive compensation for high-paid consultants who are taking jobs from civil servants and a shocking lack of public accountability.

“Over the past eight years, contracting out has eroded services and raised costs,” DC 37 Executive Director Lillian Roberts told City Council members May 7 at a joint hearing of the Contract Committee and the Civil Service Committee.

James A. Parrott, Chief Economist of the Fiscal Policy Institute, noted that the mayor’s executive budget proposal funds 18,000 outside contracts at a cost of $9.25 billion. The spending includes tens of millions of dollars for work that is normally done by city employees, including clerical, cleaning, security, accounting, engineering, architectural and computer services, Parrott said.

“Service contracts with for-profit providers are more costly because of the very high overhead and profit margins,” Parrott said.

Earlier this year, Roberts issued a white paper, “Massive Waste at a Time of Need,” written by Assistant Associate Director Henry Garrido, that identifies 10 instances in which the city could save a total of $130 million by contracting in functions such as accounting, public nursing, computer services and supplying food to public schools.

Shadow government

Responding to a question from Contract Committee Chair Letitia James, Garrido estimated that over the years, DC 37 has lost 5,000 positions through attrition as the city has increased its spending on contracting out, which has ballooned from $4 billion in 2005 to over $9 billion today. Roberts charged that contracting out has created a “shadow government” of 100,000 consultants and contract workers and said she believes that civil servants represented by DC 37 could replace an astounding 50,000 of those workers — and do the jobs more efficiently.

“Time and time again, we have seen reports of criminal activity by contract employees and we have seen contractors make fat profits by illegally underpaying their employees while the city pays costs that far exceed the salaries and benefits of permanent employees,” Roberts said.

Sleazy contractors

Board of Education Employees Local 372 Executive Vice President Santos Crespo testified about the wasteful and corrupt contracting practices in the school system. He noted that Special Commissioner of Investigations Richard S. Condon and Comptroller William C. Thompson Jr. had documented bid-rigging, low-balling and no-bid contracts in the Dept. of Education, resulting in the loss of millions of dollars. Contracting in food delivery to Loaders and Handlers in Local 372 would save $4 million a year, he said.

Crespo also slammed DOE for wasting millions of dollars on an outsourced computer program for checking attendance when using Local 372 Family Paraprofessionals could save tens of millions of tax dollars.

“The outsourcing needs to stop,” Crespo said.