Mayor's Appointees Take Reins of PEP, Defend Dubious Contracts

The Panel for Educational Policy resumed meeting on September 14th. Meeting materials can be found on the DOE web site here. My account follows below. Press coverage can be found here (NY Times), here (NY1 with video) Gotham Schools here and here (Daily News).

1. Votes for PEP Chair and Vice Chair

The first Panel for Educational Policy commenced with the vote to elect our chair. The Brooklyn member nominated mayoral appointee David Chang. I did not think the mayor’s candidate should run unopposed. I nominated myself and the Bronx member, Anna Santos seconded my nomination. The vote was 10-2 in favor of David.

I wasn't going to run for vice chair but was surprised to be nominated by Joan Correale representing Staten Island. I lost the vice chair vote 8-3-1 with support from the Bronx, Staten Island and Queens member Dmytro Fedkowskyj abstaining. The Brooklyn member supported the mayoral candidate, Philip Berry. While I did not expect to win either post, it was discouraging to see two individuals with mediocre or poor attendance records in their past PEP service ascend to leadership positions. The NY Times pegged David Chang’s attendance during his prior PEP service at 80% while Philip Berry only attended 65% of meetings. The mayor sends a terrible message to the city’s public school children when he entrusts oversight of their schools to two individuals who have struggled to make even the minimal time commitment required by the PEP.

I'd like to thank Anna Santos, Joan Correale and the public school parents of the Bronx and Staten Island for their support.

2. PEP By-Laws

The by-laws passed unanimously with little discussion. DOE General Counsel Mike Best had circulated a draft version that included a committee formed for the purpose of reviewing procurement contracts. The mayoral appointees agreed to expand this committee to five members, two borough members and three mayoral.

3. H1N1 update

The DOE and DOH guidance for the schools have been widely circulated. I asked about the policy for closing schools. It will be a last resort. Under this approach no schools would have been closed last year explained Deputy Chancellor Grimm.

4. Contract Approval Process

The new law requires the PEP to approve the bulk of DOE spending contracts. I had a fairly long discussion with DOE Chief Operating Officer Photo Anagnostopoulos about what information DOE will provide to PEP members seeking to understand the procurement contracts. Despite the clear language of the law requiring the PEP to “approve contracts”, DOE has refused to provide the actual contracts. Instead, we were supposed to make do with DOE-crafted summaries. I explained how the summaries did not accurately explain what we were buying, how were paying for it and how much it was going to cost. After much back and forth I said “you will give us the contracts yes or no?” She eventually agreed. Four mayoral appointees then admonished me, citing the risks of violating vendor confidentiality, the dangers of trying to micromanage the operations of the DOE, the vast complexity of the contracts and perhaps most remarkably, our fiduciary duty to the vendors! "We don’t need to see the contracts" they insisted. I wish the mayor’s appointees were as equally energetic in looking after the interests of the public school children as they were with the interests of DOE contractors.

5. Contract Approvals

Fifteen contracts were offered for approval. Two were controversial and were the subject of significant discussion and public comment.

Item 5, Octagon

Item 5 on the list was a contract with Octagon, Inc. acting as a marketing agent to generate revenue from vending and sponsorship arrangements. Octagon previously arranged the notorious Snapple vending deal. The comptroller’s office issued a highly negative audit of the Snapple contract in 2004 which included the finding that Octagon stood to realize “exorbitant compensation” (see comptrollers report here). The Comptroller asked the PEP to vote against the new agreement to hire Octagon as a marketing agent.

Due to the controversy, DOE made a statement defending the contract. The main point was that Octagon was not running the process to secure new deals as with the old Snapple contract but simply supporting DOE who would manage them. In response to my follow-up questioning, DOE made two disturbing admissions:

• First, they admitted that despite not having a contract, Octagon has already worked with DOE on new deals. The contract summary provided to the PEP by DOE incorrectly stated that the contract was not retroactive. And no information on what nature of work Octagon completed was provided. We were not told we being asked to approve a contract for work already performed.
• Second, the DOE admitted the contract summary provide to us misrepresented Octagon’s role. The summary stated: “The selected consulting firm will have the authority to develop, issue, negotiate and manage a competitive RFP process under DOE supervision for the selection of leading manufacturers of high quality items including, but not limited to, beverages, healthy snacks, athletic apparel…” (emphasis mine). This language directly contradicted DOE statements at the meeting asserting that Octagon would play only a minimal “advisory” role. I explained to the Chancellor, COO and fellow board members that this misinformation is precisely why it is essential for PEP members to have direct access to the contract language.

I voted against the Octagon contract citing the misleading information provided by DOE, the lack of any concrete information on what exactly Octagon would do in exchange for 15-18% commissions and the failure of the DOE to explain why the Snapple deal arranged by Octagon fell $5 million short of the revenue projected. The Octagon contract was approved 10 votes for and 3 against.

Item 6, Future Technology Associates

The DOE’s accounting system, called FAMIS, is maintained by a firm called Future Technology Associates (FTA). DOE requested PEP approval of a $54 million, four year contract with four main components: 1) maintain the system, 2) develop enhancements required by DOE and 3) integrate the accounting system with the city’s system (known as FMS). A fourth project included in the proposal was to expand the payroll system, NYCAPS.

My review of the proposal indicated the contract is actually four separate projects that were inappropriately bundled together:

• First, maintenance of the FAMIS accounting system should be bid separately, with a heavy emphasis on transferring knowledge of operating and maintaining the system to DOE technology staff. DOE insisted that without approval of the contract in its entirety the department would not be able to function at all, even to write a check or pay salaries. Eight years into the management of the city school district by the Bloomberg administration, it is discouraging to find ourselves placed in this extremely vulnerable position. I could not get a straight answer from DOE on why the system was outsourced to expensive consultants in direct contradiction of the mayor’s IT Strategic Direction polices. I was told the system required the latest software skills in order to function, skills not available amongst DOE employees, but the only skills listed in the RFP were decades-old mainframe skills.
• Second, enhancements of FAMIS should be limited to essential items with unnecessary work deferred. For example, third on the to-do list was enhancing the FAMIS web portal to make it easier to renew and replace wireless devices. Issuing Blackberries to Tweed staffers is hardly a priority given our current budget crisis.
• Third, the integration with the city’s system should be separated and put to bid as a fixed priced contract. I was told by members of the press that the DOE effectively blocked other contractors from bidding on this work by requiring any contractor to assume liability for the entirety of the FAMIS software system. The task of connecting the system with the city’s system must be isolated from ensuring the ongoing functioning of the system itself. This extension of the liability requirement may have been imposed to protect the incumbent, FTA, from competition.
• Fourth, the work extending the NYCAPS payroll system had no business whatsoever being tied into the work on the accounting system. This bundling may have been done to appease FTA or otherwise protect their incumbency.

The bundling of the various projects together into one contract made it impossible for the PEP to understand the costs and benefits of the individual projects. While it is likely that FTA would have distinct advantages in winning some pieces, I firmly believe that separating the projects would allow more competition on others.

I also had concerns about the vendor, FTA, itself. A series of columns by Daily News columnist Juan Gonzalez surfaced some information suggesting the vendor may not be of sufficient size and strength to manage a contract of this magnitude: they have no other clients, they have no actual place of business beyond the DOE space occupied by their consultants and the Florida address listed on the contract summary is a Jacksonville strip mall containing a UPS Store, presumably the mail drop location for FTA.

I voted against the FTA contract and requested the work be re-bid in separate pieces as I suggested above. The contract was approved 11-2.

6. Discussion of 4th and 6th Grade Retention Policy

Chancellor Klein outlined the timetable for consideration of test-based grade retention policies in 4th and 6th grades. The RAND study of the 5th grade promotion policy will be released in October and the vote held by the PEP in November.

I asked Chancellor Klein to be prepared to respond to 1) the statement by NY State Department of Education saying use of state tests for promotion decisions was not appropriate and 2) accounts in the Daily News and NY Times demonstrating that random guessing will produce the level 2 score needed for promotion on some of these tests.