Devastating audit of DOE's contracting process, which violates the City Charter and state laws

Last week I wrote about the problems with the new $670,000 DOE contract for Joel Rose's blended/computerized math instruction program, which was originally promised to be provided free to NYC schools in perpetuity since Rose developed it with about a million dollars of city funds while at DOE. The Panel for Educational Policy is due to vote on this contract on August 23.

Yet since his company New Classrooms went private, NYC has been charged many hundreds of thousands of dollars for this program with a highly questionable educational value.  Subsequently, Gary Rubinstein also wrote about the program's low quality, at different times called School of One or Teach to One.

All this cronyism is not an anomaly, sadly, but is consistent with the scandalously lax oversight of DOE contracts -- including a $1.1 billion contract proposed in 2015 for a contractor who had been involved in a kickback scheme just a few years ago --later thankfully rescinded by the Mayor's office and rebid for savings of between $163 million and $727 million.

On Friday, the NYC Comptroller Stringer released a follow-up audit showing how the DOE continues to violate  state law and its own rules when it comes to contracting.  More on this from the New York Daily News, New York Post and Chalkbeat.

From the Daily News:

In fiscal year 2016 the city school system handed out more than 500 contracts worth $2.7 billion without competitive bidding or required protections, Stringer's investigation found.
That’s 64% of the agency's total contract spending of more than $4 billion for that year....the city agency didn’t bother to evaluate vendors or keep track of their work — or to register contracts with Stringer’s office for review.

From the Comptroller's summary: 

A review of 521 limited competition contracts and contract actions revealed:

• DOE directed 442 of the vendors — approximately 85 percent — to begin work before the contract was even registered with the Comptroller’s Office, in violation of the New York State Education Law, the City Charter and DOE’s own rules;
• DOE submitted 302 new contracts and renewals to the Comptroller’s Office, on average, 258 days after their start dates, while 140 extensions of existing contracts were submitted on average 137 days after work began;
• In the most egregious case, a contract was submitted to the Comptroller’s Office 910 days — nearly two and a half years — after the vendor began work; and
• DOE submitted dozens of contracts to the Comptroller’s Office after the contract’s end date.

I myself discovered that of the 27 contracts approved at last month's Panel for Educational Policy meeting , 13 were retroactive—meaning at least some or all of the vendor's work had already started –  rendering the vote of the PEP pretty much irrelevant.  Contracts are only submitted and registered by the Comptroller after the PEP has voted. 

For the audit they specifically looked at how many contracts were registered retroactively.  Of 358 contracts and contract renewals, 84% of the vendors started work before registration,  an average of eight months prior to submission.  More than 10% of the contracts were submitted after the work had already ended.  In another data set of 163 contract extensions, 86% had started before submission,  an average of 137 days prior.


The Comptroller’s audit also found these continuing problems:

• DOE still does not provide sufficient guidance for contract assignments, and, in particular, it fails to ensure that a proposed new vendor’s capacity and history are adequately assessed. In addition, assignment files lack sufficient information justifying the assignments, detailing prior performance and documenting adequate insurance coverage, among other things.
• DOE has not developed written procedures or guidelines to help staff detect the warning signs of possible collusion when awarding contracts via actions other than fully competitive solicitations.
• While general guidance to contract managers appears to be available now in DOE’s contract management training manual, it does not offer the contract managers specific instruction about handling their responsibilities. For example, the training manual is silent on the performance evaluations that must be conducted throughout the contract period and on the frequency of such evaluations.
• Despite DOE’s representation in response to the previous audit that it would implement a standard format with standard criteria and ratings for evaluating vendor performance and a schedule for conducting such evaluations, we found that no such implementation has taken place.
• DOE still does not conduct required performance evaluations of contractors seeking renewals or extensions.
• DOE still does not adequately monitor its contract managers to ensure that contract monitoring and performance evaluations are conducted in accordance with its PPP manual.
• DOE does not ensure that limited-competition and non-competitive contracts are registered with the Comptroller prior to vendors beginning performance. As a result, vendor payments are delayed, which could potentially decrease competition and raise prices.

David Ross

The question of evaluations is key; many DOE contracts are renewed several times without any evidence that any assessments had been done of the quality of their previous work.  Even when an evaluation was done, in the case of New Classrooms for example, which showed no significant gains  through a randomized experiment, this study was unmentioned in the DOE Request for Authorization document, which asked the PEP for approval.

All these problems are not new, but occurred during the previous administration as well, under the aegis of David Ross.  Ross spent 12 years at the DOE as chief procurement officer,  and is now going to oversee contracts at the MTA – another troubled government agency that cannot afford to waste a single penny of public funds. Will the new contract head at DOE clean up this horrible mess?  We will have to see, but from the weak responses to the audit from DOE, I would not bet on it.

The person ultimately in charge however is Chancellor Fariña.  We've had four Chancellors in a row who were lax in terms of allowing the waste of  millions of dollars in taxpayer money, while more than 300,000 NYC children continue to languish in classes of 30 or more.  Will Fariña stick around after the election?  And if not, who will replace her?