2009-04-03 / Top Stories

Thompson Charges DOE With Contract Mismanagement

New York City Comptroller William C. Thompson, Jr. has charged that the Department of Education has routinely let hundreds of contract costs balloon well past their expected costs - including one that jumped by 6,700 percent.

"It's simply a case of runaway contracts," Thompson said. "It's reprehensible that the Department of Education plays by its own rules and goes on some insane spending spree. And who pays? Taxpayers, parents, children, all of us."

Thompson aimed his harsh criticism in a harshly worded letter to Schools Chancellor Joel Klein for not containing the swollen contract costs. Thompson then submitted testimony spelling out his fiery findings to the New York City Council Committees on Education and Contracts.

"The Department of Education continues to maintain a long-held and illconsidered opinion that its contracts and other purchases do not require the same stringent safeguards as those of other local and state agencies," Thompson said. "As a result, taxpayer money continues to be squandered through an opaque process that does not take advantage of the competitive marketplace. This is unacceptable."

What did Thompson find?

One out of every five - or 20 percent - of the Department's contracts that ended in the last two fiscal years inevitably cost well over the estimated amount by 25 percent or more.

That rate already continues to climb. So far, in the current fiscal year, 27% of the Department's requirement contracts have swollen costs topping 125% - and there's still three months left until the fiscal year ends.

One contract, with the Xerox Corporation, was supposed to cost at most $1 million - but the Department spent close to $68 million - a 6,759 percent jump in costs. Another, with Ideal Restaurant Supply, jumped from $15,000 to more than $852,000 - a 5,530 percent jump.

During those two fiscal years combined, the Department issued 372 requirement contracts, originally estimated to cost $325,236,416 but which inevitably exceeded those estimates by 25% or more. The final tab wound up at more than $1 billion.

Additionally, many recipients of the contracts - 127 of them - got the lucrative work without any competition because the Department didn't put the work out to bid.

Those 127 contracts were supposed to cost $195 million at most. But the Department spent $525 million on them.

"The Department's purchases exceed contract amounts by such a large margin that it raises fundamental questions about the integrity of the Department's entire contracting process," Thompson said. "These actions display a clear pattern of mismanagement when it comes to expenditures, and the Chancellor and the Mayor must fix this situation and rein in these costs."

The Comptroller over the last seven years has repeatedly exposed fiscal incompetence and a lack of accountability and transparency in budgeting and contracting at the Department of Education.

Key among his concerns has been a disturbing pattern of so-called no-bid contracts, which are executed without competition.

"The Department must create and follow an open and formal procurement practice and demonstrate that it will spend the public's money in an accountable manner," Thompson said. "I call on the Department to take immediate action to ensure that the scarce public dollars entrusted to it are used prudently.

Doing so will benefit not just our schoolchildren and our school system, but our city as well."

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