Hevesi Proposes Legislation Providing Oversight of Contracts Awarded
by State Authorities
Bill Addresses Reform Issue Ignored in Public Authorities
Accountability Act Signed into Law in January
Comptroller Also Issues Report Showing Weaknesses in Authority
Procurement Practices – Billions of Dollars Awarded Without
State Comptroller Alan G. Hevesi today proposed legislation
providing for oversight of public authority contracts similar
to that required for State agencies and addressing weaknesses
identified through dozens of audits of procurement practices
at New York’s public authorities.
A provision for contract oversight that was included in authority
reform legislation advanced by Comptroller Hevesi and Attorney
General Spitzer was omitted from the Public Authorities Accountability
Act signed into law in January.
“We have completed dozens of audits that show that too
often public authorities are not following the rules when awarding
contracts and are wasting public dollars. These bad contracting
practices can be ended by instituting the same oversight that
exists now for all State agencies,” Hevesi said. “Last
year’s public authority reform legislation was only the
first step towards comprehensive reform because it did not include
this and other important measures.”
Many of the audit findings were included in a report, Public
Authority Contracting Practices: Billions of Dollars of Public
Funds Committed without Adequate Oversight, issued today by
the Comptroller’s Office. The findings include:
- Failure to follow competitive bidding requirements.
- Failure to record lobbying activities relating to procurement.
- Payments made to vendors with little or no supporting documentation.
- Improper use of credit cards or use of the cards to circumvent
competitive bidding requirements.
- Lack of commitment to attaining Minority/Women Business
Enterprise contracting goals.
Under law, the Comptroller’s Office reviews the contracts
of all State agencies and has done so for more than 90 years.
In fiscal year 2004-2005, the Comptroller’s Office reviewed
13,707 contracts valued at nearly $16.6 billion, as well as
27,591 contract amendments. These 41,298 transactions were valued
at more than $28 billion. As part of the process, the Comptroller’s
Office works with agencies to improve the terms of contracts.
In some cases, however, the Comptroller’s Office does
reject non-responsible vendors selected for an agency award.
For example, the Comptroller’s Office recently rejected
a Thruway Authority construction contract with Worth Construction
because, according law enforcement and public records, the firm
and its principals have a long history of association with members
of organized crime. This determination of non-responsibility,
and the Comptroller’s authority to make the determination,
were recently upheld by the Supreme Court in Albany County.
The bill submitted to the Legislature today would require an
authority to submit contracts to the Comptroller’s Office
for review before awarding the contract, if the Comptroller
determines that there is a need for increased oversight. In
making that decision, the Comptroller’s Office would consider
factors such as the size of a contract, the past practices of
an individual public authority, and comments or complaints from
vendors and the business community.
The bill would strengthen current requirements for authorities
to establish and enforce procurement guidelines and require
approval by two-thirds of an authority’s board of directors
for exemptions to competitive bidding requirements. Further,
it would require each authority to designate a procurement officer
and each authority governing board to establish a committee
on procurement policy.
Comptroller Hevesi and Attorney General Eliot Spitzer proposed
comprehensive authority reform legislation including these provisions
in 2004. An expanded version of the legislation was passed by
the Assembly in 2005.
Currently, 46 of the State’s public authorities submit
annual procurement reports to the Comptroller’s Office.
In 2004-05, these authorities entered into 10,404 contracts
valued at $5.5 billion, and $4.8 billion in payments were made
pursuant to contracts. These annual reports cover activities
of subsidiary corporations, making information available on
189 of the 740 public authorities that exist in New York State.
Only two of the State’s major authorities must submit
procurement contracts to the Comptroller’s Office for
review before they can become effective, as is required for
most State agency contracts. The Long Island Power Authority
(LIPA) is required by its enabling legislation to do so, and
the Thruway Authority’s board passed a resolution to require
such review when the Authority was established in 1950.
The Comptroller’s Office does have the power to conduct
audits of authorities. These audits review past expenditures,
management and oversight practices and other aspects of authority
operations. The Comptroller’s Office has completed 88
audits of authorities since January 2003, 56 of which dealt
with procurement and contracting. Of the 56:
- 24 audits demonstrate a disregard for procurement rules,
including 12 that show a disregard for competitive bidding
requirements and 10 show that contracts were not approved
in advance by either the board or other authorized individuals.
- 33 involve poor quality procurements resulting in waste
or inefficiency, of which 16 reveal vendor payments made with
little or no supporting documentation to justify the amount
and purpose of the purchase and nine expose inadequate procurement
guidelines or lack of written procedures.
- Nine demonstrate apparent abuses of procurement authority.
For example, seven describe improper use of credit cards or
use of credit cards to avoid competitive bidding, and two
show authorities adding unrelated work to existing contracts
instead of re-bidding.
Notable findings from these audits include:
- The Urban Development Corporation paid $2.2 million for
temporary personnel services to three vendors with which it
did not have contracts, despite the fact that such contracts
were required under the authority’s own procurement
- New York Convention Center Operating Corporation,
which runs the Javits Center in New York City, awarded contracts
without a competitive process for consulting, architectural,
legal and engineering services in connection with a proposed
expansion of the Convention Center. The contracts, which did
not meet the Corporation’s own criteria for exemption
from competitive bidding, were ultimately worth a total of
Nassau County Health Care Corporation awarded construction
projects totaling $981,000 without adequate competition
as required by its own guidelines.
- The Buffalo and Fort Erie Public Bridge Authority awarded
two contracts valued at $1.7 million as sole source procurements
to firms with long-standing relationships with the Authority,
even though officials agreed with auditors that the services
provided were not unique and could have been provided by any
transportation engineering firm.
- The Thoroughbred Racing Capital Investment Fund circumvented
oversight of payments to a consulting attorney by paying the
individual $285,267 in numerous checks of less than $2,000.
Checks for $2,000 or more would have required additional authorization
by other Authority officials.
- The Westchester County Health Care Corporation paid $112,000
in credit card bills for expenses, such as payment to a yacht
club and a $1,300 dinner that were not properly itemized or
documented by the officials who used the cards.
- The Port of Oswego Authority did not use statewide contracts
that could have resulted in more than $80,000 in cost savings
on certain purchases.
- The Archives Partnership Trust awarded a $65,000 graphic
design services contract without a competitive process or
documentation of why the vendor was selected without competitive
Auditors did find acceptable procurement practices in some
authorities, including the Central New York Regional Transportation
Authority, Niagara Frontier Transportation Authority, Thousand
Islands Bridge Authority and Environmental Facilities Corporation.
Click here for a copy of the Comptroller's report.
for a copy of the Public Authority Contract Oversight bill
here for a copy of the Public Authority Contract Oversight