FOR RELEASE:

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 Oversight

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 guidelines.
• 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 $2.3 million.
• 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 bidding.

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.

Click here for a copy of the Public Authority Contract Oversight bill memo.

Click here for a copy of the Public Authority Contract Oversight bill text.