FOR RELEASE:

Comptroller’s Reforms to State Contracting Will Help Ensure
Contracts Are Awarded Only to Responsible Vendors

VendRep centralized system to improve and streamline process
of identifying contractors with potential problems

Working with state agencies and the business community, the State Comptroller’s Office is instituting major reforms that will help ensure that State contracts are awarded only to responsible vendors who have the integrity and capacity to deliver the goods and services they promise, Comptroller Alan G. Hevesi announced today. These reforms include ensuring that State agencies conduct and document thorough vendor responsibility determinations, as well as giving them the tools to perform those determinations in a more consistent, standardized manner.

Agencies have already strengthened their responsibility determinations and by the third quarter of 2006, the Comptroller’s Office will make available standardized questionnaires and VendRep, a new centralized database of information about vendors to help make the contracting process more efficient both for state agencies and for businesses seeking state contracts. Vendors will be able to go on-line and fill out one questionnaire, no matter how many contracts they bid on or how many state agencies they contract with.

State agencies will be able to access the questionnaires and also other information about vendors, such as whether they have paid taxes, been subject of criminal investigations, violated prevailing wage or environmental regulations and performed well on other government contracts.

“State agencies awarded contracts worth $28 billion last fiscal year and we must be sure these dollars go to reputable firms that are capable of doing the jobs for which they are hired,” Hevesi said. “For too long, the State lacked a coordinated approach to determine whether vendors are responsible and vendors had to deal with different forms and processes for different state agencies. This new process provides a more uniform and coordinated approach to awarding State contracts that protects taxpayers and provides honest businesses with a level playing field as they compete for state contracts.

“Taxpayers deserve the cleanest, most competitive system possible to ensure that we get the best goods and services at the best price from vendors who are above reproach and capable of delivering on their promises,” Hevesi said.

“Comptroller Hevesi's efforts to make the procurement process more transparent, efficient and accountable will encourage more private sector firms to bid for State contracts, resulting in healthy competition to provide better services for New Yorkers,” said Kathryn S. Wylde, President and CEO of the Partnership for New York City. “We are grateful to the Comptroller for reaching out to the business community and utilizing its expertise to develop proposals to streamline and rationalize the state's contracting process.”

Assemblywoman RoAnn M. Destito (D/WF, Rome), Chair of the Assembly Standing Committee on Governmental Operations said, “A centralized vendor responsibility database, as proposed by the Comptroller, will serve the State and vendors who wish to conduct business with the State better than the current system by increasing efficiency in the procurement process. By eliminating the duplicative vendor responsibility inquiries to which vendors now must respond if they do business with more than one agency, they will have more time and resources to devote to running their own businesses.”

While New York has avoided some of the contracting scandals experienced in other states, the failure to share information from other governmental entities has allowed non-responsible vendors to receive millions of dollars of state contracts. For example:

• Olympia Construction. Seventy-three construction contracts worth more than $7 million were awarded to two Brooklyn-based companies headed by an individual who was barred from doing work with the federal government because of allegations that he attempted to bribe federal inspectors. After the federal debarment, Olympia Construction, owned by Vassilios Tsimitras, was awarded 41 emergency construction contracts through an expedited process and Thettalia, Inc, also controlled by Tsimitras, received 32 additional contracts. While the individual deceived the State Office of General Services (OGS) in the procurement process, the proposed shared system would have made the vendor’s history available to OGS as it was conducting its responsibility determination.
• Scalamandre. Two State construction contracts worth more than $10 million were awarded to Peter Scalamandre and Sons, Fred Scalamandre and Joseph Scalamandre, even after the owners were convicted of tax fraud and payment for illegal influence, forced to pay a $5 million fine to the Federal Government, and barred from receiving federal contracts.

The Comptroller’s office began more stringent reviews of agency vendor responsibility determinations in January 2005 and required state agencies to document their own responsibility determinations. Since then, the Comptroller’s Office and other State agencies have been better positioned to take appropriate action after discovering irregularities. For example:

• Worth Construction. The Comptroller’s office denied approval for a $46 million contract with Worth Construction that the Thruway Authority had signed to construct the interchange between Interstates 87 and 84 near Newburgh after determining that the vendor was non-responsible. The Comptroller’s office discovered that the president of the company was under investigation by Federal authorities in Connecticut and faced possible indictment for alleged municipal contracting corruption – allegations that were made public in the Federal trial of the former mayor of Waterbury, Connecticut. It was further determined that the company failed to provide complete answers to questions on the vendor questionnaire by not reporting the existence of related companies and certain corporate officers, and provided inaccurate information regarding its suspension from all work by the New York City School Construction Authority and about the focus of the Connecticut investigation.
• American CIS Equities. The Comptroller’s office denied a $369,000 contract between the Manhattan Psychiatric Center and American CIS Equities after finding evidence of a relationship between this vendor and another company called American Combustible Industrial Services that had been dissolved for failing to file tax returns, had warrants from the New York State Department of Labor and open and active New York State Tax Liens. An investigation of the American CIS Equities found no records of a company by this name or address, and a visit to the company’s address found no company existing at that address.
• Molecular Imaging Systems. After the State University at Stony Brook awarded a $1.7 million contract to Molecular Imaging Systems, Inc, the Comptroller’s office provided a detailed review of the company that identified that the company’s financial condition was faltering and that stock price for the previous 52 weeks had declined by 90 percent. The auditors advised Stony Brook Hospital of these findings and officials used this information to plan for a potential emergency should this vendor become unable to provide the services.
• St. Augustine Center. Pursuant to a review of the VendRep questionnaire and additional information provided by St. Augustine Center, the Office of Children and Family Services (OCFS) determined that St. Augustine Center was a non-responsible vendor. The vendor had severe financial problems. Its debt burden was so high that it could affect the Center’s ability to provide services. The Center failed to provide essential data on its funding, finances and board. St.Augustine’s Charities Registration with the Attorney General’s Office was delinquent, so it was unlawful for it to solicit funds (including grants) from State agencies. OCFS found the vendor non-responsible. OSC reviewed the documentation and supported the agency’s determination.

Vendor responsibility generally means that a vendor has the integrity to justify the award of public dollars and the capacity to fully perform the requirements of the contract. It is a contracting agency’s duty to evaluate the responsibility of a prospective contractor. A responsibility determination is an important part of the procurement process, promoting fairness in contracting and protecting the contracting agency and the State against failed contracts or providing state funds to an unscrupulous vendor. The Comptroller’s system will improve the quality and consistency of responsibility determinations by State agencies.

Historically, each agency has used different methods to assess vendor responsibility, so businesses seeking contracts from multiple agencies have been forced to provide different information to different agencies, which imposed added cost and effort. Furthermore, because each agency performs these functions separately for each vendor, they may not be aware of adverse information uncovered by another agency.

In the fall of 2004, Comptroller’s Office staff began discussing reforms with agency personnel. Since then, the Comptroller’s Office staff has collaborated extensively with stakeholders. Staff surveyed 118 State agencies and 123 vendors and conducted 47 outreach sessions involving 1,628 participants representing 57 state agencies and 65 companies that do business with the state to seek input. The development of the process included a working group composed of staff from both houses of the State Legislature, the Attorney General’s office, and nine state agencies including the Office of General Services.

Beginning in January, 2005, contracts submitted to the Office of the State Comptroller (OSC) for approval were required to include an affirmative declaration that the vendor has been determined to be responsible. To date, the Comptroller’s office has reviewed vendor responsibility determinations for approximately 17,000 contracts submitted to the OSC for approval and conducted a more detailed review for 5,000 of these contracts.

By April, 2006, standard questionnaires will be posted to the Comptroller’s website for final comments by vendors and state agencies before they are finalized, and by the third quarter of 2006, vendors will be able to fill out questionnaires on-line, facts will be verified and agencies will have access to the information provided by vendors

By law, most State agency contracts valued at more than $15,000 cannot become effective until they have been approved by the Office of the State Comptroller. In State fiscal year 2004-05, OSC reviewed 13,707 contracts valued at nearly $16.6 billion dollars. This is in addition to 27,591 contract amendments for a total of 41,298 transactions valued at more than $28 billion last fiscal year.

“By providing better access to more information, agencies will be better able to make informed choices when awarding contracts,” Hevesi said. “This will make it easier for reputable vendors to do business with the State while helping state agencies make accurate responsibility determinations when they award contracts.

“This is a system that will be good for both taxpayers and businesses. For too long, people seeking to do business with the State have been frustrated by the cumbersome review process State agencies put them through to determine whether they are responsible vendors,” Hevesi said. “The review process is different for each agency and imposes added costs on them as they work to meet differing standards. This new system is a major step toward our goal of making New York State a better partner for businesses, and to provide taxpayers with the best services possible.”

Click here for a copy of the Comptroller's report on State Contracting Reforms.

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Vendrep Background

Access to Other Sources of Information
Specific information on vendors is already filed with a number of governmental agencies, such as, at the State level, the Attorney General’s Office, the Department of Labor and the Department of Taxation and Finance. Currently, contracting agencies solicit information from these and other relevant sources individually. This can be a time-consuming process.

When the VendRep system is complete, consistent information about vendors will be available centrally to state agency contracting offices from the following sources:

• Responsibility determinations by the vendor responsibility information exchange system in New York City (VENDEX). VENDEX provides background information from vendors who bid on all New York City contracts and subcontracts valued at $100,000 or more, sole source contracts valued at $10,000 or more, and/or whose aggregate business with the City in the preceding 12 months totals $100,000 or more,
• The Excluded Parties List System (EPLS), which is an electronic, web-based system that identifies those parties excluded from receiving federal contracts, certain subcontracts, and certain types of federal financial and non-financial assistance and benefits,
• Charities registration with the Attorney General’s Office,
• Liens with the Department of Taxation and Finance,
• Issues surrounding the prevailing wage requirement resulting in debarment by the Department of Labor,
• Outstanding issues with the Department of Environmental Conservation,
• Professional licensing information with the State Education Department,
• All State contract work for the particular vendor,
• Performance information from other State agencies on current and prior contracts with the particular vendor,
• Information maintained by the federal Occupational Safety and Health Administration (OSHA), and
• Investigative information obtained by the Office of State Comptroller on criminal background checks and alleged ties to organized crime.

A shared system will provide information on vendors from myriad sources. It will not only lessen the chance that information useful in determining responsibility is missed, but it will also streamline the investigative work that is incumbent upon the contracting agency to conduct in the effort to determine responsibility. For a vendor, it will greatly reduce the duplication of work that is now required when submitting bid proposals to more than one State agency.

Vendrep Background

Common Questionnaire

Currently, agencies employ different documents to collect information from vendors that is necessary to determine responsibility. The Office of General Services (OGS) offers a model vendor responsibility questionnaire and the New York State Council of Contracting Agencies has developed one geared, primarily, toward construction contracts. Some agencies use their own questionnaires.

The Office of the State Comptroller also offered a model questionnaire in November 2004 in an effort to facilitate compliance with the requirements of the bulletin and move toward standardization. It is a six-page form that can be utilized to capture the following:

• A vendor’s Workers’ Compensation insurance carrier information,
• The principal owners and officers of a vendor,
• Any other business name or federal employer identification number used in the past ten years by the vendor,
• Individuals serving in a managerial or consulting capacity who have served as a public official, full or part-time State agency employee or consultant, or officer of any political party in New York State,
• Information related to a vendor’s integrity, and
• Information related to a vendor’s financial capability.

The model vendor responsibility questionnaire also asks a series of questions concerning suspension, debarment, or termination relating to a contract with any level of government. The business conduct of the vendor, as well as the vendor’s compliance with various State and Federal regulations, is also reviewed, and the vendor must detail any type of material weakness in its system of internal controls revealed in the past three years by government audits and any bankruptcy proceedings within the past seven years. The questionnaire also requires the vendor to indicate whether it contracted or subcontracted with any State agency within the past five years and whether the vendor or its affiliates experienced any negative action (e.g. default on any public or private contract, or unsatisfactory performance assessment by any government agency) during the same time period.

Providing the model questionnaire was an early step toward moving all contracting agencies to use the same approach in making responsibility determinations.