New York State Comptroller Thomas DiNapoli issued a report yesterday exposing billions of dollars of MTA waste over the last four years. DiNapoli’s office examined the MTA’s spending on personal and service contracts and discovered numerous inefficiencies and redundancies in the process that has cost the agency approximately $2.9 billion in unnecessary spending.
“The MTA has raised fares and received more tax dollars to cover its deficits and debt,” DiNapoli said in a statement. “At the same time, the MTA expanded its use of personal service contracts without a thorough evaluation of the need or cost-effectiveness of those contracts. Now more than ever, every dime counts, and the MTA needs to manage public resources more carefully. Consultant contracts should only be used when absolutely necessary, and there has to be documented justification of that need.”
According to the state audit, these contracts now consume nearly 15 percent of the MTA’s operating budget, and expenditures have increased from $315 million in 2006 to $881 million last year. Oftentimes, the MTA could not prove that the outsourced services — including contracts for engineering and architecture, waste management, consulting and information technology — represented the most cost-efficient option. DiNapoli also urged the MTA to establish a way to determine “whether these contracts were still necessary or if they could be suspended or scaled back to help manage fiscal constraints.”
Hand in hand with this recommendation was the comptroller’s finding that “the MTA contracted for some services that would appear to be within their in-house capabilities.” DiNapoli wants the MTA to document “the need to contract out for such services.” That’s being diplomatic. If the in-house capabilities exist, the MTA shouldn’t be paying anyone else to carry out its tasks.
As examples, DiNapoli’s audit cites 244 contracts worth $513.6 million for engineering and architecture services, 387 contracts totaling $203.9 million for maintenance services, 183 contracts worth $149.5 million for consulting services, and 46 contracts $99 million for waste removal. Furthermore, the MTA contracted out for real estate management services, tree trimming operations and bus engine repair efforts. All of these tasks could be and oftentimes are completed in-house.
In a press release, the Comptroller’s Office nicely bulleted its other findings:
- MTA records showed that the agency initiated or completed consultant contracts valued in excess of $4.5 billion between January 1, 2005 and October 16, 2008;
- Spending on miscellaneous contracts consistently exceeds $1 billion per year and is rapidly approaching $2 billion per year;
- The value of awarded contracts nearly tripled between 2006 and the first 10 months of 2008, while the actual number of contracts declined by 35 percent during the same period;
- New York City Transit alone accounted for 776 contracts worth $1.8 billion during the audit period; and,
- Nearly one-quarter of all service contracts were non-competitive, including awards to sole contractors and well as emergency purchases.
DiNapoli also issued a set of recommendations for the MTA:
- Improve documentation of compliance with the MTA’s “All Agency Guidelines for Procurement of Services” by determining whether agencies can collaborate on contracts, or fulfill their needs by using another agency’s in-house expertise or existing contract;
- Periodically re-evaluate personal and miscellaneous contracts after they begin; and,
- Take steps to scale back or suspend reliance on service contracts, where appropriate.
The MTA took few issues with the findings and created a subcommittee on service contracts while the audit was ongoing. Whether any financial streamlining comes of it remains to be seen. This audit was one of nine on the MTA DiNapoli has released recently, and his office promises more to come. No matter how much posturing the State Senate does, this is real financial oversight, and the MTA should listen to these recommendations.
You can find a copy of the Comptroller’s Report in PDF form along with the MTA’s response to it right here.
9 comments
[…] posted here: DiNapoli: MTA spending frivolously on service contracts :: Second … By admin | category: management consulting | tags: amr, Consulting?, epresented-the-most, […]
Taking a broad swipe at the outsourced Engineering work is really unfair. The MTA has several gigantic capital projects going on (Second Ave Subway, 7-extension, East Side Access) which I’m sure are a large chunk of this $881M — all which involved tunnel boring and other critically important aspects. Do you really want the guys who have operated, but never actually BUILT, transit infrastructure designing your new tunnels, or would you trust the experts who have designed rail tunnels around the world — who can figure out the mechanical properties of rock (or soil) in which the tunnel will be placed, and how to build it to keep it from collapsing?
Just like work being done around your own home: there are some small DIY projects that can be done in-house, but for the big-ticket items, you hire a professional.
“Do you really want the guys who have operated, but never actually BUILT, transit infrastructure designing your new tunnels…”
this is a red herring. the article above in fact says:
“Hand in hand with this recommendation was the comptroller’s finding that “the MTA contracted for some services that would appear to be within their in-house capabilities.” DiNapoli wants the MTA to document “the need to contract out for such services.” That’s being diplomatic. If the in-house capabilities exist, the MTA shouldn’t be paying anyone else to carry out its tasks.”
After I wrote that comment, I re-read the article and noticed that clause. And I agree, if the decision is trivial, like “what color should we re-paint the iron columns”, then the decision should be made in-house (don’t know if it actually is or not).
But even for moderate-sized project, companies often outsource; this way, when the project is done, so are the people. When using in-house staffing, you then need to find work for these folks once the task is complete. Also, I would venture to say that some of the liabilities are shifted to the consultants if something goes wrong.
Another question (to which I have no answer) is whether the 7-Line design work really falls in this category. I’m sure the MTA pays for it out of its capital budget, then applies for reimbursement from the city. So is that included in the above numbers?
I agree with you if that’s the case, but I’d imagine that sort of expense would be grouped under those projects and not “misc contracts.” In either case, they need to get their stuff together and organize their books or be held accountable for where the money is going. Blowing nearly a billion dollars in outside contracts in a year should be a clear indicator that they need to expand their workforce instead of artificially scaling through outsourcing. They already don’t have enough people on staff to maintain smooth operation of the current system.
I’d like to get a copy of this report to review it myself. If anyone has a link, drop it in the comments.
The report can be found right here. I linked to it in the last line of this post too.
Fair enough. And now that I think about it, I did once see an ad from the MTA in the “Public Notices” section of the New York Post… seeking bids for a contractor to furnish ten pairs of work boots. For the price of the ad, they probably could’ve gone to the nearest K-Mart (no Walmart in the city) and picked them up themselves.
Again DiNapoli, who failed to answer a single accounting/audit question correctly in getting his posiiton is grandstanding. Yes, the operating agencies'(not mother MTA, by the way)projects cost too much. Yes, too many chiefs make any decision an incredibly lengthy process. But, the accuser has neither the experience nor the credentials to make the accusations. This is noise, not substance. I speak from decades of personnal experince…
[…] Comptroller Week on Second Ave. Sagas. Hot on the heels of his report that the MTA is spending frivolously on contracts, New York State Comptroller Thomas DiNapoli has issued another report on the state on […]