In The News › BGR says city bungles contracts

Nov 9, 2010

Source: The Times-Picayune

Filed under: Contracting, Orleans Parish

BGR says city bungles contracts

Bloated deals cost New Orleans, it says

Tuesday, November 09, 2010
By Gordon Russell
The Times-Picayune

City Hall has done a poor job of contracting for services, vastly expanding the size and scope of many contracts without seeking competitive bids and using private companies to do many jobs that could have been done in-house, according to an analysis of 2009 contracts by the watchdog Bureau of Governmental Research.

Reforming the city’s sloppy management of outside vendors is one way to improve New Orleans’ dire financial situation, the report says.

The report, available at, examined 822 contracts that were in force last year, deals that ranged in value from a few thousand dollars to tens of millions. The authors note dryly that BGR cannot say what proportion of contracts that represents “because the city could not provide a complete list of the contracts in effect in 2009.”

Technology contracts came under special scrutiny in the report, both because they represented some of the city’s largest deals and because the city’s technology systems “continue to suffer from a lack of integration and functionality” even after Mayor Ray Nagin’s technology directors paid five companies more than $70 million to improve them.

Mayor Mitch Landrieu’ new technology director, Allen Square, has made similar complaints about the state of technology at City Hall, telling the City Council last week that “our systems are in real, real crisis.”

Contracts ballon

The largest single contract examined in the BGR report was the now-expired deal held by Ciber Inc., which had a value of $46.8 million.

The contract — under which the firm was to convert city services from a mainframe to a web-based platform — was initially capped at $5.5 million, the report notes, but was amended and expanded four times, eventually reaching eight times its initial value.

Some of the expansion was understandable, BGR wrote, given the difficulties of getting government up and running after Hurricane Katrina. But “the city also asked Ciber to perform additional services that cannot be justified on that basis,” the report said.

Similarly, the report notes, the city’s technology contract with Telecommunications Development Corp. grew tenfold, from $450,000 to $5 million.

By expanding deals so dramatically, the report concludes, “the city failed to explore the potential benefits of fresh competition.”

The report also suggests that city officials have misclassified some services as “professional services” to give themselves more flexibility in choosing the contractor. By law, work not considered a professional service must be awarded to the lowest bidder.

The BGR report questions one such award in particular: A contract worth $5.7 million that was given to ACS State & Local Solutions Inc. to create and staff the city’s “ill-fated” 311 call center. The report argues that the work should not have been classified as a professional service and thus should have been given to the lowest bidder.

Skirting the rules?

The rules appear to be twisted in other ways, the report says. For instance, the data BGR examined suggests that city officials take advantage of a rule that allows the city to forgo competition for contracts worth $15,000 or less. More than half the contracts that fell below that threshold were very close to it, the report said, raising questions “as to whether the city used the exemption to avoid putting contracts out for competitive selection.”

In other cases, the report says the city hired contractors for “projects that went nowhere.” Among other examples, it cites $513,000 in fees paid to an architect to design new Parks & Parkways buildings. But instead of new buildings, city officials have decided to repair the old ones, making much of the architectural work superfluous.

Even as it outsources many services at great cost, the report notes that the city has at times failed to pay for contracts that have proved their worth. For instance, city officials provided only $225,000 for sales tax audits to be performed by private accountants, even though the accountants identified $4.8 million in unpaid sales taxes that ultimately generated $2.1 million in collections.

Costs of regulating Entergy

While most of the report focuses on contracts awarded by the Nagin administration, it also scrutinizes a group of contracts awarded by the City Council to the firms that help it regulate Entergy New Orleans.

The cost of the contracts appears high, the report said, noting that the utility consultants billed the council $5.8 million in 2009. By comparison, the report says, the state Public Service Commission, which regulates utilities in every parish outside Orleans, paid $4.7 million in legal and consulting costs in 2009.

The report suggests that the disparity owes in large part to the fact that the PSC has a “significant in-house staff” numbering nearly 100, while the council has only one staffer devoted to utility regulation. The cost of that staff to the PSC is $7.5 million, the report says.

In its conclusion, BGR says that most of the problems highlighted in the report could be corrected “simply by adhering to existing policies and procedures.” But it also recommends that city officials undertake a more thorough analysis before deciding whether to outsource a service and that they should carefully review any proposal “to substantially expand the scope of services of a contract.”

Nov 9, 2010

Source: The Times-Picayune

Filed under: Contracting, Orleans Parish

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