“You can’t look every place,” was Mayor Bloomberg’s response to last week’s federal arrests of four highly-paid CityTime consultants. “I’m not trying to excuse it. It is something we certainly should focus on. On the other hand, if you want to know how big projects have big things that slip through the cracks, this is as good an example as you need.” Ringleader Mark Mazer and three other consultants for SAIC, the company charged with implementing CityTime, were arrested for inflating consulting hours and fees and receiving kickbacks through a series of shell corporations. Mazer’s mother and wife were also arrested in the scheme for setting up some of the shell corporations.
The mayor’s assertion that the theft of $80 million from NYC coffers via CityTime is a “slip through the cracks” could be considered disingenuous at best considering the facts. For years, alarms have been sounded about SAIC’s mismanagement of the CityTime computerized timekeeping project for 145,000 NYC workers. What started as a $63 million dollar project in 1998 during the Giuliani Administration has ballooned to $722 million. Twelve years later, only 46,000 employees are on the system. Voices as diverse as Councilwoman Letitia James, DC37’s Lillian Roberts, NYC Comptroller John Liu, and numerous whistleblowers from inside the Office of Payroll Administration have all shed light on the failures. Mayor Michael Bloomberg, known for his purported financial management skills, refused to see or hear.
As far back as 2003, Richard R. Valcich, then-Executive Director of the Office of Payroll Administration, scrutinized SAIC’s mismanagement of CityTime. In a 6-page letter, Valcich detailed allegations against SAIC, including unilaterally changing terms of the contract with the city, delaying schedule of implementation “with no tangible result”. Valcich, who retired in 2004, wrote in 2003, “Unfortunately, instead of progress, we are now bogged down in the quagmire of SAIC’s internal bureaucracy! SAIC has repeatedly been late on virtually every deliverable. The inability of SAIC to deliver on time has resulted repeatedly in wasted city resources…SAIC has been guilty of producing deliverables far below acceptable standards. The city has found SAIC’s commitment to quality almost nonexistent.”
Mayor Michael Bloomberg turned a blind eye then, and continues to do so.
Fast-forward to 2008. The CityTime project remained uncompleted – years overdue and overbudget millions of dollars. The NYC Council Committee on Contracts, then chaired by Letitia James, held a joint oversight hearing with the Committee on Civil Service and Labor examining the NYC Office of Payroll Administration’s Procurement and Application of the CityTime contract.
In 2009, the Contracts committee held another hearing examining the CityTime contracts.
That same year, yet another hearing was held to examine the outsourcing of public services to the private sector.
Meanwhile, DC37 saw the CityTime debacle in a broader context, calling the $9 billion city contract budget “massive waste at a time of need.” DC37 found NYC contract spending has risen 37% in five years, from $6.75 billion to more than $9 billion in more than 18,000 contracts. According to DC37, these contracts, many of them “no bid”, have “created a shadow government not elected by the citizens, but who enjoy major control over the provision of public services, creating a parallel workforce of thousands of employees paid by the taxpayers, but not accountable to them.”
DC37 analyzed 10 examples of contracting out by city agencies, from the Dept. of Information Technology and Telecommunications and the Human Resources Administration to the Dept. of Education and the 311 system. The union found NYC could save millions of dollars by having the work done in-house by city workers.
Executive Director of DC37, Lillian Roberts, spoke to the current scandal.
“CityTime has wasted approximately $780 million; there are so many things that could be done with $780 million. While they were wasting that, the union was complaining because workers were being laid off. These are jobs our workers can do and they will be taking this job over very soon because that contract has been ended,” she said. “The impact and loss of revenue in this one contract has caused layoffs and homelessness. Some of our people couldn’t pay their rent.
Day care. Pest control. Food stamps. Laundry. They are contracting out. Everything that has any money in it – the lavatories, the child health care centers – these are things that can be billed back and receive money. When you start to contract out, you are talking about people who are out to make money versus a nonprofit situation through civil service that does not make money but provides services for people. [Contractors] feel they don’t have to be efficient when they deliver services to the city. That has been proven by this high-range corruption that has just been discovered. [CityTime] is the tip of the iceberg.”
Roberts believes the high caliber of city workers could have written the complex code for the variety of municipal pay scales. “They are doing it right now,” she said. “Our people were making $60-70 an hour versus someone making $300,000 a year. CityTime cost a lot more. It was not efficient. They did not know what they were doing. [The contractors] were depending on us to teach them. They didn’t know the system. Yet, they were making this enormous amount of money. It was very demoralizing to our people. And look how long it has been going on and it is not finished.” Roberts believes city workers would have finished the CityTime project a long time ago.
“There are real jewels in the city,” said Roberts, speaking of the diversity of highly skilled NYC residents. City officials “should definitely use the skills here. Some of these projects were billing from outside of the city and outside of the country. We don’t get tax returns on that.”
Roberts said, “City workers are not afraid of oversight. We are vetted, fingerprinted, passed tests and undergo background checks (unlike contractors). The elected officials are here – most of them – eight years. The city workers are here to carry the continuity of the services required to run the city. When people come in, experiment and do all sorts of odd things, there is a question about it. Why? This is why we asked that somebody come in and take a look at this. There is something wrong with this picture. That is why the federal government is investigating.”
Recognizing that city employees are blamed for administration policy decisions, Ms. Roberts said, “I hope this demonstrates very clearly to everybody we are all victims of a mess here.”
Three months into his tenure, Comptroller John Liu called for Mayor Bloomberg to immediately freeze all requests for contracts or payments associated with the CityTime project until completion of his audit into the Office of Payroll Administration’s oversight of the “bloated project.” At that time, the cost had mushroomed from $68 million to $738 million. In addition, only about 45,000 of a projected 156,000 City employees actually used the CityTime system.
By September, the contract for implementation and maintenance of the system with SAIC would have expired. Mayor Bloomberg put pressure on Liu to extend the contract and pay additional millions to SAIC, the CityTime contractors, going so far as to threaten that city workers would not be paid on time if Liu did not comply.
After intense negotiations, an agreement was reached which stipulates SAIC must complete the full installation of CityTime by June 30, 2011. The City will not pay SAIC any more money for the completed implementation and deployment of the CityTime timekeeping system. Upon full and timely completion of the installation, with 165,000 employees on the system, the city will pay SAIC up to $32 million, only for maintenance and support services. For each month beyond the June 30, 2011 completion deadline, $3 million in damages would be assessed against the City’s payment to SAIC.
A spokesperson in the Mayor’s office said the consultants who were arrested were subcontractors; their arrests will not impact the continuation of the CityTime Project. The prime contractors, SAIC, will be expected to continue working on CityTime. However, they will not be paid.
Council member Letitia James said, “I applaud the federal prosecutors for this indictment, but it should not have taken this amount of time to expose. The $80 million in funds stolen from the City of New York could have been used to fund day care centers, firehouses, municipal workers, senior centers, and the list goes on. Every penny should be accounted for and this travesty lies at the feet of the administration who failed to uncover this massive fraud when I first sounded the alarm two years ago.
The fact that this complex scam was able to take place under the radar of the administration is proof of just how out of control the greed of some consultants has become. It is time to stop using public funds to continue these poorly managed, poorly supervised private enterprises. The city must stop outsourced jobs without having the resources or inclination to manage the contractors. Until that happens, the MTA should cancel its $10 million contract with CityTime today.”