Lawmakers Argue Against No-Bid Contracts

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The New York Sun

Loopholes allowing the city education department to skip competitive bidding processes should be closed, city elected officials argued yesterday at a hearing examining millions of dollars in no-bid contracts awarded by the department.

Suggesting that favoritism may have played into a $15.6 million no-bid deal with a private consulting firm last summer, elected officials questioned the department’s financial transparency and called on the chancellor to submit to the same competitive bidding practices required of all other city agencies.

“The department is not above the law,” the city comptroller, William Thompson, Jr., said. “Even though they act like they are.”

Education department representatives said the exception to competitive bidding is necessary for the school system in some instances when time is of the essence. They gave the example of a surprise increase in state funds for universal pre-kindergarten this year that left the city with only a few months to find providers before the school year began.

“We’re trying to move more and more in the direction of transparency,” a lawyer for the department, Michael Best, said. “We’re not sure that every one of those rules makes sense for us.”

The hearing yesterday came months after both the chairman of the City Council education committee, Robert Jackson, and the city’s public advocate, Betsy Gotbaum, had requested the details of a contract signed in June with Alvarez and Marsal Public Sector Services, LLC. It was the latest in a series of confrontations between the Bloomberg administration and other city elected officials over no-bid contracts by the education department, including Mr. Thompson’s investigation into a contract with Snapple to sell beverages in city schools.

Out of a $4.5 billion school budget for goods and services, 2.6% is spent on non-competitive contracts.

Alvarez and Marcel was hired to help the department streamline the school bureaucracy as it moves to replace the current system organized around regions with a new system organized around empowerment schools. The firm had previously helped the St. Louis and New Orleans school districts reduce deficits by closing schools and laying off non-teaching personnel.

The department said it awarded Alvarez and Marsal the latest contract in part because the firm had worked with the city in the past. Under a private contract signed in January 2006 and paid for by the Fund for Public Schools, a non-profit organization closely tied to the department and chaired by the schools chancellor, Joel Klein, the firm found $89 million in savings for the school system. After the contract ended, the firm continued its service to the schools without charge.

“All of us thought they did a very successful job,” the deputy chancellor for Finance and Administration, Kathleen Grimm, said. “So what the department thought was that we would continue with them.”

The department publicized its plans to enter into the contract in an advertisement that included a contact number and remained posted for a week. It didn’t receive any calls. The $15.6 million contract, which includes hourly wages for consultants topping $400, was awarded in June.


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