History of Department of Education no-bid contracting

No New York City mayoral agency has a category of contracts comparable to the Department of Education’s exceptions to competitive bidding, or no-bid, contracts, according to the City Comptroller’s Office lead auditor John Graham.

Under the law that created mayoral control, the department was required to create its own rules to regulate their procurement procedures. While the city and state comptrollers have the authority to audit contracts after they are awarded, there are no outside agencies involved in the process of choosing vendors for city education contracts.

Having a procurement process that is entirely internal to a single department is not an anomaly in the City’s history. There was a time when no city department had to submit pending documents to any outside agency before work on a contract was started and payments made to the vendor.

“What we do now is a huge advancement on what existed before,” said Lisa Flores of the Procurement Policy Board. “There are so many people involved. Before, under the Board of Estimate, decisions were basically made behind closed doors - a bunch of men smoking cigars, making deals.”

Under the previous, and much-criticized, Board of Education no-bid contracting procedures were more transparent than they are today.Under the old board, which was made up of appointees of the mayor and borough presidents, all no-bid contracts over $10,000 were discussed at meetings that were open to the public.  Every contract had to be registered with the city comptroller and could not be executed until the comptroller had given his approval.

“It was a good process on contracts,” said James Vlasto, former director of communications for the Public Advocate and the Board of Education.  “There was a public hearing, where you could go and ask questions. There was public participation.”

Origins of the Committee on Contracts

The seeds for the department’s current procedures were sown before mayoral control began. Now that the final say for staffing and other decisions lays with Mayor Michael R. Bloomberg, critics, including Graham, argue that the department’s position that being a municipality empowered by the state with different needs should allow them to have different rules from other mayoral agencies.

The forerunner to the department’s Committee on Contracts, the Exceptions to Bidding Committee, was started under Chancellor Rudolph F. Crew by former head of financial operations for the Department of Education, Louis Benevento.

According to Benevento, the committee was created to streamline the contracting process in order to better meet schools’ needs. He said there was not enough support within the Board of Education to assist principals and administrators in the community school districts with writing the sometimes-onerous Request for Proposals that are required to competitively bid contracts for professional services. He said the way administrators skirted the overwhelming task was to split purchase orders so that each individual order was below the amount where the procurement system would require proof of competitive bidding to complete the order.

Until 1996, splitting purchase orders went on under the radar because the procurement and accounting systems for the Board of Education were totally separate. Then, Benevento became the head of both procurement and accounting and linked the systems.

“I set up a series of controls and edits to prohibit the splitting of purchase orders,” Benevento said. “Badaboom! Once that happened, we knew about a lot more of these exceptions to bidding, which were probably taking place on a larger scale in the 1970s and 80s.”

Once circumventing the system’s controls was made more difficult, the main concern was filling the needs of schools in the space of a single school year.

“That’s a very special thing about schools, there’s only ten months really. If you’re going to bid something out, you better permit 3 to 6 months, at least - if all works well,’ Benevento said. “Years ago, we didn’t get a budget from Albany until maybe September, October. The City didn’t finalize its budget to the school system. Those dollars maybe became available November, December. Now you need these professional services. You’ve got these fourth graders who are going to be with you another four or five months. You don’t have four or five months to go out there on a bid.”

The committee was set up to process the increase in recognized exception to competitive bidding contracts. The Board of Education approved a form that the Committee on Contracts still uses to approve or deny requests for exceptions to competitive bidding. It seems that Benevento’s system is mostly still intact within the Department of Education. The major difference today is what happens to contracts after they are approved by the Committee on Contracts. When the committee headed by Benevento approved a contract before mayoral control, he would then have to submit that contract as an item for resolution on the Board of Education’s agenda.

As part of the transition to mayoral control contracts approved as exceptions to competitive bidding began to be circulated to various department heads within the Department of Education for their sign off in place of review by the Board of Education.

There is no evidence that even this process of wider review within the department is still used today.