New York State Comptroller Thomas P. DiNapoli today proposed changes to the state’s procurement practices in the wake of criminal charges and allegations of corruption in the awarding of contracts for state economic development projects.

“The alleged contracting and kickback schemes uncovered by federal and state prosecutors show lax oversight over economic development spending,” DiNapoli said. “The state funneled taxpayer money to quasi-government organizations, avoiding scrutiny and sidestepping usual procurement practices. This created an environment ripe for self-dealing and abuse. New York state must take credible steps to reestablish the public’s faith in government and address the broader problems.”

By state law, the State Comptroller’s office is responsible for reviewing and approving state agency contracts above $50,000 and certain contracts over $1 million for state public authorities. The Comptroller’s independent oversight helps ensure that the process is fair and gets the best value for taxpayer dollars. In 2015, the Comptroller’s office reviewed 21,381 contract transactions totaling $169.2 billion.

In recent years, executive and legislative actions have eroded the Comptroller’s contract oversight. In 2011, this oversight was eliminated for construction and construction-related services contracts, among other purchases, issued by the State University of New York (SUNY) and City University of New York (CUNY). In 2012, the Comptroller’s oversight of Office of General Services (OGS) centralized contracts was removed.

In 2015, state agencies issued over $6.8 billion in contracts without Comptroller review.

DiNapoli’s comprehensive package of reforms increases independent oversight of contracts, prohibits the state from using state-affiliated not-for-profits to do state business, makes procurement requirements uniform, and toughens ethics and transparency rules. Specific proposals include:

• Restore the Comptroller’s independent oversight for SUNY, CUNY and OGS centralized contracts. Recent allegations show widespread weaknesses in SUNY’s procurement process and lax oversight of its affiliated not-for-profits. Restoring systemic checks and balances taken away from the Comptroller can help prevent future abuses and ensure that everyone is following the same rules.
• Prohibit the use of not-for-profits to bypass procurement laws and transparency. All contracts for state spending should either be held directly by a state agency or public authority and subject to independent oversight. SUNY’s affiliated not-for-profits had lax oversight and poor processes in place that appear to have been manipulated in multiple ways, allowing a non-competitive contracting process to occur and business to be directed to preferred contractors. These entities should not be used for state business or to bypass the routine and well-tested rules and regulations that state agencies follow.
• Require state public authorities to follow the same procurement requirements as state agencies. The procurement rules and approval process are not the same for every entity entrusted with taxpayer funds. Public authorities can adopt their own internal guidelines and do not have to follow state agency requirements clearly set out in law. Having everyone follow uniform requirements helps give assurance of competition, fairness and best value for taxpayers.
• Review contracts over $1 million for the Research Foundation of SUNY.Currently, the Research Foundation is not required to have any independent review of its contracts, which DiNapoli would change. He proposes that his office review contracts over $1 million funded with state dollars.
• Create tougher ethics requirements and penalties for those who abuse the procurement process. DiNapoli would strengthen disclosure of conflicts for employees of state agencies or public authorities, as well as board members and others, engaged in the process. He also wants to prohibit vendors who have violated procurement law from getting state business and create a code of ethics for vendors doing business with the state.
• Increase transparency. To assure a level playing field for all potential vendors, DiNapoli would require state agencies, public authorities and their affiliates to publish in the State Contract Reporter all potential business opportunities, including notice of single or sole-source procurements.

In early November, DiNapoli took administrative actions related to the bid-rigging and fraud scandal. He put the Empire State Development Corp. (ESD) on notice that any SUNY Polytechnic Institute contracts transferred or assigned to ESD must be submitted to his office for review. He made a series of recommendations to improve the payment process for economic development projects to help prevent against fraud and address the long delays that have occurred with payments made by ESD for projects. He lowered the threshold requirements for review of contracts from $250,000 to $50,000 for SUNY Poly’s contracts and put public authorities on notice of his plan to watch them closely.

As government contracting has grown in size, scope and complexity, the Comptroller’s oversight, which was established more than 100 years ago, has become more important than ever. While DiNapoli’s office legally has 90 days to review contracts, on average contracts are approved within nine days. His office is also committed to a high level of transparency and releases a monthly press release disclosing major state contracts and spending approved by his office. It also issues a detailed annual report, “State Contracts by the Numbers,” to inform the public and policymakers of actions taken.

Read DiNapoli’s letter to executive and lawmakers, or go to: http://www.osc.state.ny.us/reports/economic/cuomo_procurement_legislation.pdf

Read the bill memo, or go to: https://assembly.state.ny.us/leg/?default_fld=&leg_video=&bn=A06355&term=2017&Memo=Y

Read the legislation, or go to: https://assembly.state.ny.us/leg/?default_fld=&leg_video=&bn=A06355&term=2017&Summary=Y&Memo=Y&Text=Y

Read “State Contracts by the Numbers,” or go to: https://osc.state.ny.us/sites/default/files/state-agencies/documents/pdf/2019-01/state-contracts-by-numbers-2015.pdf