Examination of Pitts Management Associates (PMA)

Issued Date
February 14, 2018
State University of New York Downstate Medical Center


PMA claimed it saved Downstate $138 million during the period December 1, 2012 through November 30, 2014 through a Restructuring Action Plan (RAP) under contracts CM00939 and TQ00002. The objective of our examination was to determine whether PMA’s implementation of the RAP achieved the claimed savings.


Downstate originally entered into contract CM00939 with PMA for consulting services for the period December 3, 2012 through September 3, 2013. That contract was later extended for three months through December 2, 2013. At that time, the contract and the extension were subject to approval by the Office of the State Comptroller (OSC).

Prior to Downstate extending contract CM00939 to December 2013, Chapter 56 (Part Q) of the Laws of 2013 allowed Downstate to obtain services and commodities related to its restructuring without following certain State procurement requirements, including executing contracts without prior approval from OSC. In December 2013, Downstate replaced contract CM00939 with contract TQ00002, which was not subject to approval by OSC. Collectively, Downstate paid PMA $34 million under these two contracts for consultant services necessary to implement a RAP that would help Downstate achieve financial stability. In December 2015, PMA reported cumulative savings of $138 million for Downstate under both contracts.

Key Findings

We found that Downstate officials did not properly monitor and assess PMA’s performance under the contracts, including PMA’s implementation of the cost-saving improvements identified in the RAP. We also found that for select areas, PMA did not use sound methodologies, or even follow its own methodologies, to calculate the savings achieved during the RAP period. Moreover, we found that Downstate’s weak control environment and poorly written contracts exacerbated these conditions. As a result, we question the accuracy of $74,674,978 of $85,455,000 in PMA-claimed savings we reviewed as part of our examination. This does not include $349,627 in understated savings we found when reviewing PMA’s calculations.

Key Recommendations

Management at Downstate Medical Center should:

  • Establish and promote a control environment that sets the foundation for proper internal controls.
  • Establish clear agreements with vendors that:
    • Require specific and measurable deliverables.
    • Delineate the specific duties and responsibilities of the vendor versus those of Downstate.
    • Contain specific remedies in the event Downstate determines the vendor fails to provide deliverables.
  • Establish controls to properly administer future contracts to:
    • Effectively monitor contractor progress.
    • Verify whether deliverables are in compliance with contract terms prior to certifying the work was completed.
    • Safeguard against a contractor’s failure to meet contract requirements, such as monetary retainage, until the contractor meets the terms and conditions.
  • Review the clinical guarantees that were not stopped and recover as appropriate.

Holly Reilly

Division of Contracts and Expenditures
Holly Reilly, Director of State Expenditures

Phone: (518) 474-4868; Email: [email protected]
Address: Office of the State Comptroller; Division of Contracts and Expenditures; 110 State Street, 10th Floor; Albany, NY 12236