Thanks are due to our friends at ProPublica for pointing out that the New York Office of the State Comptroller published a letter stating it would not approve a stimulus-funded contract for highway bridge painting, absent a more comprehensive review of the vendor’s responsibility. This is a great example of effective stimulus oversight that other states, localities, and even the federal government can learn from (especially in light of recent news that the General Services Administration awarded stimulus-funded contracts to a company with a history of misconduct).
Firstly, as is often the case in discovering contractor misconduct, the Comptroller’s staff followed up on a whistleblower complaint, this time in the form of an anonymous tip suggesting the bidder may be a front for another contractor that had been debarred. As we have stated time and again, whistleblowers and inside sources often provide the critical pieces of information that lead to uncovering fraud, waste, and abuse.
Secondly, the New York Comptroller’s office employed contract oversight best practices. Like in other states and cities, New York statutes generally require a vendor to be determined to be responsible prior to the award of a contract. The New York state Comptroller is unique in having the authority to independently review most state agency contracts -- generally those worth more than $50,000 -- effectively granting it to the power to reject a contract before it is signed. Even though a vendor may be exempt from state responsibility requirements, the Office of the State Comptroller may still investigate a vendor as part of its review process.
The New York Comptroller, Thomas DiNapoli, has decided that every stimulus contract will receive the most intensive responsibility review that is usually reserved for higher-risk contracts, partly because the Comptroller’s Office thinks the stimulus will attract new vendors.
The way the responsibility review is set up to work is this:
(2) The agency procurement office reviews the questionnaire and independently verifies the vendor’s responses by using a list of independent sources. Sometimes the procurement officer finds a lapse such as an outstanding tax lien. If the contractor fixes the problem, the procurement officer can determine that the contractor is responsible, and the contract goes to the Comptroller.
(3) The Comptroller’s vendor responsibility team then conducts a more detailed review, by looking at debarment lists from other states or consulting POGO's Federal Contractor Misconduct Database, for example. If it finds something, it informs the procurement official at the agency, who usually works with the vendor to resolve the issue if possible.
Naysayers may view this process a needless impediment, but it's important to remember:
The responsibility review process doesn’t take forever. The Comptroller’s staff reports that it has been approving stimulus-related contracts in an average of 3.5 days.
The responsibility review process is not anti-business. The responsibility review helps remove the "bad guys" from the pool of competition and helps the "good guys" comply with the rules. It’s rare that the Comptroller finds a vendor is not responsible because they give the business a fair opportunity to correct any problem.
The responsibility review process increases contractor responsibility. The Comptroller’s office has learned anecdotally that their rigorous review makes contractors more proactive, with more contractors obeying employment and workplace laws and paying taxes. In other locations, audits have found a direct correlation between a contractor’s workplace law violations and poor quality goods or services by the contractor.
The National Employment Law Project delved deep into state and local contractor responsibility reviews in The Road to Responsible Contracting and recommends that the federal government consider how it too can "incorporate more rigorous responsibility review at the front end of the selection."
However, there are some components that still need some work. New York state does not yet have a misconduct database (NYC's Vendex focuses only on vendors that do business with the City of New York), something they would like to implement but that has not been possible with the economic downturn. Without it, procurement officers at different agencies, and even in different states, are duplicating compliance reviews for the same contractors. Also, there is not yet a rigorous system for subcontractor oversight.
Kudos to the Comptroller for publicly releasing his letter to the state contracting agency. It sends a clear message to contractors that someone is watching and lets potential whistleblowers know that their tips will be taken seriously.
Unfortunately, even though thousands of stimulus-funded contracts have been signed across the nation, POGO has not heard of any other examples where the responsibility of contractors is being questioned. If you know of some effective oversight mechanisms that are being used for the stimulus, please let us know about it by completing this brief survey.
-- Ingrid Drake