14 minute read
REFORMS NEEDED
COMMENTARY
CONTRACT CONUNDRUM
Advertisement
New York City’s delays in paying nonprofits threatens their existence.
By John MacIntosh
EVERY NONPROFIT LEADER knows that procurement matters since when and how nonprofits get their funding can be more important than how much they get. Fair procurement is also inseparable from racial and economic justice, as few nonprofits have the financial resources to shield their clients and staff from the risks – layoffs, furloughs, missed payrolls, hollowed-out programs – created by late, unpredictable or otherwise dysfunctional procurement.
There is widespread agreement that procurement was dysfunctional during then-New York City Mayor Bill de Blasio’s administration, which is no surprise given that he showed no sign of having the political will required to change it. He also showed little evidence of caring very much about the city’s nonprofit partners. I have been optimistic that Eric Adams’ administration would be different, though after nine months the results appear to be mixed.
The good news is that procurement has received attention from experienced leaders who have already taken some tangible actions. The officials leading the charge on procurement reform – New York City Comptroller Brad Lander, Deputy Mayor Sheena Wright and Chief City Procurement Officer Lisa Flores – each have direct experience on this issue.
Early education nonprofits are starting to close because of back payments due.
Lander was executive director of the Fifth Avenue Committee. Wright led the United Way of New York City, which Checkbook NYC shows had 37 city contracts totaling $234 million during her tenure; 97% of which were registered late with an average delay of more than 10 months. (Checkbook also suggests that the organization is still owed as much as $30 million for work completed before June 30.) Flores was the deputy comptroller for contracts and procurement, where she oversaw the review of all contracts, and led some of former New York City Comptroller Scott Stringer’s work highlighting registration delays.
These leaders have also taken concrete steps that should improve procurement in the future. They publicly highlighted the issue through the Joint Task Force to Get Nonprofits Paid On Time; they made additional information on procurement available through the launch of Passport Public; they cleared more than $4.2 billion in unregistered contracts through the Clear the Backlog initiative, which involved staff being lent from higher-capacity city agencies to those that were struggling; and they have engaged two outside consulting firms to explore the more fundamental changes required to better procurement – for example, changes to the Procurement Policy Board. All of this should be celebrated.
At this point a cynic might ask: “Yeah that’s great, but what does the data say? What are the facts? How is the city really doing?”
Unfortunately, there are limitations to the publicly available data. While Passport Public is a fantastic new tool, it only covers some contracts. (The Mayor’s Office of Contract Services said it was “working with city contracting agencies to phase in current contracts” but there was no announced timetable and no definitive list of what’s not included.) Checkbook – the other public source of data – is exhaustive but only for contracts that have been registered, making it less helpful for understanding what is going on right now.
With these caveats, the data shows there are contracts that remain unregistered from fiscal year 2022, and in some areas, payment delays against registered contracts from fiscal year 2022 and prior are so large that they pose an existential threat to the nonprofits involved. There are also worrying signs that the registration backlog – largely cleared for fiscal year 2022 – is building up again for fiscal year 2023.
For fiscal year 2022, 24% of contracts remain unregistered. The city has been successful in clearing the backlog of new nondiscretionary contracts (only 5% unregistered); but amendments (16% unregistered) are lagging and discretionary contracts (47% unregistered) remain a huge problem. A disproportionate number of the unregistered nondiscretionary contracts are from the Department of Education and the Mayor’s Office of Criminal Justice.
For fiscal year 2023, the backlog is building. Only 47% of new nondiscretionary contracts are registered or pending; only 16% of amendments
COMMENTARY
are registered or pending; and no discretionary contracts have been registered. Here again the Mayor’s Office of Criminal Justice and the Department of Education continue to show the lowest registration rates.
While discretionary contracts are a miniscule fraction of the city’s budget, they are vital for many of the small community-based organizations. And while nonprofits may be doing better – taken as a whole – those with contracts from the Department of Education and the Mayor’s Office of Criminal Justice appear to be suffering, which is consistent with what we have been hearing from individual organizations.
In an earlier press release, Adams said, “We are putting new streamlined processes into place so we don’t get bogged down in backlogs again – now or in the future.” Well, the future is now and there is no sign of these new processes. Before things get out of hand, the city should consider a Reclearing the Logjam effort focused on the agencies that are struggling. Nonprofits are spending money right now serving New Yorkers under unregistered contracts, and the more time passes, the more pressure they will face.
Despite the attention it has received, registration is only the first step of the process that leads to payment. Unfortunately, it is harder to estimate exactly how the city is doing with payment compared with registration. Registration is an all-or-nothing event that occurs on a given day; payments take place over time and the delay is a matter of degree. While Checkbook shows every check cut by the city, and its associated contract, it does not show when the corresponding invoice or voucher was presented.
– New York City Mayor Eric Adams
Nevertheless, we can use Checkbook to estimate the gap between what nonprofits have spent and how much they have been paid – a decent proxy for delays. On this basis, Checkbook suggests nonprofits have yet to be paid for 27% of the work they have done under registered contracts. Large corporations can easily handle delays of this magnitude given their high profits and access to financing, but most nonprofits cannot. In particular areas, for example early childhood education where the delay appears to be 4 1/2 months, delays have reached the point where they threaten the ability of the partners to pay their staff – let alone continue the work.
It would be a shame if the city were to have largely cleared the registration logjam only to have the problems reappear as payment and invoicing delays. While waiting for the consultants to develop long-term solutions, the city should launch a short-term effort to clear the invoice and payment logjam.
The procurement “problem” will never be “solved” in a large, bureaucratic, shortstaffed system prone to backsliding where improvements will often be incremental. It’s a thankless, Sisyphean task requiring continuous focus and political will. However, this administration has the right people for the job, and we should be encouraging and cajoling them to keep working rather than resting on their laurels. Things are likely to get worse for the city’s finances in the next few years, and it’s even more important that nonprofits get paid on time when money is tight. ■ John MacIntosh is a partner at SeaChange Capital Partners, which helps nonprofits navigate complex challenges.
NOVEMBER 17, 2022
Museum of Jewish Heritage 36 Battery Place, New York, NY 10280
Join us as we bring together experts across sectors to assess the current state of New York’s transportation systems, break down recent legislative actions, and look towards the future of all things coming and going in New York Panel Topics Include: • Reimaging New York’s Transit Systems • Building Towards a Safer and More Secure Future • What are the Most Innovative Transportation Projects Happening in New York? • Connecting All of New York KEYNOTE SPEAKER: Marie Therese Dominguez, Commissioner, New York State Department of Transportation
SPONSORS: BOINGO WIRELESS T-MOBILE DATAMINR KPMG BROWN & WEINRAUB DHC PATRICK B. JENKINS & ASSOCIATES TRANSIT WIRELESS AMAZON BAE SYSTEMS CHECK OUT THE FULL AGENDA & REGISTER TODAY! For more information on programming and sponsorship opportunities, please contact Lissa Blake at lblake@cityandstateny.com.
Waiting to connect
New York City had a plan to expand broadband access – until the Adams administration abandoned it.
By Annie McDonough
ASELF-PROFESSED “tech geek,” cryptocurrency enthusiast and former COBOL programmer, New York City Mayor Eric Adams is an unabashed techie. Adams has been a vocal cheerleader for moving more city services online, diversifying the local tech ecosystem and making the city’s own technology offices more efficient.
But when it comes to expanding broadband internet access – something that will allow New Yorkers to participate in the technological evolution Adams champions – some lawmakers and civic technologists warn that despite the well-intentioned goal of getting the least connected New Yorkers wired up, the administration is so far prioritizing quick wins over the long-term goal of universal, affordable and reliable broadband.
Last month, Adams and Matt Fraser – the chief technology officer appointed to lead the city’s consolidated tech offices under the Office of Technology and Innovation – announced Big Apple Connect, a new program that commits to offering free in-home internet and basic cable subscriptions to 300,000 public housing residents in over 200 developments by the end of 2023. The program, starting out in more than 100 New York City Housing Authority developments, is essentially a subsidy program. The administration is bulk purchasing internet and cable packages from two large internet service providers – Charter Communications and Altice – at a cost of under $30 per month under threeyear agreements. Negotiations are ongoing with the city’s third cable franchisee, Verizon. The program is estimated to cost the city $30 million per year, though that will depend on how many residents sign up.
While few disagree that NYCHA residents are most urgently in need of high-speed, affordable broadband, the launch of Big Apple Connect highlighted the fact that New York City already had a comprehensive plan for expanding broadband internet – a plan that the Adams administration has indefinitely shelved.
The Internet Master Plan, released in January 2020 under the de Blasio administration, outlined the existing barriers to greater broadband adoption in New York City. Although the vast majority of the city has access to broadband internet, affordability is a major barrier to adoption. Many people living outside of high-income areas only have an option of one or two providers, and fiber optic infrastructure, which can provide higher speeds, is far from ubiquitous. The report found that 29% of households in the city lack a broadband subscription at home.
The Internet Master Plan’s prescription for high-quality and affordable universal broadband included the creation of a competitive marketplace with a diverse range of providers, the utilization of city-owned assets like rooftops and lampposts for providers to install broadband equipment, and an investment in new publicly owned fiber optic infrastructure. The plan included an initial $157 million investment to build new publicly owned infrastructure in underserved areas that could be used by private companies, reducing the city’s reliance on privately owned internet infrastructure.
Just before leaving office last fall, former Mayor Bill de Blasio announced that a dozen companies were selected to participate, including some minority-owned or minority-led companies. A pilot program related to the plan had previously tasked a handful of providers with offering low- or no-cost internet plans at 18 NYCHA developments. Those pilots are still going on, but the $157 million has yet to be touched.
With Big Apple Connect – a program that so far relies on only two legacy cable service providers and their existing internet infrastructure – several people who worked on the Internet Master Plan said the city was missing an opportunity to diversify the market and build publicly owned infrastructure.
The Adams administration has said that moving ahead with Big Apple Connect while the Internet Master Plan is still on pause is about “stopping the bleeding.”
– New York City Council Member Jennifer Gutiérrez
“While the Master Plan contemplated a multiyear long and very expensive $157 million investment, Big Apple Connect will help citizens immediately,” Brett Sikoff, executive director of franchise administration at the Office of Technology and Innovation, said at a City Council hearing last month. Because Charter, Altice and Verizon already have existing internet infrastructure that can serve NYCHA buildings and are already cable franchisees, the city office only sent a request for proposals to participate in Big Apple Connect to those three providers. Now it’s just a matter of getting residents signed up.
City officials acknowledged that creating a more competitive market is critical to affordable and reliable internet access. “We will continue to discuss ways to partner with M/WBEs in the future on other telecommunications projects,” Office of Technology and Innovation spokesperson Ray Legendre said in an emailed statement.
But at the September hearing, employees from the office were unable to provide a timeline for when additional providers, including MWBEs, might be brought in to participate in Big Apple Connect, or how they would be able to compete for customers with Charter and Altice if those companies have already signed up large swaths of NYCHA residents.
Silicon Harlem was selected as one of the 12 providers in the Internet Master Plan last year. CEO Clayton Banks told City & State that he hasn’t been contacted by the Adams administration about either the Internet Master Plan or about participating in Big Apple Connect. “We’re very curious what the future looks like,” Banks said. “My experience in the last couple of years of putting together the Internet Master Plan, getting an RFP out and having 12 companies identified as competitive ways of making sure everyone gets connected – (Big Apple Connect) was just a little bit of a surprise.”
Some proponents of the Internet Master Plan view it as an obvious way for the Adams administration to achieve its stated goal of creating a more competitive and diverse marketplace. “If they were trying to build a more inclusive tech ecosystem in New York City, they were handed it on a silver platter,” said one person who worked on the Internet Master Plan and was granted anonymity to speak freely.
Given that the Internet Master Plan isn’t moving forward, some lawmakers said the Adams administration doesn’t appear to have a master plan of its own in the works to replace it. Following last month’s hearing, New York City Council Member Jennifer Gutiérrez, who chairs the Technology Committee, called for a “robust roadmap” and not “pop-up programs” to expand broadband access and adoption across the city. “I am deeply concerned that OTI was not able to provide any details on longer-term plans to connect New Yorkers to the internet beyond the Big Apple Connect program, which was announced the morning of the hearing,” Gutiérrez said in a statement. “While I celebrate a program that expediently provides internet access for our NYCHA developments, it’s unacceptable that OTI does not have a comprehensive plan that works to connect more New Yorkers to the internet.”
At that September hearing, Sikoff said the office was continuing to “reevaluate” the Internet Master Plan, which was the same answer that Fraser gave when asked about the plan in May. Sikoff suggested that in addition to its cost, officials were concerned that the Internet Master Plan would duplicate new build-outs of fiber that have happened since the plan was released in 2020. It’s unclear what part of the Internet Master Plan was still being evaluated, though Sikoff left open the possibility that unspecified aspects of the plan could be “leveraged” in the future.
Asked about whether the Adams administration had a master plan of its own for expanding broadband access, Legendre said the administration was “action-oriented when it comes to meeting the digital needs of our lower-income communities, immigrant communities, and communities of color.” He pointed to Big Apple Connect, new 5G connectivity at LinkNYC kiosks and the administration providing access to devices and digital skills training to “New Yorkers who have been left behind in the digital age.” He also pointed to Connected Communities, a de Blasio-era program that provided devices and digital literacy training in historically underserved areas. ■
Mayor Eric Adams has a short-term plan for internet access, but not one that applies to the whole city.
