Legislation will protect taxpayers by amending existing law to require cost benefit analysis for certain outsourcing contracts and will increase transparency by requiring public notice of intended service contracts

New York, NY- At today’s Stated meeting, the Council will vote to safeguard billions of taxpayer dollars that are spent annually in the procurement of City services. The common sense legislation will amend an existing law to enhance competition, increase transparency and maximize cost efficiencies when entering into contracts that could displace City workers. The existing law, Local Law 35 of 1994, was intended to meet these goals. However, in the 17 years since then, the City has rarely reached the cost-benefit stage of the process—much less provided any discernable analysis as to why not.

FOSTERING COMPETITION, INCREASING TRANSPARENCY AND CREATING GREATER ACCOUNTABILITY IN CITY SERVICE CONTRACTING

In the last fiscal year, the City spent more than $10 billion working with private contractors. While some of this outsourcing was necessary and cost-efficient, more than $3 billion of this money was spent contracting out standardized and professional services jobs, such as general maintenance, cleaning, data entry and computer programming. Governments often claim that such services can be provided more cheaply if outsourced, yet recent studies show the privatization and outsourcing of these very types of services has often been more costly to taxpayers.

“Outsourcing is not always the way to go. A recent study shows that privatization and outsourcing can be on average, almost twice as expensive for taxpayers,” said Council Speaker Christine C. Quinn. “It is time for outsourcing practices to change. In the current fiscal climate, we literally cannot afford to overlook the possibility that city workers may be able to do the job for less.”

“The City stands to significantly benefit from this legislation,” said Council Member Darlene Mealy, Chair of the Committee on Contracts. “The annual plans will increase competition, the cost benefit analyses will highlight areas for potential cost savings, and the new certification procedure will create transparency in contract decision making. The act will save money, services and jobs, and is a win for all New Yorkers.”

The current law requires agencies to determine whether a proposed services contract would displace City employees and if so, to conduct a cost-benefit analysis to determine if outsourcing makes the most sense for the City. Unfortunately, the current law has not lived up to its promise. Agencies have interpreted the law to apply only to a very narrow universe of contracts and over the past 10 years, have never made a determination of displacement or conducted any cost-benefit analyses.

Under the Outsourcing Accountability Act, the law will be clarified to ensure that it applies to a broader universe of contracts, require City agencies to explain in detail their non-displacement determinations and in certain circumstances, presume displacement so that the agency would be required to conduct the cost benefit analyses envisioned under the original law.

Further, under the Act, agencies will be required to publish a services contracting plan at the beginning of each fiscal year, mapping out each agency’s planned service contracts. This blueprint will give City employees as well as private vendors the ability to see what services agencies need so they can prepare accordingly to fill those needs. The advance notice will afford both City employees and private companies greater opportunities to compete since they will have more time to prepare their proposals.

In these ways, the Act will foster competition, increase transparency and protect taxpayer dollars. The legislation is not meant to hinder outsourcing. Rather, the Act will help ensure that outsourcing contracts are in the best interests of the City. Specifically, the Act will amend the current law in the following ways:

• Require the City to provide public notice of the intent of agencies, both mayoral and non-mayoral, to issue requests for proposals, invitations for bids, or other solicitations, or renew or extend existing service contracts through annual contracting plans;
• Better define the types of contracts covered under the law to include all new, renewed, and extended successor contracts for standard and professional services;
• Require agencies to conduct a retrospective review of their employment actions over a three-year period prior to the proposed contract to identify key indicators such as attrition, layoffs, and announcements of anticipated employment actions related to employees who perform the services sought in the proposed contract. If the agency identifies any such factor, there is a presumption of displacement and the agency must conduct a cost-benefit analysis, weighing the efficiencies of outsourcing the service versus performing the work in-house; and
• Require agencies to provide details underlying their (non-)displacement analyses, including information concerning the capacity within the agency to perform the services sought in the proposed contract, and to certify that none of the indicators of displacement occurred in the three-year period preceding the proposed contract.

The Council has worked hard over the years with the Bloomberg administration to streamline the contracting process. To name a few examples: the Council raised small purchase limits, averting many steps of larger procurement projects; allowed agencies to acquire goods off of federal government vendor lists; authorized agencies to streamline the procurement of client services; and reduced the number of forms needed to be filed by vendors with multiple contracts.

Each of these reforms has led to significant reductions in the amount of time it takes the City to process procurements. But, with every process involving the expenditure of public money, we must balance the need to get the job done with an obligation to protect taxpayers. With this legislation, the benefits of potential cost savings to the City far outweigh any burdens of implementing the law. The Council is also confident that the requirements of this law can be achieved simultaneously with other procedural safeguards already performed for every City contract, including drafting the contract solicitation, publication process, bidding period, bid evaluation, Vendex and responsibility determinations and contract negotiations. Therefore, this legislation will not add significant time to the contracting process.

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