PEF: Make state agencies meet consultant-reduction goals, save $656M by 2012-13
By SHERRY HALBROOK
Thanks to the Contract Disclosure Law of 2006, some of the state’s overspending on private consultants is coming into sharper focus and it’s not pretty.
Based on reports filed with the Office of State Comptroller (OSC), PEF believes the state could save between $280 million and $480 million annually by replacing just half the consultants with state employees.
“Unfortunately, that’s still just the tip of the iceberg,” said PEF President Ken Brynien, “because the reports filed with the OSC cover only 20 percent of total consultant expenditures. Many state agencies are either failing to file any reports on their consultant use, or their reports are incomplete or incorrect.”
Nevertheless, data reported to the OSC for the 2008-09 state fiscal year reveals the state paid thousands of consultants performing professional services an average of $160,719 annually, 62 percent more than public employees doing similar work even after you factor in the cost of their pensions and benefits.
While that 62 percent average disparity in cost is staggering, it’s dwarfed by the profligacy of private contracting by some agencies.
For example, the state Election Commission paid the equivalent of 12 full- time consultants working on three separate contracts $5.7 million a year, equating to an annual cost of $456,000 per consultant.
The state Insurance Fund paid an average of $450,000 a year to the equivalent of three full-time consultants working under separate contracts.
The “winner,” however, is the $543.94 average hourly cost for legal consultants at the NYS Racing Commission Oversight Board, including paralegal services at a cost of $552 an hour.
“When taxpayers are crying out for relief, and the governor is searching for ways to economize and make state government more cost-effective, how can such blatant overspending persist?” Brynien asked. “People like to blame state employees for the shortfall, but they are a great value. The blame is easy to place when you get the hard data and crunch the numbers, as we have.”
PEF recommended the state take the following steps to achieve the greatest potential savings:
1. Enact a Consultant Reduction Plan with a goal of saving $375 million annually by fiscal year 2012-13. Over three years, this plan could save the state more than $656 million.
The plan should:
• Require the state Division of Budget (DOB) to set savings targets for each state agency for consultant spending, focusing on information technology and engineering services;
• Freeze new and renewed state-agency consultant contracts for more than $100,000 until a cost-benefit analysis is completed by an agency and reviewed, and a waiver is approved by the DOB; and
• Require the state Transportation Department, as part of its consultant-reduction plan, to conduct at least 90 percent of its bridge inspections with state employees within three years.
• Enact a law requiring state agencies to perform a cost-benefit analysis before entering into any consultant contract for more than $100,000.
• Enact penalties for failure to file reports under the Contract Disclosure Law. The DOB and OSC should improve the consultant reporting as recommended by the Governor’s Task Force on Personal Services Contracting. (See related article)