Cold state contract facts belie warm, fuzzy
privatization myths
By SHERRY HALBROOK
“It’s a classic and favorite privatization myth that New York state only
contracts out for services that involve highly specialized or unique skills not
readily available in the state’s civil service work force,” said PEF Director of
Civil Service Enforcement Tom Cetrino.
“But you don’t have to scratch very deep below the surface to see that’s a lot
of baloney,” Cetrino continued.
We recently uncovered a perfect example at the state Transportation Department
(DOT) that proves how bogus that and many other myths are privatization
advocates use to disguise their plunder of the public coffers.”
Nothing like the real thing
In 2001, DOT hired Cambridge Systematics to re-engineer and automate the
Department’s Special Hauling and Divisible Load permitting systems to make them
easier to use and more efficient.
This was supposed to be a technology consulting contract for two and a half
years.
Instead of taking the scheduled exit ramp when that original contract ran out,
DOT kept right on driving. It hired Cambridge Systematics to provide on-site
staff for the permitting office.
DOT’s own civil service employees — ranging from grade 13 senior engineering
technicians, to grade 24 civil engineer 2s — who staff the Special Hauling and
Divisible Load permitting office are experienced and qualified to do this work.
Cambridge had no employees qualified to do it, when it was given this contract.
“No private-sector function exists that’s equivalent to the state regulatory
functions of DOT’s permitting office,” Cetrino said.
So, Cambridge hired and trained new employees to staff the permitting office.
Now, they work at the new DOT headquarters in Albany where, “to the average
citizen, they appear to be state employees.”
How sweet it is!
Another myth contends the private sector gives better value because it has to
compete in the market place.
Reality: What competition?
DOT did not solicit competitive bids for its contracts with Cambridge. It just
handed the work to the Massachusetts-based company and “showed them the money.”
DOT knew Cambridge had no employees qualified to staff the permitting office, so
it added $20,000 to the contract to cover Cambridge’s advertising and recruiting
costs. It also allows a Cambridge vice president to bill tax-payers’ more than
$200 per hour for time spent hiring permitting staff and signing their
timesheets.
DOT paid $1 million more to Cambridge to staff the office than it would have
paid state employees to do it.
“If DOT had hired new state employees in 2004 to staff the permitting office, it
would have cost taxpayers approximately $336,000 annually including benefits,”
Cetrino said. “Instead, it cost at least $638,000 including overhead and profit
for the Cambridge employees working at DOT in Albany. That’s nearly twice the
cost of the state employees, and this is repeated every year.”
But the running tab to taxpayers is even higher because Cambridge also bills for
its home-office staff support. From contract inception through the first three
months of 2005, the staff in Massachusetts billed at an average of $161.79 per
hour, plus another $15,000 for expenses such as travel, copying, computer and
phone.
DOT hikes the allowable hourly rates for all Cambridge employees under this
contract by 5 percent annually. And that is compounded by the 170 percent fee to
cover Cambridge’s overhead and profit which is added to the labor charges.
Getting in deeper
The original six staff to cover the transition to the new systems has grown to
seven. That contract is running out, but DOT is preparing to award a new
five-year contract for 11 on-site staff.
So much for the myth that state contracts are for short-term projects where
permanent staffing isn’t needed.
“The Cambridge contracts are a typical scenario with New York state.” Cetrino
said. “Once consultants get their feet in the door, you just can’t get rid of
them.”
Is your state agency wasting money on private consultants/ contractors? If it
is, get the facts and share them with PEF. Contact the PEF Department of Civil
Service Enforcement at (518) 785-1900 or (800) 342-4306, ext. 280.
So far, PEF and the NYS Fiscal Policy Institute have identified more than $500
million wasted annually by the state on “deals” with private contractors for
work that could be done better and for substantially less by state employees.
The Communicator Dec.06/Jan.07
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Clarification: A photo caption in the November issue of The Communicator should
have said PEF Vice President Pat Baker and Regional Coordinators Dee Dodson,
Vernetta Chesimard and Jemma Marie-Hanson coordinated the PEF Sept. 11 memorial
service in New York City.