DiNapoli seeks changes in state-contracting procedures following corruption allegations

ALBANY, N.Y. — New York State Comptroller Thomas DiNapoli is proposing changes to the state’s procurement process for state contracts.

His effort follows criminal charges and allegations of corruption in the awarding of contracts for state economic-development projects, DiNapoli’s office said in a news release issued Tuesday.

“The alleged contracting and kickback schemes uncovered by federal and state prosecutors show lax oversight over economic-development spending,” DiNapoli said in the release. “The state funneled taxpayer money to quasi-government organizations, avoiding scrutiny and sidestepping usual procurement practices. This created an environment ripe for self-dealing and abuse. New York state must take credible steps to reestablish the public’s faith in government and address the broader problems.”

Nine people, including two executives at Fayetteville–based COR Development Company, LLC, were charged in a case involving federal corruption and fraud offenses.

The charges arise from two “separate but overlapping schemes” involving bribery, corruption, and fraud in the award of hundreds of millions of dollars in New York State contracts and other official state actions, Preet Bharara, the U.S. Attorney for the Southern District of New York, said in a Sept. 22 news release.

DiNapoli in early November took administrative actions related to the bid-rigging and fraud scandal, his office said.

He put the Empire State Development Corp. (ESD) on notice that any SUNY Polytechnic Institute contracts transferred or assigned to ESD must be submitted to his office for review.

He made a series of recommendations to improve the payment process for economic-development projects to help prevent against fraud and address the long delays that have occurred with payments made by ESD for projects.

He lowered the threshold requirements for review of contracts from $250,000 to $50,000 for SUNY Poly’s contracts and put public authorities on notice of his plan to watch them closely.

Oversight
By state law, the state comptroller’s office is responsible for reviewing and approving state-agency contracts above $50,000 and certain contracts over $1 million for state public authorities.

In 2015, the comptroller’s office reviewed 21,381 contract transactions totaling $169.2 billion.

In recent years, executive and legislative actions have eroded the comptroller’s contract oversight.

In 2011, the state eliminated the oversight for construction and construction-related services contracts, among other purchases, issued by the State University of New York (SUNY) and City University of New York (CUNY).

In 2012, the state removed the comptroller’s oversight of Office of General Services (OGS) centralized contracts.

In 2015, state agencies issued more than $6.8 billion in contracts without comptroller review.

DiNapoli said he wants changes that would increase independent oversight of contracts, prohibit the state from using state-affiliated nonprofits to do state business, make procurement requirements uniform, and “toughen” ethics and transparency rules.

Specific proposals
DiNapoli wants the state to restore the comptroller’s independent oversight for SUNY, CUNY and OGS centralized contracts. He contends recent allegations show “widespread weaknesses” in SUNY’s procurement process and “lax oversight” of its affiliated nonprofits. Restoring systemic checks and balances that had been taken away “can help prevent” future abuses and ensure that “everyone is following the same rules,” his office added.

The state comptroller also seeks to prohibit the use of nonprofits to bypass procurement laws and transparency. DiNapoli contends all contracts for state spending should either be held directly by a state agency or public authority and be subject to independent oversight. SUNY’s affiliated nonprofits had “lax oversight and poor processes” in place that appear to have been “manipulated in multiple ways,” allowing a non-competitive contracting process to occur and “preferred” contractors to secure business, per the news release. These entities “should not be used” for state business or to bypass the routine and well-tested rules and regulations that state agencies follow.

DiNapoli also wants to require state public authorities to follow the same procurement requirements as state agencies. The procurement rules and approval process “are not the same” for every entity entrusted with taxpayer funds. Public authorities can adopt their own internal guidelines and do not have to follow state agency requirements clearly set out in law. DiNapoli contends that having everyone follow uniform requirements “helps give assurance of competition, fairness and best value for taxpayers.”

In addition, DiNapoli also wants to review contracts over $1 million for the Research Foundation of SUNY. The Research Foundation is currently not required to have any independent review of its contracts, something that DiNapoli “would change.” He proposes that his office review contracts over $1 million funded with state dollars.

The state comptroller also seeks to create tougher ethics requirements and penalties for those who abuse the procurement process. DiNapoli would strengthen disclosure of conflicts for employees of state agencies or public authorities, as well as board members and others, engaged in the process. He wants to prohibit vendors who have violated procurement law from getting state business and create a code of ethics for vendors doing business with the state.

Contact Reinhardt at ereinhardt@cnybj.com