Personal, Miscellaneous Contracts Cost MTA Nearly $3 Billion Since 2005

New York State Comptroller Thomas P. DiNapoli today released an audit that found the Metropolitan Transportation Authority (MTA) needs to improve its process for approving personal and miscellaneous services contracts, which have consumed up to 15 percent of the MTA’s annual operating budget in recent years. The audit found that the cost of such contracts increased to $881 million in 2008 from $315 million in 2006.

During the four-year period examined by the audit, the MTA awarded thousands of contracts worth approximately $2.9 billion for outsourced services, including engineering and architecture, waste management, consulting and information technology. Auditors found that the MTA could not show that awarded contracts were always the most cost-effective option. The MTA also lacked a process to periodically determine whether these contracts were still necessary or if they could be suspended or scaled back to help manage fiscal constraints.

“The MTA has raised fares and received more tax dollars to cover its deficits and debt,” DiNapoli said. “At the same time, the MTA expanded its use of personal service contracts without a thorough evaluation of the need or cost-effectiveness of those contracts. Now more than ever, every dime counts, and the MTA needs to manage public resources more carefully. Consultant contracts should only be used when absolutely necessary, and there has to be documented justification of that need.”

DiNapoli’s auditors found that the MTA contracted for some services that would appear to be within their in-house capabilities. In such cases, the MTA should consistently document the need to contract out for such services. For example, MTA awarded 244 contracts totaling $513.6 million for engineering and architecture services, 387 contracts totaling $203.9 million for maintenance services, 183 contracts worth $149.5 million for consulting services, and 46 contracts $99 million for waste removal. The MTA also awarded contracts for real estate management, tree trimming and bus engine repair, despite the existence of in-house staff that perform similar services.

The audit recommended that the MTA look at the potential for cost savings by eliminating contracts for outside services. By way of illustration, the audit noted that a 10-percent dollar reduction in consultant contracts, the goal Governor Paterson set for state agencies and public authorities, would save $176 million.

The DiNapoli audit also found that:

MTA records showed that the agency initiated or completed consultant contracts valued in excess of $4.5 billion between January 1, 2005 and October 16, 2008;

Spending on miscellaneous contracts consistently exceeds $1 billion per year and is rapidly approaching $2 billion per year;

The value of awarded contracts nearly tripled between 2006 and the first 10 months of 2008, while the actual number of contracts declined by 35 percent during the same period;

New York City Transit alone accounted for 776 contracts worth $1.8 billion during the audit period; and,

Nearly one-quarter of all service contracts were non-competitive, including awards to sole contractors and well as emergency purchases.

The audit recommends that the separate constituent agencies of the MTA:

Improve documentation of compliance with the MTA’s “All Agency Guidelines for Procurement of Services” by determining whether agencies can collaborate on contracts, or fulfill their needs by using another agency’s in-house expertise or existing contract;

Periodically re-evaluate personal and miscellaneous contracts after they begin; and,

Take steps to scale back or suspend reliance on service contracts, where appropriate.

The MTA agreed with most of the audit’s findings, and announced the creation of a subcommittee on service contracts usage shortly after the start of the audit process in November 2008. This audit is part of DiNapoli’s ongoing efforts to closely monitor the financial operations of the MTA. Since 2007, DiNapoli has released nine other audits on the MTA as well as six reports on MTA finances and policy. There are several other MTA audits underway.

Click here to view the audit and MTA response.