TESTIMONY
Jocelyn Strauber, Commissioner of the Department of Investigation, on Recommendations to Reform NYCHA's Micro Purchase No Bid Contracts Process
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11 min
Jocelyn Strauber discusses DOI's investigation into NYCHA's micro purchase no bid contracts, uncovering corruption, and proposes reforms to tackle vulnerabilities.
- Strauber reveals findings from a joint investigation with the Brooklyn district attorney, showing bribery in NYCHA's contracting process.
- DOI recommends centralizing procurement, lowering the vendor screening threshold, and conducting integrity screenings to counter corruption.
- Despite implementing one recommendation, NYCHA rejects several others, albeit taking steps to improve procurement process controls.
- NYCHA's CEO fully supports DOI's latest set of 14 recommendations aiming to strengthen oversight and controls, with plans for implementation within a year.
- The testimony underscores the critical need for transparency, accountability, and public involvement to ensure integrity in NYCHA's procurement process.
Jocelyn Strauber
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My name is Jocelyn Straubber, and I'm the commissioner of the Department of Investigation, known as DOI.
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Thank you, Chair banks, and members of the committee on public housing, chair Juan and members of the committee on contracts, and Chair Brewer and members of the committee on oversight and investigations for the opportunity to speak about DOI's recommendations.
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To the New York City Housing Authority, Nitro, as they relate to micro purchase no bid contracts.
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As you know, DOI oversees NYCHA through its office of the inspector general for NYCHA, and we conduct investigations that can result in criminal charges, administrative findings, or both.
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When an investigation identifies corruption vulnerabilities, DOI makes recommendations to reform city policies and procedures called policy and procedure recommendations or PPRs.
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In order to address those issues.
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DOI's recommendations do 3 critical things.
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1st, They alert city agencies to corruption risks and provide a means to prevent them.
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2nd, they prompt a dialogue between the agency and DOE.
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Concerning the importance of the recommendations in addressing the risks the agency faces and the challenges, if any, to implementation.
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And 3, create an environment of ongoing accountability, not just by DOE, but by other governing entities and the public because DOI's recommendations are publicly issued either via our website or on some occasions in a public report.
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In short, DOE's recommendation process promotes transparency and government and accountability on the part of agencies that deliver vital public services and invites the participation of other governing bodies and the public in DOI's anti corruption work.
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Today, I will provide you with a summary of the micro purchase no bid contract investigation, DOI conducted with the Brooklyn district attorney's office.
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That led DOE to issue 5 PPRs to NYCHA in 2021 and NYCHA's related responses.
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And I will summarize the 14 recommendations that DOE announced earlier this month after the arrests of 70 current and former Nighthat employees.
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For ease of reference, those 14 recommendations are also attached to my written testimony that has been submitted for record.
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I want to make clear that I'm not able to address or provide information about the recent arrests or the related recent investigation.
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Which was handled jointly with the United States attorney for the Southern District of New York and our other federal partners.
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Micro purchase no bid contracts are generally used at NYCHA to procure small repairs directly at the development level.
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So that they can be done quickly without a complex bidding and procurement process.
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NYCHA employees who work in the housing developments principally supervisors handle these contracts.
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In approximately 2019, DOI began looking at NIKE's micro purchase contracting process due to reports from NICA employees that they had received bribe offers from vendors doing business at NICA Housing Developments in Brooklyn.
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DOI partnered with the Brooklyn district attorney's office to conduct the investigation, which included the use of undercover DOE investigators.
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Who posed as assistant superintendents at a number of developments.
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The investigation found that between 2019 2021, 9 vendors paid bribes totaling tens of 1000 of dollars.
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Tonight to employees or DOI undercover investigators.
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To obtain lucrative, no bid, micro purchase contracts awarded at the housing development level.
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In 2021, DOI and the Brooklyn district attorney announced bribery charges against 9 vendors.
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Ultimately, after 3 additional vendors were charged, 12 vendors in total plead guilty to either rewarding official misconduct in the 2nd degree, a class e felony, or giving unlawful gratuities.
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A class a misdemeanor.
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These vendors were associated with 11 companies.
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The companies also plead guilty to either a felony, a misdemeanor, or a violation.
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DOI warned other city agencies about these vendors in light of the charge conduct by entering cautions into passport, which flag, as you know, derogatory information about vendors for city agency contracting officers who check passport regularly for information on city vendors.
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The investigation and the charges that I just described made clear in our view that Nitrogen needed tighter controls over the micro purchasing process to prevent this type of corruption.
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Doi therefore issued in 20 21, 5 PPRs, he focused on the vendors as well as the NYCHA supervisors.
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Most importantly, DOI proposed that NYCHA moved contracting authority from the development level staff to a central procurement department and that NYCHA conduct additional screening of vendors.
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Specifically, DOE recommended that Nietcha, move responsibility for small procurement awards from frontline superintendents and property managers to NICE's central procurement department, which will receive requests for small procurement work from the housing development staff and then award jobs to contractors on a rotating basis.
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2nd, DOI proposed that Knight will lower the cost threshold for vendor screening review.
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From 250,000 to a 100,000 so that all vendors whose aggregate work for NICA is a $100,000 or above on an annual basis, are subject to screening by DOE's office of the inspector general.
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3rd, DOE recommended that night to conduct cursory integrity screenings.
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At the inception of work by small procurement contractors, even those below the existing 250,000 aggregate contract limit.
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Nitrous procurement department, we recommended should check passport, the city's contracting database, to identify contracting cautions by any city agency.
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4th, we recommended that NYCHA adopt a fixed price list for small procurement jobs to prevent overbilling.
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That is to prevent contractors from charging as close as possible to the $10,000 micro purchase limit even for trivial jobs.
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And finally, we recommended that oversight of small procurement jobs be further enabled by having housing development staff upload all signed invoices into NyTra centralized payment database known as Oracle.
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Prior to and after issuing these recommendations.
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DOI maintained a robust dialogue with NYCHA about the significance of the proposals in light of the investigation's findings.
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Nietta ultimately implemented only the 3rd recommendation of the 5 that I just mentioned concerning cursory integrity screenings and rejected the rest, although Nietcha did take some other steps intended to improve controls around the procurement process.
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Those included training of development staff involved in awarding contracts about ethical procurement and the consequences of corruption.
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Training them to check down in Bradstreet, a risk management tool for potential red flags about vendors prior to solicitation of contracts.
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And developing templates that itemized labor and material costs involved with each quote from the vendor.
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Those templates were provided to the development staff for their use.
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Problems within the micro purchase process persisted, however, despite the changes that NICE implemented.
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In particular because frontline supervisors at the housing development level continued to have primary authority over small procurement purchases.
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Despite DOE's recommendation against this practice.
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DOE worked with the US attorney for the Southern District of New York on 2 other separate matters that in 2020 2, led to the arrest of 2 former night to supervisors on charges of accepting 1000 of dollars in bribes to dole out no bid contracts.
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Last year, both of those former NYCHA employees were convicted and sentenced to federal prison terms for their criminal conduct.
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The 14 recommendations that DOE issued as a result of its most recent investigation are attached to my testimony as I mentioned.
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They focus on strengthening oversight and controls around the micro purchase process so that it is less vulnerable to abuse by both NICA employees and vendors while still maintaining efficient service for Nitro Residence.
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These recommendations also call for additional education of Nitro employees, on topics including how to identify corruption and fraud and their duty as city employees to report corruption and illegal bribery and gratuities to DOE.
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3 of the recommendations DOE recently made are similar to those made in 2021 that were not implemented.
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DOI continues to believe that these policy changes are essential to remedying the vulnerabilities that we have now seen in a number of separate investigations.
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Specifically, these recommendations are that NYCHA should remove responsibility for micro purchases from staff within the housing developments and place that responsibility with specialized central staff outside of the developments with the necessary expertise.
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Establish a schedule of cost estimates for the top 15 types of services and goods most often obtained by developments through the micro purchase method.
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And when a vendor's cost proposal exceeds the cost estimate, require the vendor to provide a written explanation for the additional cost.
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And finally, review all micro purchases whether or not in excess of the cost estimate schedule prior to processing payment to a vendor.
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These reviews should be conducted by NICE staff outside the development commissioning the work and should include a review of relevant documentations such as the statement of services before and after photos and the vendor's invoice.
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Nietta's CEO, Lisa Bova Hayat's response to these 14 recommendations was unequivocal, Nietta fully supports them and is working with DOE's OIG for NYCHA to implement them.
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Our inspector general overseeing NYCHA has been actively working with the agency on this effort.
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Some of these recommendations I understand will take some time to implement as they require restructuring of the micro purchase process but I understand also that NICE aims to implement the majority of the 14 recommendations within the next year.
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And NICE can provide more detail, I'm sure, on the exact time frames.
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The micro purchase process is critical to NICE's ability to efficiently obtain the goods and services necessary area to maintain the housing developments and be responsive to residents' needs.
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It is equally critical that the process be subject to thoughtful oversight and controls.
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So that NICA's resources are used for the benefit of NICA residents and not to line the pockets of corrupt vendors and staff.
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I believe these recommendations offer a path forward that seeks to ensure integrity in this process while maintaining the necessary efficiency.
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Thank you for your time, and I'm happy to take any questions that you may have.