Report: How Class Size Matters helped the city save $727 million, and our plea to the Mayor how to use these funds for NYC kids

December 23, 2015

Last February, on a lazy Sunday afternoon, I was perusing the list of DOE contracts due to be voted on that week by the Panel for Educational Policy. Among the long list of contracts, I noticed a proposed contract for equipment and internet wiring worth $1.1 billion over five years, extendable to nine years at two billion dollars. I had never seen a DOE contract that large before.

Though no other details were provided to the public in advance, (something Helen Rosenthal, head of the City Council Contract committee, and I had already publicly complained about) I looked up the name of the company that was to be awarded this huge contract.  After googling “Custom Computer Specialists”, I found a link to City Council testimony that I had given in October 2011, about the many wasteful and corrupt DOE technology contracts.

I was astonished to discover that this very same company had been involved in a kickback scheme, robbing DOE of millions of dollars just a few years before, according to a report from the Special Investigator’s office.  This widely reported scandal subsequently sent Ross Lanham, a DOE consultant, to jail.

I immediately blogged about my discovery, and promptly alerted Public Advocate Tish James and Council Member Helen Rosenthal, as well as members of the media.

On Monday, the very next day, DoE officials started getting lots of calls from reporters.  Later that day, the PEP Contract committee was due to meet at 5 pm at Tweed, the DOE headquarters.  I was sitting with a bunch of reporters in a room in Tweed, waiting for the meeting to begin when the reporters began getting emails from the DoE officials, announcing that that in the last 24 hours, the contract had somehow been “re-negotiated” and reduced by nearly half a billion dollars – with no change in the terms.

It was still going to be a ridiculously high $635 million over five years, extendable for four more years at over $1 billion.  The fact that nearly $500 million could be cut out of the contract over night was even more evidence of how inflated the contract had been.  When the Contracts committee met, surprisingly few members asked any questions about it, except for Robert Powell, the Bronx appointee and head of the committee.

Here is my account of these events, as well as an article from the NY Post, in which Public Advocate Tish James called for DOE to withdraw the contract.  Geoff Decker in Chalkbeat NY wrote that the lack of information provided the public in advance called into question the 2010 revisions to mayoral control, which were supposed to provide more transparency and accountability for the awarding of contracts.

Juan Gonzalez  in the Daily News provided even more details about the original scheme that had defrauded DOE of millions.  He  pointed out that the company being awarded the contract had been the high bidder among three companies, and that the man who was still CEO of the company, Gregory Galdi, had set up a real estate company with Ross Lanham that was dissolved only after Lanham’s arrest.

At the subsequent PEP meeting on Wednesday evening, Helen Rosenthal and I pleaded with Chancellor Farina and the PEP members not to allow this unconscionable contract to be approved.  The Chancellor was obdurate that “due diligence” had been done and that awarding the contract would allow NYC kids to be “put in the future” while now they’re “struggling in the past.”

The DOE official in charge, David Ross, argued that the contract had to be rushed through in order for the city to have a chance of winning $100 million in federal E-rate funds – without mentioning that the DOE had been cut off from this program for the last five years because of the very same scandal that had sent Ross Lanham to jail.

I made this point when I had my two minutes to speak , and argued that by awarding a contract to this very same company, the DOE was almost sure to be barred from any reimbursement from the feds.  I also said that with a fraction of the amount, the DOE could double the number of schools to be built and significantly relieve school overcrowding.

Laura Zingmond, the Manhattan PEP member, responded that there was “plenty of money” to go around for both building more schools and awarding this contract.  Though some members expressed reservations, the PEP approved the contract 10-1, with only Robert Powell, voting no.  More on this disappointing vote in my blog and in Schoolbook.

 (Of course, a few months later when the underfunded school capital plan was proposed to the PEP, it was rubberstamped , without expanding it by even one seat.)

Then in March, a few weeks after the vote, the city cancelled the Custom Computer Specialists contract, the first time this has ever happened in the history of the DOE.  Possibly officials were concerned about how the NYC Comptroller and other oversight agencies would have questions about this egregious contract.

Today, Juan Gonzalez reports that after DOE rebid the contract and broke it into several smaller parts, the same work and equipment will cost city taxpayers far less: $472 million over five years, $163 million less than the renegotiated amount and $627 million less than what Custom Computer Specialists was originally supposed to receive before Tish James, Helen Rosenthal and I protested.  Assuming that the city is also now far likelier to receive $100 million in federal E-rate funds, we may have helped save the city $727 million.

Juan also reports that DOE now promises that the details of these contracts and all future contracts will be provided to the public a month in advance of every PEP vote.  Yet DOE officials also promised this last February, and this still has not occurred.  I am not holding my breath.

It’s encouraging that this contract was cancelled and substituted with a far less costly one; but it should never have been approved by the DOE and the PEP in the first place.  To propose awarding up to $2 billion to a contractor found to have engaged in a kickback scheme just a few years before is evidence of either extreme incompetence or corruption.  In either case, the people in charge of contracting at DOE should have been replaced.

Juan’s column ends this way: “As for Haimson, the parent advocate who blew the whistle on this, her shoe-string organization gets no finders fee for bringing the issue into the open. Here’s hoping Chancellor Fariña uses some of that money to at least reduce class size at a few schools. “

I agree.  These funds should be invested in smaller classes, and used to expand the number of schools to be built — to alleviate the crisis in overcrowding – which at a recent town hall meeting in Queens, the Mayor claimed the city cannot afford to address.

So now I am asking you, Mayor de Blasio: It would take only $125 million to double the seats in the capital plan, a fraction of savings we helped ensure, which would be matched by the state according to the school construction reimbursement formula.   Another $125 million should be spent on hiring more teachers to reduce class size.

Please allow NYC kids to have a better chance to learn in uncrowded conditions with smaller classes. I urge you to give our children and future generations of children an early Christmas present by making this possible.