Private contractors require better government oversight

In late July, it was revealed that the Federal Aviation Administration had functionally outsourced safety checks on the doomed 737 Max to the airplane’s manufacturer, Boeing. The FAA relied on Boeing to conduct safety analyses on the new planes and failed to rigorously oversee the process. Moreover, the FAA never fully understood the intricacies of the safety issues involved. The tragic results, two crashes and a grounded fleet, have been well documented.

Also last month, state Comptroller Thomas DiNapoli issued a report that found the “MTA’s homeless outreach program didn’t do much outreach.” While the Metropolitan Transportation Authority spent millions to have a nonprofit provide services to homeless people who live at Grand Central Terminal and Penn Station, the nonprofit workers did an average of only 2.2 hours of outreach per shift, spent most of their time in an office, which they often kept closed, and filed false and incomplete daily reports. The comptroller’s office found that the MTA did little to oversee the program, resulting in failures that posed dangers to both homeless people and commuters.

These seemingly unrelated news stories are in fact connected. In both cases, essential government functions – testing the safety of airplanes and providing homeless services – were outsourced to private entities. In both cases, the government agencies failed to oversee the private entities to make sure the work was done properly.

Going forward, where government agencies outsource core responsibilities, certain safeguards will be needed: During the initial contracting process, agencies must create specific tasks and standards by which success can be measured; an agency must then routinely conduct on-the-ground reviews to see whether the reporting of such standards is accurate; there must be real-time consequences whenever such standards are not met, be it canceling the contract, financial penalties or other remedies stated in the contract itself. The bottom line is that agencies cannot simply assume that when work is outsourced it is being done and being done well.

These issues are not new to us. During the five years we served as commissioner and first deputy commissioner of the New York City Department of Investigation, we supervised multiple cases, both criminal and civil, where city agencies failed to supervise private entities that had been hired to help the agency carry out its mission. Indeed, the tendency to simply write a check to a private vendor, and then walk away, led to multiple large-scale systemic failures to deliver basic care and services to New Yorkers.

For example, the New York City Administration for Children’s Services pays private providers to administer foster care services for many of the children in its custody. In 2018, the Department of Investigation discovered that although the Administration for Children’s Services had a process for evaluating these providers, and that process uncovered serious safety concerns for children, ACS frequently failed to ensure that providers addressed these concerns. Instead, ACS simply continued paying them for dangerously inadequate care.

Similarly, the city Department of Homeless Services contracts with private companies to provide shelter to many homeless families. In 2015, DOI issued the first of two reports on this type of outsourcing. That report found that private entities charged almost double market rates and provided dangerously inadequate housing, including apartments infested with rats and mice, and laden with multiple safety and fire violations. In 2018, the department issued its second report that found that families were being placed in hotels (often well above market prices) that also were housing prostitution rings.

Further, for years, the city Department of Correction hired a private company, Corizon Health, to provide health care services to inmates in city jails. Corizon failed to provide adequate medical services and employees were arrested for smuggling contraband into the jails. A DOI investigation revealed that the city did not adequately supervise Corizon or screen Corizon staff before putting them in charge of inmates. In the course of the investigation, DOI found that a deputy commissioner allowed a total of 658 fingerprint background cards to pile up on a shelf outside his office, never having been sent for screening.

The problem with failing to supervise private entities doing government work extends throughout government – city, state and federal – and crosses ideological boundaries. This is not an issue of left or right: The Boeing fiasco occurred in Donald Trump’s federal government; the cases we investigated took place in one of the most liberal cities in the country.

There is a tendency in some quarters to assume that private industry is more efficient than government and that the best government can do is get out of the way. Our experience, gained from multiple long-term investigations and many subsequent arrests, is that this is not always the case. Neither government nor the private sector have a monopoly on competence; both provide ample examples of mismanagement and, at times, outright corruption.

Government cannot continue to outsource key functions without exercising supervisory control. These responsibilities are simply too important to be left to the whims of private actors with private motivations. Government has a duty to screen these actors and supervise their conduct – with that supervision written into the contracting process – to ensure that the taxpayers are getting what they pay for and safety of citizens is never compromised.

Government watchdogs – whether inspectors general, legislators or the media – should take heed.