We audited New York State’s Hurricane Sandy disaster procurement processes. Our audit objective was to determine whether the State conducted its Hurricane Sandy-funded disaster recovery procurements using full, fair, and open competition methods. By continuing to use a November 2012 Governor-issued temporary waiver, the State did not foster open competition and ensure that it obtained the best services at the best prices. Our testing found that the State used the Governor’s waiver to explain why it did not follow its contracting requirements when it (1) allowed six contracts to extend beyond 5 years, (2) did not follow its mini bid process for two contracts, and (3) entered into four contracts with initial terms of more than 1 year. During our work, the State indicated the waiver was not expired or explicitly superseded and was still in effect. Further, the U.S. Department of Housing and Urban Development (HUD) has not instructed disaster recovery grantees to limit the use of waivers. Although a waiver of requirements, including those for procurement, might be needed immediately following a disaster, the State’s continued use of a waiver 5 or more years later does not appear to be reasonable or cost effective. The State’s repeated use of the waiver led to numerous contract extensions that cost more than $99 million and other contract changes that increased those contracts’ costs by $103 million.
In addition, the State can improve its disaster recovery procurement processes by addressing its policy’s weaknesses. Our review of 14 contracts found that the State’s policies (1) allowed agreements to lapse or be backdated and (2) did not fully address potential conflict-of-interest issues. These issues occurred because Federal regulations required the State to adopt and follow its own procurement requirements, and the State lacked key internal controls. Further, the Housing Trust Fund Corporation (Corporation), which had oversight authority, gave the State authority to enter into contracts on its behalf. Improvement in the State’s procurement processes for its remaining disaster recovery funds should ensure that the State (1) limits its potential liability for contractors’ actions and costs, (2) provides full, fair and open treatment to prospective contractors, and (3) obtains the contracted services at the best value, all of which could result in improved program delivery to disaster impacted communities.
We recommend that the Office of Community Planning and Development’s Office of Disaster Recovery issue guidance to all disaster recovery grantees that waivers of requirements related to a disaster’s impact should be for reasonable and limited time periods after a disaster occurs. Further, the State should revise its policies and procedures to improve its procurement processes and address the identified issues.
