Audit Report On The Department Of Education’s Custodial Supply Management Contract With Strategic Distribution, Inc.

Audit Report On The Department Of Education’s Custodial Supply Management Contract With Strategic Distribution, Inc.

AUDIT REPORT IN BRIEF

This audit determined: (1) the adequacy of the New York City Department of Education’s (“DOE’s”) controls over the award and monitoring of its custodial supply management contract with Strategic Distribution, Inc. (“SDI”); and (2) whether in awarding and monitoring the contract, DOE followed its Procurement Policy and Procedures (“PPP”) guidelines (the “PPP Guidelines” or the “Guidelines”).

On July 1, 2010, DOE entered into a five-year contract with SDI for the purpose of furnishing and providing on-site delivery of custodial supplies to the approximately 1,200 public schools throughout New York City under the jurisdiction of DOE. The contract was valued at $88.1 million with an option to extend another six months for an additional $8.7 million.

Audit Findings and Conclusions

DOE did not have adequate controls over its award of the custodial supply management contract to SDI. The evidence provided by DOE was insufficient to establish that it: (1) conducted a fully competitive contract award process; or (2) performed an adequate price analysis before it awarded the contract to SDI. As a result, the City may be paying more than necessary for the purchase of custodial supplies.

In addition, DOE failed to adequately monitor its contract with SDI in accordance with its PPP Guidelines and the terms of the contract. As a result, DOE could not provide information about whether certain basic goals and objectives of the contract had been met, including whether goods had been purchased at reasonable prices and supplies had been promptly delivered. Additionally, there was no formal tracking system to ensure that custodian complaints pertaining to the purchase of supplies were addressed in a timely manner. DOE’s failure to properly monitor the contract on an ongoing basis may have resulted in the payment of higher costs and supply shortages.

Audit Recommendations

To address these weaknesses, we make the following seven recommendations:

• DOE should retain all pertinent documents related to the bidding process in accordance with its rules and policies.
• Where there are a limited number of bidders, DOE should conduct additional steps, such as a comparable market analysis, to ensure that the prices quoted in the bids are reasonable prior to deciding to award the contract.
• DOE should adequately monitor its contract with SDI in accordance with the terms of its contract. Specifically, DOE should (a) review all management reports and semi-annual contract reports within the required timelines; (b) require the production of sales data from SDI; (c) conduct reconciliation of data contained within the data and the reports; and (d) discuss discrepancies and deficiencies with SDI in a timely manner.
• DOE should track and compare market prices to the current contract prices and, when applicable, request a reduction in prices.
• DOE should develop a mechanism for obtaining and analyzing purchasing trends and price data relative to custodial supplies.
• DOE should develop and implement a formal complaint tracking system that would provide custodians with a vehicle for expressing their concerns and observations and that would provide DOE the ability to track complaints and determine trends and patterns that need to be addressed, such as mark-up costs inconsistent with the contract.
• DOE should explore methods that can be used to establish better communication with its custodians about the purchase of custodial supplies, including the use of surveys, forums, and complaint forms.

Agency Response

In their response, DOE officials agreed to implement the seven recommendations cited in the report, but claimed, without providing any additional evidence, that they were already in compliance with three of the recommendations. DOE also included objections to certain findings in its response. After a careful review and consideration of the arguments in DOE’s response, we found that those arguments do not alter our original findings.