Audit Report on the Department of Sanitation’s Awarding and Monitoring of Its Contract with Cariati Developers Inc. to Provide Emergency Adult Food Access Program Services

Executive Summary

The objective of this audit was to determine whether the New York City Department of Sanitation (DSNY) awarded a contract to Cariati Developers Inc. (CDI) in accordance with New York City (City) procurement standards and with due diligence; and whether it effectively monitored the implementation of the contract.

The COVID-19 crisis has exacerbated food insecurity in the City. In an attempt to assist affected residents during the crisis, the City, through the New York City Emergency Management Department (NYCEM) and DSNY, has provided meals and groceries (food pantry boxes) to vulnerable adult New Yorkers through the Emergency Adult Food Access Program.

On April 2, 2020, DSNY awarded CDI a $14 million emergency contract to provide food delivery services for the program for a three-month period commencing on April 13, 2020. According to the contract, CDI would provide pantry boxes each containing a three-day food supply equivalent to nine meals per box. According to the Notice of Award, the initial quantity of boxes to be delivered each day was between 5,000 and 10,000 boxes, with the possibility of increasing this amount later in the contract period. The unit price to be paid to CDI was set at $29.35 per box.

DSNY terminated its contract with CDI on May 3, 2020, just three weeks after the vendor’s first day of deliveries, due to poor performance and due to DSNY having become aware that more than a month prior to CDI having been awarded the contract, the owner had been convicted of obstructing the Internal Revenue Service. CDI was paid $1,428,406 for its three weeks of work under the contract.

Audit Findings and Conclusions

DSNY did not adequately follow the City’s procurement guidance and displayed insufficient due diligence in its decision to award an Emergency Adult Food Access Program contract to CDI. Among other things, DSNY did not discover that the owner had been convicted of a federal felony; more than a month before it awarded the contract to the vendor, the owner had pleaded guilty to obstructing the Internal Revenue Service. In addition, DSNY awarded the contract to CDI without any evidence that the vendor had prior food sourcing, packaging, and/or delivery experience, even though the bid booklet called for the vendor to have had at least three years of such experience in the preceding five years. According to the company’s website, CDI’s business scope includes new home construction, excavation, snow removal, and the removal and hauling of debris. CDI previously had contracts with DSNY to remove snow and to remove debris after Superstorm Sandy. DSNY also did not maintain sufficient controls over its vendor payments. Before DSNY made most of its payments to CDI, the agency did not obtain independent confirmation that the number of food boxes the vendor billed for had actually been received. However, DSNY did monitor CDI’s performance and terminated the contract within three weeks of the vendor’s first day of deliveries due in part to the vendor’s poor performance. DSNY also terminated the contract because the agency had become aware that more than a month before it awarded the contract, the owner had been convicted of a federal felony.

Audit Recommendations

To address the issues raised by this audit, we made the following seven recommendations:

• DSNY should routinely include a Google search of a vendor when conducting a vendor responsibility review.
• DSNY should enforce its bid booklet requirement for potential vendors to file PASSPort disclosure statements or, at a minimum, require the submission of disclosure statements outside of PASSPort that cover certain basic topics, such as the criminal history of the potential vendors’ principals.
• DSNY should consistently document the search results of its vendor responsibility reviews at the time those reviews are conducted, even when they do not show any adverse information.
• DSNY should consider a potential vendor’s directly relevant experience when determining whether the vendor has the capabilities to provide a particular type of service and should document that consideration in its bid evaluation.
• DSNY should consistently obtain independent confirmations of the amounts of food received from the vendors before making payments.
• DSNY should establish a tracking system to record vendor food delivery, billing and payment information, and consistently review the information in this system prior to paying invoices in an effort to prevent double payments.
• DSNY should recoup from CDI the double payment of $15,644.

Agency Response

In its response, DSNY generally disagreed with the audit findings, agreed with three of the audit recommendations (recommendations #1, #3, and #7), and failed to directly respond to four of them (recommendations #2, #4, #5, and #6) in that either it did not address the specific recommendations offered or it simply restated its disagreements with the findings upon which the recommendations were based.