Audit Report On The Expenditures Submitted By PURVIS Systems Incorporated For Its Contracts With The New York City Fire Department

PURVIS Systems Incorporated (PURVIS) specializes in providing technology and communications services and systems to the public sector. During our scope period (July 1, 2004, to October 2012), PURVIS had six multi-year contracts with the New York City Fire Department (FDNY). Five of these contracts were procured utilizing the New York State Office of General Services (OGS) Back-Drop contracts. Those five contracts, with a total contract amount of $98.1 million, required PURVIS to provide services such as: maintain and repair the Starfire Computer Aided Dispatch (CAD) system; maintain and repair the Voice Alarm (VA) system; provide upgrades to the Emergency Reporting System (ERS) and Electro-Mechanical Alarm Display System (EMADS); design and install a new digital voice alarm system; and design and install an electronic Patient Tracking System (PTS).

Payment invoices were submitted on a monthly basis. The invoices, along with the supporting documents, are first reviewed and approved by FDNY project managers who were assigned to the project. They are then reviewed by FDNY Contract Unit staff who verifies that the hourly rates charged correspond to the contract and to ensure that the contract has not exceeded its not-to-exceed amounts. As of October 2012, FDNY paid PURVIS approximately $93.5 million for these five contracts. Table I lists the project description and the total value of each of the five contracts.

Audit Findings and Conclusion

We could not determine whether PURVIS accurately and properly billed the City in accordance with the terms of five City contracts because of deficiencies in FDNY’s contract management. Specifically, FDNY did not require PURVIS to provide detailed information on its consultants’ timesheets that would allow verification of the work hours and work locations (which affected the rate paid) and did not include non-travel rates for certain titles within its contracts despite the fact that some consultants with these titles did not travel. FDNY also did not ensure that consultants were qualified for their respective work titles. These deficiencies resulted in FDNY approving payments without sufficient documentation. Based on the audit of the documentation available, we question $1.12 million in payments made to PURVIS.

FDNY also paid PURVIS for hardware purchases prior to the hardware being delivered to FDNY, and there was no pre-approval of the hardware purchases as required by the contract. In addition, we question whether FDNY obtained the best price for the City when three of the five contracts were negotiated. The three contracts reviewed were signed within a month of each other, yet the hourly rates varied from 16 percent to 51 percent for the same OGS titles. If the three contracts were negotiated with the lowest hourly rates for each title, the City could have saved an estimated $7.02 million over the terms of the two contracts with the higher hourly rate.

Lastly, PURVIS had a significant mark-up for services that it obtained from subcontractors. These “mark-ups” ranged from 9 percent to 288 percent. Our research found that several municipalities impose limits on the amount of these markups, ranging from 0 percent to 10 percent. Had FDNY imposed a maximum of a 10 percent subcontractor “mark-up” on these contracts, the City could have saved an estimated $4.6 million.

Audit Recommendations

FDNY should:

• Consider seeking reimbursement for the $1,119,516 ($870,719 for non-travel staffing billed at travel rate + $248,797 for staff who did not qualify for the titles billed).
• Ensure that all future contracts:
  • Include non-travel rate titles that correspond to travel rate titles when applicable.
  • Require its contractors to provide more detailed information on the timesheets, including but not limited to:
    • A more detailed description by project on the work they performed.
    • Work location for each specific project.
• Consider that all future contracts include a clause:
  • To ensure that the City is getting the best pricing from its contractors and that any cost savings are being passed along to the City.
  • That limits the mark-up a contractor can charge on services or materials to ensure the City is getting the best pricing from its vendors.
• Strengthen the control on its payment approval process by:
  • Ensuring that the consultants worked the hours that FDNY is billed for.
  • Verifying the work location of consultants to ensure that the correct hourly rate is being used to bill the City.
  • Ensuring consultants qualify for the title they are using to bill the City.
  • Ensuring that hardware purchased by the contractor is necessary and only used on a FDNY project. FDNY should pre-approve all hardware purchases in writing, especially items sent to a non-FDNY site.
  • Ensuring that contractor payments on hardware purchases are being made in accordance with the contract terms.
  • Requiring supervisory signature by its vendor prior to the submission of subcontractor timesheets.
• Ensure that contractors awarded multiple contracts for similar services are providing the best price on those contracts.

Agency Response

FDNY officials disagreed with the audit’s findings and conclusions and disagreed with most aspects of the recommendations. In their response, PURVIS officials believe they were fully compliant with all contract requirements. We disagree with FDNY’s and PURVIS’s positions. We encourage FDNY officials to revisit their position as we believe that implementation of the recommendations would improve FDNY’s contract negotiation and payment processes.