Letter Report on the Departments of Housing Preservation Development and Building’s Emergency Demolition Declarations and Contracting

Summary of Findings

 This investigation focused on the 52 “Emergency Demolition” contracts registered during Fiscal Years (FY) 2016 through 2018 that were awarded for buildings determined by the Department of Buildings (DOB) to have “serious structural damage and/or a deteriorating condition … [with] a collapse or failure … expected in the very near future.”¹ The 52 contracts analyzed in this report do not include “immediate emergency demolitions,” which are subject to different procedures.²

Our investigation found that after the underlying emergencies associated with the 52 Emergency Demolition contracts were declared, it took more than six months on average for demolition work to begin and more than nine months on average for a contract to be registered so that a contractor could be paid. These findings call into question the effectiveness and utility of current procedures.³ We also specifically found certain DOB and HPD procedures intended to expedite Emergency Demolitions to be outdated. We recommend that these procedures be revamped to leverage improved systems of communication that come with 21^st century technology, minimize the time procurement and the start of demolition take, and expand the pool of contractors that bid on and are awarded emergency contracts to increase competition.

Specifically, the investigation found that:

3. Commencement of work on Emergency Demolitions was prolonged, which extended the risk the buildings pose to public safety, due to the time expended to obtain permits and to approve the emergency
4. Registration of Emergency Demolition contracts was delayed due to various inefficiencies in the approval and contracting processes, which caused delays in payments to contractors.
5. Chronic delays in payments contributed to a limited pool of contractors for Emergency Demolition contracts which resulted in decreased

Repairing the Emergency Demolition processes is within the City’s control: new procedures must take advantage of current technologies, ensure that contractors can start work and be paid more quickly, and maximize competition by maintaining, increasing, and developing an interested contractor pool. Specific recommendations to achieve these goals are made at the conclusion of this letter.

The Emergency Demolition Process

DOB can issue an Emergency Declaration to remedy a hazardous building condition through demolition, with a quarter-century-old DOB policy memorandum stating that work should commence within 30 to 60 days of the declaration.⁴ The receipt of a DOB Emergency Declaration enables HPD to engage in emergency procurement to demolish a building and remedy the condition.⁵ Use of emergency procurement procedures requires the consent of both the New York City Law Department and the Bureau of Contract Administration (BCA) of the Comptroller’s Office to allow HPD to bypass required controls when selecting a contractor.

Emergency procurement procedures were developed to enable the City to expeditiously address conditions that create “an immediate and serious need for goods, services, or construction that cannot be met through normal procurement methods.”⁶ Emergency procurements must “be limited to the procurement of those items necessary to avoid or mitigate serious danger to life, safety, property, or a necessary service.”⁷ However, these procedures contain increased risks because, in the interest of expediency, they bypass standard fiscal and integrity controls designed to “protect against corruption, waste, fraud, and abuse.”⁸

When DOB declares an Emergency that requires demolition of a building to protect public safety, it notifies HPD and the property owner. If the owner does not elect to remedy the dangerous condition, HPD will procure and oversee the services necessary to do so. Once HPD has obtained the “prior approval” from the Law Department and BCA required under the PPB Rules to proceed with the emergency procurement, HPD solicits bids from a pool of demolition contractors it has identified as both: (1) qualified to perform demolition work because they previously obtained DOB demolition permits; and (2) interested in emergency work because they indicated a desire to receive notice of such work.⁹ After awarding the contract, HPD must first submit a “determination of the basis of the emergency and the selection of the contractor” to the Law Department and BCA for approval, and then obtain, prepare, and submit the paperwork required for registration of the contract.¹⁰

While HPD works to register the contract, DOB requires the contractor to obtain all permits required to address the Emergency, even though not mandated to do so by the City’s Administrative Code.¹¹ Once the permits are secured, demolition may proceed. After the contractor finishes the demolition, HPD certifies the work is complete and notifies DOB of that finding. DOB then conducts its own inspection to verify that the demolition is finished and that the unsafe condition has been remedied.¹² The contract must be registered before the contractor is paid. (See Appendix I for a process flowchart.)

Emergency Demolitions are Beset with Delays in Obtaining Permits and Procurement Approvals

The investigation found that, although DOB’s 1993 policy memorandum sets forth the expectation that work will commence within 30 to 60 days of an emergency declaration, for the 52 Emergency Contracts reviewed, it took more than 6 months on average to begin demolition work.¹³ The delays are primarily attributed to the time required to obtain permits for demolition and procurement approvals.

Obtaining Permits

Work on the FY 2016 through 2018 Emergency Demolition contracts commenced—as represented by the permits obtained—significantly later than the 30 to 60 day period recommended by DOB, as shown in Figure 1. For the FY 2016, 2017, and 2018 contracts, demolition permits were obtained on average 135, 110, and 128 days after the contract award.¹⁴

However, as discussed herein, generally only six contractors submitted bids on emergency demolition work undertaken in FY 2018, the most recent year we reviewed.

Note: the number in parenthesis after the fiscal year is the number of Emergency Demolition jobs for contracts that were registered that year. The number of demolition jobs differs from the number of Emergency Demolition contracts, because some contracts cover demolitions for more than one job, i.e., building or structure.

Deficient demolition plans submitted by HPD contractors caused most of the delay in commencing work. In these cases, multiple submissions were required to obtain DOB approval for issuance of necessary permits.¹⁵ DOB often rejected plans multiple times before it issued demolition work permits for the Emergency Demolition contracts registered in FY 2016 through 2018, 85% of all jobs required more than one submission before being approved by DOB, as illustrated in Figure 2. In addition, as shown in Figure 3, more than two weeks often passed before the contractors resubmitted plans after a rejection.

The City can improve the speed of the permitting process if both HPD and DOB could increase their technical support for review of the demolition plans prepared by its contractors and their design professionals and provide ongoing guidance and training on both demolition plan requirements and preparation of plans. HPD could also continue to follow up with its contractors regarding plan submission status, and monitor the status. DOB could periodically provide training on the requirements for successful demolition plans it has given to HPD and its contractors in the past.¹⁶

DOB could also prioritize its review of plans for HPD Emergency Demolition jobs, as it has done in the past, since the improved speed of approval over the fiscal years examined was at least partially attributable to additional plan reviewers being hired and by such plans being accurately identified as emergencies to better ensure quicker reviews. However, a number of plans took longer than four days for review, which exceeded the turnaround time of one to two days that DOB asserted it actually took. If agency headcounts decrease, which is a possibility due to the fiscal constraints faced by the City due to COVID-19 associated revenue loss, then review time could easily increase and result in a backlog.

Prioritizing review of plans by DOB requires accurate identification of submissions as HPD Emergencies—but of the DOB data found a number of data reliability issues. Most significantly, inaccurate data entry resulted in Emergency Demolition plans being categorized incorrectly as non-emergencies, which would not get prioritized. For FY 2016, 2017, and 2018 contracts, DOB correctly identified only 19 percent, 57 percent, and 47 percent, respectively, of plans submitted as HPD Emergency Demolitions. In addition, one job was not identified anywhere as an HPD plan in the spreadsheet we received from DOB.¹⁷

Procurement Approvals

 City procurement rules require that HPD obtain the prior approval of the Comptroller and the Law Department before proceeding with an emergency procurement.¹⁸ The time required to obtain BCA’s prior approval grew from an average of 3 days for both FY 2016 and 2017 contracts to 28 days for the FY 2018 contracts. This increase resulted from a collaborative effort between HPD and BCA to standardize HPD’s cost estimates and bid breakdown sheets that accompany HPD’s request for prior approval. BCA and HPD completed this standardization by the middle of FY2018, which has helped to ensure that appropriate contractors are retained at reasonable costs. These changes resulted in a reduction of prior approval times to three days or less for 65% of the requests.¹⁹

Submission of Emergency Demolition Contracts for Registration Takes Too Long

 Unlike non-emergency procurements, emergency contracts are legally effective before they are registered with the Comptroller’s Office.²⁰ However, registration of emergency contracts remains a prerequisite for payment to contractors for work performed. Therefore, ensuring a timely submission of Emergency Demolition contracts to BCA for registration is a critical step, especially for small contractors that cannot wait extended periods of time for payment.²¹ Of the 52 Emergency Demolition contracts registered from FY 2016 through 2018, HPD took between 139 to 241 days on average after award to submit the contracts for registration, a breakdown of which is set forth in Figure 4. For the FY 2018 contracts, an average of 171 days passed between HPD awarding Emergency Demolition contracts and submitting them for registration, which was approximately 71 fewer days than for the FY 2017 contracts, but still more than five times longer than recommended by the PPB Rules.²²

A major cause of the delay in submitting Emergency Demolition contracts for registration was the time it took HPD to submit its “determination of the basis of the emergency and the selection of the contractor … to the Comptroller and the Corporation Counsel for approval,” which HPD calls a Written Determination.²³ According to PPB Rules 3-06(c)(3), this determination, which is required for registration of the contract, should be submitted “at the earliest practicable time.” The earliest practicable time to submit the request is immediately after a contractor is awarded the contract.²⁴

Review of the FY 2016 through 2018 Emergency Demolition contracts indicates that instead of submitting its Written Determination at the earliest practicable time, HPD submitted it as part of its emergency contract registration package – the last possible opportunity to do so. To obtain BCA’s approval, HPD submitted a batch request for multiple approvals—typically in a spreadsheet—for Emergency Demolition contracts ready to be registered.²⁵ Upon receipt of this spreadsheet, BCA produced its written approval for each award in a document referred to as a “3- 06 Letter.”

The resulting wait to submit Emergency Demolition contracts for registration could be lessened, and possibly eliminated, if HPD were to provide its Written Determination as soon as practicable after contractor selection, as required, rather than waiting to request approval until contracts are ready to be registered. In a revised process, as of February 2020, HPD forwards its Written Determination for BCA’s final approval of the emergency contract separate from and ahead of the registration packet in an agreed upon format.²⁶ In addition, in lieu of sending HPD an approval letter, BCA cross-signs and endorses HPD’s Written Determination in order to cut down on response time. Further, since November 2020, BCA has included in its prior approval email instructions for HPD to submit at the earliest practicable time a determination of the basis of the emergency and the selection of the contractor in accordance with PPB Rules 3-06(c)(3). Prompt submission of the Written Determination will provide BCA with the information needed to timely issue its endorsement consistent with the PPB Rules.

Registration is also delayed because documents must be obtained from the contractor to register a contract. HPD neither sets time frames for the contractors to submit such documents nor tracks when such documents are received, as it could easily do on an Excel spreadsheet. Delays in obtaining any documents required for registration result in delays in the registration of the contract and the contractor receiving payment. Imposing time frames, as the Comptroller’s Office has previously recommended for other types of contracts, would help expedite contract registration.²⁷

A Limited Pool of Contractors is Repeatedly Awarded Emergency Demolition Contracts

 The delay that a contractor experiences before receiving payment for an emergency procurement narrows the contractor pool. Only contractors who have the financial capacity to incur contract expenses upfront or those who have obtained loans to cover the cost of waiting for the City’s payment can afford to bid on Emergency Demolition contracts.²⁸ As a result, HPD repeatedly awards Emergency Demolition contracts to a limited number of contractors which diminished competition for the City’s demolition work. For the 52 Emergency Demolition contracts registered during FY 2016 through 2018, only 15 contractors bid. Of those 15, 8 contractors were awarded contracts, with 4 contractors obtaining most of the contracts.²⁹

HPD’s pool of contractors has decreased dramatically from FY 2016, when HPD solicited Emergency Demolition bids from a list of approximately 56 contractors, to FY 2018, when the number of contractors on its list dropped to 18.³⁰ Contractor participation has also decreased over time from 13 contractors bidding on the FY 2016 Emergency Demolition contracts to 6 contractors bidding on the FY 2018 contracts.³¹ With the number of small businesses closing due to the economic impact of COVID-19, efforts to distribute City contracts among as many businesses as possible might mean survival for some, especially M/WBE companies.³²

Note: None of the 2017 New Bidders bid on the FY 2018 contracts.

The pool of contractors qualified and interested in Emergency Demolitions is limited for a number of reasons, many of which are beyond the City’s control: the preference for reliable contractors with satisfactory prior demolition experience; the legal requirement to pay prevailing wages; the need for specialized equipment; and limited interest in City work when private construction work is readily available. Accordingly, the need for the City to minimize the obstacles within its control is crucial.

Recommendations

 The City can minimize delays in procurement and permit review by revamping its procedures. A more efficient and better coordinated effort among DOB, HPD, and BCA is needed to effectuate the City’s goals of promptly addressing emergency situations without unduly sacrificing financial and competitive controls embodied in the City’s regular procurement processes. The faster Emergency Demolitions are completed and the underlying contracts are registered, the more quickly the public is protected from potentially dangerous structures and contractors are paid. In addition, when contractors are paid more quickly, Emergency Demolition contracts will become more attractive, potentially leading to a greater number of qualified bidders, greater competition, and lower prices.

To that end, we recommend that DOB:

• Establish policies and procedures for prioritizing review of Emergency Demolitions permit applications;
• Create a standardized cover sheet for DOB demolition plan submissions that clearly identifies them as HPD Emergency Demolition plans;
• Host training sessions for HPD and its demolition contractors on requirements for DOB demolition plan approval on a periodic basis; and
• Implement backend controls and automated functions within DOB’s plan review database to minimize data entry errors.

Additionally, we recommend that HPD:

• Maximize its efforts to attract new contractors and retain existing contractors interested in bidding for Emergency Demolition contracts, including exploring new strategies to publicize the program and creating incentive programs for smaller businesses;
• Continue to work together with the Law Department and the Comptroller’s Office to expedite approvals for Emergency Demolition contracts and ensure the timely submission of such contracts for registration;
• Exercise greater oversight over the design professionals hired by private contractors and consider:
  • independently reviewing demolition plans prior to submission to DOB;
  • meeting with design professionals and/or contractors after failed plan reviews to ensure timely revision and resubmission; and
  • setting goal dates for resubmission of demolition
• Track the work of its contractors’ design professionals to explore the possibility of denying approval of subcontractors who repeatedly fail plan review;
• Establish a written best practices timeline of when each task in the Emergency Demolition process is expected to be completed, and distribute this guideline to contractors; and
• Electronically track the receipt of documents necessary for

BCA is committed to:

• Making all efforts to consistently achieve a prior approval turnaround time of one to two days, when no additional information is needed from
• Revisiting the final approval process in six months to a year to determine whether timely approvals of HPD’s Written Determination and reduced registration package submission timeframes were

Endnotes

¹ Department of Buildings Operations Policy and Procedure Notice # 16/93 (Subject: Notification to the Department of Housing Preservation and Development (HPD) Regarding Emergency Demolitions) October 29. 1993 (OPPN 16/93), available at: https://www1.nyc.gov/assets/buildings/ppn/oppn1693.pdf (accessed February 24, 2021). The 52 Emergency Demolition contracts that were registered between FY 2016 through 2018 address emergency declarations from December 2014 through November 2017. The contracts registered in each fiscal year are referred to in this letter as “the FY XXXX contracts”, for example “the FY 2017 contracts.”

² The 25 Immediate Emergency Demolitions contracts that were registered in FY 2016 through 2018 were not analyzed as part of this investigation. Accordingly, the term “Emergency” in this letter refers to non-immediate emergencies only. “Immediate Emergencies,” as designated by OPPN 16/93 to address buildings with “life threatening structural damage and/or in imminent danger of collapse” follow procedures reflecting the immediate need, i.e., generally within 48 hours, to demolish the compromised structure.

³ The investigation included review of contracts and documents obtained from DOB, Department of Housing Preservation and Development, and the Bureau of Contract Administration of the Comptroller’s Office, as well as interviews of officials of these agencies. The investigation did not evaluate the structural engineering and public safety judgments made by DOB that formed its decisions whether to declare an emergency and/or which category of emergency to declare, but rather focused on the events that occur after such a declaration is made.

⁴ OPPN 16/93.

⁵ A declaration of an emergency permits the City to “demolish, repair, or take whatever action necessary to make the building safe,” even if on privately owned property. New York City Administrative Code § 28-215.8.

⁶ New York City Procurement Policy Board Rules (PPB Rules) 3-06 (a).

⁷ PPB Rules 3-06 (b).

⁸ PPB Rules Introduction.

⁹ PPB Rules 3-06 (c)(2). HPD requests prior approval from both agencies by email before proceeding with bids. Before email, the requests were made via telephone, thus the process is still sometimes referred to as obtaining “oral” approval. During the time Period reviewed, HPD’s vetted list of demolition contractors contained 18 contractors.

¹⁰ PPB Rules 3-06 (c)(3).

¹¹ New York City Administrative Code §28-105.4 (“work that would otherwise require a permit may be performed without a permit to the extent necessary to relieve an emergency condition”).

¹² After the verifications have been obtained, HPD can seek recoupment of its expenses to safeguard the property from the homeowner (https://www1.nyc.gov/site/hpd/services-and-information/emergency-repair-program-erp.page) (accessed February 24, 2021).

¹³ See OPPN 16/93. OPPN 16/93 does not define or indicate what work should begin within the expected time frame. DOB policy and City practice do not impose any sanctions, or other negative consequences, if work does not commence within the expected time frame. For the FY 2016, 2017, and 2018 contracts, demolition permits were obtained on average 200, 183, and 243 days, respectively, after the underlying emergency declaration.

¹⁴ The number of days between the contract award date and the issuance of the demolition permit ranged from 49 days to 411 days for the FY 2016 contracts, from 46 days to 329 days for the FY 2017 contracts, and from 36 days to 224 days for the FY 2018 contracts.

¹⁵ A vendor awarded an HPD Emergency Demolition contract, generally a demolition contractor, hires a design professional (i.e., Licensed Professional Engineer or Registered Architect) to prepare demolition plans for submission to DOB’s Building Enforcement Safety Team (BEST) for approval to be able to obtain the necessary DOB permits. The demolition contractor, who is responsible for the actual demolition work, subcontracts with other companies to complete supplemental parts of the work, such as submitting necessary paperwork to DOB to obtain work permits, asbestos abatement, and installing fences or sidewalk sheds. Subcontractors must be approved by HPD.

¹⁶ The Comptroller’s Office’s recent recommendation that expediters, persons or firms paid to interface with DOB and address issues during the plan review process, “be banned, and replaced by a team of in-house Business Advocates to solve problems for businesses free of charge” might also improve the speed of obtaining permits. Save Main Street, August 5,                          2020,         available         at:                          https://comptroller.nyc.gov/wp-content/uploads/documents/Save_Main_Street_8_5_20.pdf (accessed February 24, 2021).

¹⁷ We also note additional reliability issues we identified in the DOB plan review database: 1) One job with a Review Result stated as “Partial Approval” underwent and passed a pre-demolition inspection and was issued a permit; and 2) One job with a Pre-Demo Inspection Status stated as “No Pre-Demo Inspection Performed-Job Never Permitted” was shown in a later data production received from DOB as having passed a pre-demolition inspection being issued a permit.

¹⁸ PPB Rules 3-06(c).

¹⁹ For the 20 prior approval requests HPD submitted after January 1, 2018 for contracts registered as of October 15, 2019, BCA took an average of 11 days to give prior approval for Emergency Demolitions. This was due to seven requests that took from 5 to 90 days to obtain prior approval. The ongoing efforts of BCA and HPD will continue to improve prior approval times through price standardization and a greater reliance on automated computations.

²⁰ Emergency contracts are an exception to the City Charter’s requirement that contracts be registered before they are effective. New York City Charter Section 328(d)(1). See also PPB Rules 2-12(e)(1) (“The requirement for registration prior to the effectiveness of the contract is waived under the following circumstances…contracts awarded on an emergency basis…”).

²¹ A prior analysis of New York City agency contracts by the Comptroller‘s Office highlighted concerns that delays in the procurement process, including delays that affect certain emergency contracts, require the Office “to consider efficiencies that may speed up City procurement without sacrificing thorough review.” Running Late: An Analysis of NYC Agency Contracts, Office of the New York City Comptroller, May 2018, https://comptroller.nyc.gov/wp- content/uploads/documents/Running-Late-An-Analysis-of-NYC-Agency-Contracts.pdf, at page 1 (“Running Late”) (accessed February 24, 2021).

²² According to PPB Rules 2-12(e)(4), for contracts awarded on an emergency basis: “the awarding agency shall, within thirty days of the award, submit a copy of the contract (and such related materials as are included in subdivision

(c) of this section) to the Comptroller for registration and for an audit of the procedures and of the basis for the determination of the need for an emergency or accelerated procurement.”

²³ PPB Rules 3-06(c)(3).

²⁴ This approval follows the prior approval to engage in emergency procurement.

²⁵ PPB Rules 3-06(e)(3) requires a Written Determination to contain the following information: the date the emergency first became known; a list of goods, services, and construction procured; the names of all vendors solicited; the basis of vendor selection; contract prices; the past performance history of the selected vendor; a listing of prior/related emergency contract, and PIN. Of these required items, HPD’s spreadsheet only contained the contract price. BCA’s 3-06 Letters to HPD during the time period reviewed differ in content from those sent to other agencies in that they did not address or include the contractor selection. Rather, they merely formalized the prior approval.

²⁶ Because the process was revised recently, the investigation did not examine whether BCA is providing timely final approvals or if there has been a reduction in the time to submit the registration package. Review of the amended procedure in six months to a year would indicate whether it is successful.

²⁷ See Running Late at page 8; see also Still Running Late: An Analysis of NYC Agency Contracts in Fiscal Year 2018, Office of the New York City Comptroller, January 2019, https://comptroller.nyc.gov/wp- content/uploads/documents/Still-Running-Late.pdf, at page 15 (“Still Running Late”) (accessed February 24, 2021).

²⁸ A prior analysis of New York City agency contracts by the Comptroller‘s Office found that “the time it takes to get paid is too much for smaller businesses to bear.” Still Running Late, at page 4. In addition, in the case of the contractor who passes the cost of its loan to the City through its bid, the resulting contract price is more expensive for the City.

²⁹ Five, six, and four contractors were awarded the FY 2016, 2017, and 2018 Emergency Demolition contracts respectively. See Appendix 2.

³⁰ As of July 28, 2020, the Emergency Contractor list consisted of 15 contractors.

³¹ A total of 10 contractors bid on contracts registered in FY 2019 and 2020, including three new contractors but only one of the new contractors was awarded a contract. In addition, 9 of the 16 total contractors who had previously bid on the FY 2016 through 2018 contracts did not bid on the FY 2019 through 2020 contracts.

³² For example, a survey of 500 MWBE companies conducted by the Comptroller‘s Office in June 2020 found that 85% believe they cannot survive for six more months, 65% were able to contract for COVID 19 services but only 62 competed for such contracts, and only 10 of those 62 were awarded contracts. Minority and Women-Owned Businesses at Risk: Impact of COVID-19 on New York City Firms, July 10, 2020, available at https://comptroller.nyc.gov/wp- content/uploads/documents/MWBE-Survey.pdf (accessed February 24, 2021).