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The Department of Education (DOE) has failed to regulate and monitor its job order contracts (JOC) program, leaving it susceptible to fraud and abuse, according to an audit released today by Comptroller William C. Thompson, Jr. The audit also found many examples of incomplete and poor repairs performed by JOCs.

Also, according to the audit, DOE’s use of a consultant, The Gordian Group, to undertake both inspection of the JOC program as well as consulting services, is an apparent conflict of interest.

“The Department of Education has allowed its job order contracting program to fall into disrepair,” Thompson said. “DOE needs to implement internal controls to correct the issues revealed in today’s audit. New York City’s schoolchildren need and deserve well-maintained facilities, and their parents need to know that their hard-earned tax dollars are not being misused.”

The DOE’s Division of School Facilities is responsible for overseeing school building maintenance by using its own work force and by administering job order contracting. A JOC is utilized by the DOE to perform maintenance, repairs, and minor construction work. In 1994, the DOE’s Division of School Facilities employed The Gordian Group to develop and implement the JOC program and to provide construction management services. The Gordian Group also created a “Construction Task Catalog” of unit prices for specific work items, upon which the value of JOC contracts are based. In Fiscal Year 2005, approximately $18.7 million of the Division’s budget was allocated to the JOC program.

This audit covered work performed under job orders associated with general construction JOCs that were in effect in Fiscal Years 2004 and 2005.

Thompson’s audit found significant weaknesses in the JOC program, including:

• DOE lacks a formal, organized system for administering, collecting, and maintaining documentation. Consequently, DOE files did not contain evidence that required project documentation was submitted and approved, which may have exacerbated problems with work quality and completeness as identified in the audit.

While reviewing 32 files of projects for which contractors reported using subcontractors, none contained the DOE’s written approval for those subcontractors. Subcontractor approvals are necessary to ensure that contractors employ only qualified and responsible companies to carry out the work.

• DOE lacks any written policies or guidelines that spell out the circumstances under which the use of a JOC is appropriate, and also lacks clear guidelines for carrying it out.

In the case of DOE’s orders to Biltmore General Contracting, Inc. to upgrade the William Grady High School in Brooklyn, the scale of the work exceeded the type of maintenance and repair work intended for the JOC method. The job at William Grady involved various skilled trades people to do demolition, electrical work, and finish woodwork, and was therefore not an appropriate use of the JOC method.

• If DOE had adequately inspected work performed, deficiencies would have been uncovered and might have been corrected while the work was still ongoing. Problems with ensuring that adequate inspections were conducted have led to JOC contractors not completing all required work, not doing satisfactory work, or not completing work on time.

Examples of poor quality and incomplete work include deteriorated and defective doors at PS 70 in Queens, unpainted ceiling piping at PS 162 in Queens, frayed and missing carpet at IS 228 in Brooklyn, missing adhesive strips in entrance steps at PS 262 in Brooklyn, and unpainted basketball support steel at PS 149 in Manhattan.

• DOE does not review prices in the “Construction Task Catalog,” to ensure that prices are consistent with industry standards, thereby leaving the JOC program susceptible to fraud and abuse. Further, the DOE’s use of The Gordian Group to undertake both inspection and consulting services is an apparent conflict of interest.

• DOE lacks an adequate system of internal controls to ensure that invoices submitted by The Gordian Group are properly reviewed and approved. As a result, DOE overpaid The Gordian Group $63,482 in management fees associated with invoices for Fiscal Years 2004 and 2005.

To address the issues revealed in the audit, Thompson made 24 recommendations, including that DOE should:

• Ensure that JOC contractors submit all required material samples, product data, drawings, test reports, guarantees and warranties. Record and properly maintain all required documentation in DOE files.
  
  
• Ensure that JOC contractors are assigned work within their designated regions. In those cases where work must be assigned to a contractor in another region, written justification must be included in DOE files.
  
  
• Develop and implement written guidelines that stipulate the circumstances and monetary threshold under which the use of JOCs would be appropriate. In this regard, the use of JOCs should be limited to performance of repairs, maintenance work or minor construction.
  
  
• Ensure that it adheres to unit prices in its “Construction Task Catalog” when determining the cost of work. DOE should also review the unit prices in the “Catalog” and make any necessary adjustments to ensure that the prices are consistent with industry standards.
  
  
• Implement inspection procedures for Division inspectors consistent with procedures required for The Gordian Group inspectors. Review file documentation to determine if The Gordian Group inspected the work discussed in the audit. If the DOE cannot verify that inspections were properly conducted, the DOE should seek to recoup any payments made to The Gordian Group for that work.
  
  
• Ensure that JOC contractors complete all work satisfactorily, and on schedule. Compel the contractors mentioned in the audit to immediately perform all necessary remedial work to correct noted deficiencies.
  
  
• Recoup $63,482 in overpayments to The Gordian Group. Implement internal controls to ensure that invoices are properly reviewed and approved.

In its response, DOE disagreed with many of the report’s findings, including those concerning incomplete and inferior work. However, DOE officials agreed to provide more comprehensive documentation to manage the JOC program.

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