Former New Orleans mayor wasted money with outsourcing, IG says

Former New Orleans Mayor Ray Nagin’s technology outsourcing cost the city an unnecessary $1 million more than if the work had been done in-house, according to a new report from Ed Quatrevaux, the city's inspector general.

The report, issued Aug. 30th, found the city’s contract with Telecommunications Development Corp. wasted more than $750,000 in an eight-month period from salaries alone. TDC salaries would have cost the city $960,000 more annually than having city employees do those tasks, Quatrevaux said in the report. The sum is equal to nearly a third of the $2.8 million shortfall the technology office faces this year, according to a story in the New Orleans Times-Picayune.

Read the IG report here.

Additionally, the inspector general noted that the city unnecessarily increased the cost of the Federal Emergency Management Agency reimbursement assistance for Hurricane Katrina by hiring TDC to receive invoices from Integrated Disaster Solutions, a firm hired to work with FEMA for Hurricane Katrina repair payments. TDC billed the city $275,000 while providing no additional services, when New Orleans could have hired IDS directly, Quatrevaux said. New Orleans also incurred an additional unnecessary expense of $52,000 “by shifting administrative workers from a competitively bid contract for non-professional services to the higher priced TDC contract for professional services,” he wrote.

The inspector general also found the procurement process of TDC was flawed and did not promote fair competition. “The city passed over a higher ranked proposal and chose TDC despite lower scores for experience and competency and higher proposed hourly rates," Quatrevaux said in the report. "After negotiating a reduction in TDC’s proposed hourly rates for the contract, the city increased the rates through a questionable contract amendment.”

Moreover, the report concluded, “the contract maximum swelled from $450,000 to more than $5 million, without regard for the impact on the city’s budget….The responsible officials did not ensure that adequate funds were available for the contract, jeopardizing the integrity of the city’s budget.” By the end of May, TDC had billed the city $3.7 million, the report states.

In a formal response, current Mayor Mitch Landrieu's chief administrative officer, Andy Kopplin, said the new administration wasn't involved in hiring TDC and since taking office has overhauled the city's procurement process. Kopplin added that the new administration agreed that the IT department had developed an over-reliance on contractors and as a consequence the administration was working on reducing the use of contractors as well as contractor rates.

In the Times-Picayune article, Landrieu spokesman Ryan Berni said TDC quit handling all recovery-related work June 30. The technology portion of its contract expires Sept. 30, he said.

Nagin paid TDC and other contractors in part with a $200 million state-financed revolving loan intended to jump-start rebuilding projects, according to The Times-Picayune.

New Orleans is not the only government entity to recently experience technology outsourcing issues. Virginia is still fighting massive computer failures that are inhibiting the state's Department of Motor Vehicles and other agencies from carrying out their duties. And like New Orleans, Defense Secretary Robert Gates’ announced that part of his plan to reduce Defense Department spending by $100 billion over five years included eliminating thousands of DOD positions and thousands more contractor jobs.