Wants Details on Savings: Council Slams DOE On No-Bid Contract

Wants Details on Savings
Council Slams DOE On No-Bid Contract

By HOWARD MEGDAL

Deputy Schools Chancellor Kathleen Grimm came under fire from City Council members during a Nov. 21 hearing to explore the reasons for a no-bid, $15.8- million contract that the Department of Education awarded to identify possible cost-cutting measures.

The Chief-Leader/Pat Arnow 'PAY NOW, SAVE LATER': Deputy Schools Chancellor Kathleen Grimm defends a $16-million no-bid contract with a management consulting firm to skeptical City Council Members, citing the firms's special expertise and contending that it makes more sense to pay heavily for its advice now rather than incurring long-term costs by adding staff with similar skills. Ms. Grimm, the Deputy Chancellor for Finance and Administration, maintained that the contract with Alvarez & Marsal was logical because of the firm's unique qualifications to perform the task and its previous experience with DOE. She also asserted that A & M had already identified $89 million in savings.

'Lack Skills In-House'

"Alvarez & Marsal has analytical skills simply not found elsewhere in the department," Ms. Grimm said during her testimony. "The Chancellor didn't want to build those costs permanently into the department - so there are times where it is necessary to go to the outside."

Council Members, however, wondered why such tasks were not performed inhouse, as well as why, if the savings were so vast, another firm charging less would not have been able to identify them.

"The Office of Management and Budget is a huge city agency," Education Committee Chairman Robert Jackson said. "That is the agency our departments are supposed to turn to on these issues."

Ms. Grimm replied, "And we do turn to them - but A & M had the breadth and depth of experience even my distinguished colleagues at OMB didn't have."

Worked for DOE Before

The firm had done two previous audits for the department while paid by a nonprofit, the Fund for Public Schools, which is chaired by Chancellor Joel I. Klein. Ms. Grimm also identified A & M's takeover of the St. Louis school system's finances in 2003 as rendering it uniquely qualified.

But the normally laid-back Mr. Jackson grew heated as he questioned that experience. "There were 10 other bidders for the St. Louis deal," he said. "So obviously, there are other firms who can handle this kind of work. As for the previous contracts, if I had my foot in the door for two years, I'd be uniquely qualified, too!"

DOE General Counsel Michael Best and Director of Purchasing David Ross also appeared before the Education Committee. Mr. Best declined to make available the report from A & M detailing how the $89 million was saved, though Ms. Grimm did explain that the funds allowed the department to hire 312 new Teachers and 140 other new staff members.

"This is common practice," Mr. Best said of keeping the report confidential. "That's your response," Mr. Jackson shot back. "That's to be continued, and we will be legally challenging that." Mr. Ross also maintained that the contract, while part of the 3 percent of DOE expenses devoted to no-bid contracts, was not secret, and had been advertised for a week in the City Record. A number of Council Members jumped on this point, accusing him of painting a false equivalency between an open process and the ad.

"This is a far cry from an invitation for bids," Councilman G. Oliver Koppell said. "To say otherwise is misleading at best."