The New York City Department of Education failed to employ proper safeguards and controls in awarding multi-million dollar milk distribution contracts for schools, city Comptroller Scott Stringer said Wednesday.
That makes the city vulnerable to possible collusion, Stringer said at a Wednesday news conference at the municipal building in lower Manhattan. Stringer has referred the findings to U.S. Justice Department.
"DOE ignored red flags that its milk contracts may have been tainted," said Stringer. "We see possible collusion when rival bidders become business partners within two months of being awarded contracts. Instead of doing its due diligence, DOE needlessly put taxpayers at risk. Moving forward, DOE must put tighter controls in place to ensure that bids are made independently and that bidders have the financial ability to deliver the services they promise."
The city serves more meals and spends more money on those meals than any other U.S. government entity outside of the Department of Defense — about 850,000 meals daily. According to Stringer, saving just one penny on the cost of each meal through better controls would add up to big-time savings for taxpayers—more than $1.5 million per year.
The audit found that DOE lacked adequate procedures to detect warning signs of possible collusion. The three winning bidders began as competitors, each vying for the same contracts, but became business partners within two months of the contracts being awarded, said Stringer.
Beyer and Elmhurst, which had won the lion's share of the distribution bids in August and September 2008, subcontracted the majority of that work in October 2008 to their former competitor, Bartlett, according to the comptroller.
