New York City

NYCHA’S $250 million no-bid — and sometimes no work — repair jobs

October 7, 2019 Greg B. Smith, THE CITY
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This story was originally published on Oct. 7 by THE CITY. 

Low-level city Housing Authority managers have doled out thousands of no-bid repair contracts totaling more than $250 million to a select few vendors in recent years — ignoring corruption warnings, an investigation by THE CITY found.

The tactic allowed one insider-vendor to pocket nearly $2 million via hundreds of so-called “micro-purchase” contracts, including for work that a Department of Investigation probe found appears to have actually been performed by NYCHA employees.

NYCHA’s board recently extended that vendor’s contracts into 2020.

To tackle a mountain of repair requests, the agency lets development managers hire private contractors without seeking competitive bids, as long as the contract is below $5,000.

THE CITY found evidence that some managers often turn to a small group of favored vendors who win these contracts again and again — defeating the purpose of competitive bidding rules that aim to ensure taxpayers get the best bang for their buck.

One case in point: Matrixx Construction, a firm created by a former NYCHA manager that operates out of the basement of his Queens home.

NYCHA contractor Louis Sykes had his Rosedale, Queens, home listed as his primary office, Oct. 4, 2019. Photo by Ben Fractenberg/THE CITY

Since Matrixx formed in 2015, it’s been awarded 428 under-$5,000, bid-free NYCHA contracts totaling more than $1.8 million, records show. Evidence that surfaced in an internal probe by the DOI indicated that some repair work Matrixx billed for was done by NYCHA’s own staff, documents show.

In the spring of 2015, for instance, NYCHA hired Matrixx to clean out 28 apartments at the Van Dyke Houses in Brownsville, Brooklyn. Over two weeks, Matrixx was awarded five separate under-$5,000 contracts and billed the authority $21,000, records show.

The internal DOI report, obtained by THE CITY via the Freedom of Information Law, reveals that probers found work orders showing repairs in all but one of the apartments were actually performed by NYCHA staff — but Matrixx got paid for the jobs.

Investigators also found there was no documentation that NYCHA had inspected much of the work Matrixx billed for. Matrixx’ owner denies any wrongdoing.

Repairs went down the drain

For some tenants, Matrixx’s work left much to be desired. For instance, NYCHA awarded the company multiple no-bid contracts last May to rehab bathtubs in several apartments in the aging Morris Houses in the South Bronx.

Over a two-week period, Matrixx got four under-$5,000 contracts, totaling $16,140, to install “tub surrounds” and “grab bars” in six apartments. Tenants in some of the apartments told THE CITY the work was either repeatedly delayed or had to be done over.

Tenant Yvette Vega, 36, lives in a one-bedroom apartment with her husband, Manuel Rivera, 5-year-old twins, Kaylin and Jaylin, and 16-year-old daughter Nayha. Her bathroom had become infested with black mold, a pervasive problem in NYCHA’s aging buildings that, in her case, was particularly dangerous: She and her twins have asthma.

NYCHA workers tore out a wall while trying to find the leak causing moisture to build. After the work, her bathroom needed a new plastic tub surround.

Contract records obtained by THE CITY show on May 1, NYCHA awarded Matrixx a $4,970 no-bid contract — just $30 below the $5,000 cutoff — for tub work in two Morris apartments. Vega’s was one of them.

An example of installation of grab bars at the Morris Houses by NYCHA contractor Matrixx, according to sources. Photo obtained by THE CITY

She says the contractor did the work, but left without installing a handle on the shower faucet. Vega had to use a wrench to turn on the water whenever anyone needed to take a shower or a bath.

She complained to NYCHA managers, who ordered a new handle.

“They came out to do the job but they had to come back and do it again,” she said.

And at another Morris Houses apartment last spring, Matrixx workers made the mistake of screwing the metal bars into the plaster wall instead of into metal studs behind the wall, according to sources familiar with what happened. The grab bars were useless and had to be replaced by NYCHA workers, the sources said.

Costs rise amid work backlog

The authority’s increasing reliance on the use of no-bid contracts — which allows building managers to hire contractors at will, with little oversight — has coincided with NYCHA’s struggle to attack its huge backlog of repair requests, THE CITY’s analysis found.

By early 2013, the logjam had grown to 420,000 open repair requests. Then-Mayor Michael Bloomberg ordered NYCHA to bring the numbers down.

By May 2018, NYCHA reported the backlog had dropped to 150,000. As of August, it had climbed back up to 312,000.

Meanwhile, the amount spent on no-bid contracts took off year after year, from $32.2 million in 2014 to $61.1 million last year, records show.

Through August of this year, NYCHA had spent another $47.6 million on these contracts — a rate that could push the amount to a record $71.4 million by year’s end.

All told, since Jan. 1, 2014, NYCHA has spent more than $251 million on more than 90,000 no-bid contracts.

NYCHA spokesperson Barbara Brancacio defended the use of no-bid contracts to deal with work that can’t be handled by NYCHA staff. She said the authority now carefully monitors the no-bid contracts for patterns indicating potential corruption.

“NYCHA has implemented stringent reforms and processes in order to maintain that all vendors are thoroughly vetted before any contract is approved,” she stated in response to questions from THE CITY. “This high standard is maintained after contracts are approved and ensure that any work performed by a vendor is completed correctly and is properly tracked by the authority.”

As for NYCHA’s steadily increasing spending on these contracts, Brancacio stated, “Due to immediate needs by property management staff, there was an increase in micro purchases for additional resources.”

Warnings of ‘corruption hazards’

The housing agency, landlord to more than 400,000 New Yorkers, has long been aware of the potential for problems with no-bid contracts.

DOI has warned NYCHA officials three times in the last three years about the agency’s vulnerability to corruption if they don’t aggressively track how the money is being spent and whether the work is being performed, according to internal documents obtained by THE CITY.

In 2016, DOI examined NYCHA’s contract procurement practices, starting with “micro purchases.” NYCHA Inspector General Ralph Iannuzzi looked at a 10-month window in 2015 and found NYCHA awarded $54 million in no-bid contracts to 1,512 vendors.

A disturbing pattern emerged: one-third of those contracts — $18 million worth — wound up with just 17 favored vendors. This select group had been awarded hundreds of micro purchases during that time period, with each vendor pocketing between $514,000 and $1.7 million.

DOI investigators quoted a NYCHA manager as saying the authority carefully monitors no-bid contracts looking for “suspicious activity,” and will reject a vendor if anything untoward is discovered.

But DOI probers noted that NYCHA couldn’t provide any examples of this happening, and said they were told these types of no-bid contracts “are very rarely rejected.”

Sending its findings to NYCHA in February 2016, DOI warned the extensive reliance on under $5,000 no-bid contracts opens up the authority to two “corruption hazards.” Those include one vendor or a small pool of them monopolizing micro-purchases — and NYCHA staff conspiring to steer contracts to a preferred vendor.

The issue re-emerged in DOI’s May 2017 report on Matrixx, and again in January when investigators red-flagged the no-bid contract issue in a report looking at a host of problems at the Throggs Neck Houses in the Bronx.

In a January letter to NYCHA, DOI found that in one month in 2017, two Throggs Neck building managers had awarded five contracts for power washing — each just under $5,000 — to one firm for a total of $24,185, the report states.

“By breaking up the job into separate contracts, commonly known as bid-splitting or bill-splitting, (the managers) avoided compliance with NYCHA’s procurement rules,” DOI wrote.

A Matrixx of contracts

Matrixx owner Louis Sykes had worked for years as a superintendent at several NYCHA developments, including Van Dyke. A few months after he retired in late 2013, he incorporated Matrixx and landed his first under-$5,000 contract with NYCHA within a year — at Van Dyke.

That contract was approved by a former colleague of his. Records show that since 2015, the former colleague has signed off on 229 no-bid contracts to Matrixx worth a total of $1 million.

In October 2015, seven months after Sykes first began winning contracts, NYCHA auditors contacted DOI.

The auditors noticed work orders showing NYCHA staff performing repairs that Matrixx was billing for at another development, Glenmore Plaza, in Brownsville, Brooklyn, according to DOI’s report.

At Glenmore, DOI found a work order that stated a NYCHA worker painted a specific apartment. They also found a copy of the same work order — but this one was allegedly signed by Matrixx, the apartment’s tenant and the development’s superintendent.

From a 2017 city Department of Investigation report examining Matrixx’s no-bid contracts Photo obtained by THE CITY

When DOI visited the apartment, the tenant said a NYCHA worker had done the job. The worker also said he did the job. Nevertheless, Matrixx submitted a bill for $2,439 and was paid for the work, according to the DOI report.

Over the next two years, DOI began examining all of Matrixx’s under-$5,000 contracts. Soon investigators found more evidence that NYCHA workers had performed repairs for which Matrixx billed the housing agency, according to the DOI report.

At Woodson Houses, also in Brownsville, DOI found a work order for plastering and painting one apartment that was allegedly signed by the tenant, Matrixx and a NYCHA supervisor — claiming all plaster, paint and repair work had been performed by Matrixx.

But the tenant told investigators that NYCHA workers did the plastering. When they were finished, they told her to call NYCHA call center to set up a painting appointment.

They told her earliest date was for the next year. The tenant told DOI she painted herself.

Sykes claimed he did the job personally, according to the DOI report.

‘I told them the truth’

In a brief interview with THE CITY Friday, Sykes declined to answer questions about DOI’s findings, repeatedly stating, “It’s all in the report.”

“I haven’t done anything wrong,” he said. “I told them [DOI] anything they needed to hear. I told them the truth and I haven’t had a problem since.”

NYCHA requires that all work — either by staff or vendors — be tied to specific work orders. But DOI repeatedly couldn’t find specific work orders tied to Matrixx’s work.

That included dozens of contracts totaling $238,000 to clean up more than 100 common areas, such as lobbies and community rooms, in developments in Brooklyn, Queens, Manhattan and the Bronx.

In all the cases, Matrixx got paid. In none of these cases was there any record showing that a work order had been created requesting the cleanup — or that anyone at NYCHA had inspected the work afterward.

Because the record-keeping was so flawed, DOI determined its inquiry into whether Matrixx was paid for work performed by NYCHA staff was “inconclusive because NYCHA staff did not follow NYCHA’s work order procedures” in several ways — including failing to create work orders for all work performed by vendors.

In response to questions from THE CITY, NYCHA management claimed that since the 2017 report, Matrixx was “vetted and approved twice” by DOI.

DOI does not “approve” vendors. It merely collects information and passes it on to NYCHA, which “has an affirmative duty to support and document determinations of either (the) responsibility or non-responsibility” of vendors,” DOI noted in its last “vendor name check” of Matrixx sent to NYCHA in August.

In that same “vendor name check,” DOI contended that Matrixx was untruthful in its more recent filing with the Mayor’s Office of Contract Services.

Matrixx answered “no” to the question of whether anyone with an ownership interest in the company had worked for NYCHA within the last five years. At the time, Sykes’ wife — who has an ownership interest in the company — had just retired from her job at NYCHA.

“Therefore she should have been included in the vendor’s response” to the question, DOI wrote to NYCHA.

Signs of a systemic problem

The DOI look at Matrixx exposed a number of issues that went well beyond Sykes’ firm.

Starting in 2016, NYCHA workers were required to sign a form called “statement of services” after a job is finished to generate a payment to the vendor. It states, “I hereby certify that the above described work, labor, material and equipment and services in accordance with the above referenced [purchase order] has been satisfactorily completed and inspected.”

But a NYCHA superintendent who was shown work orders with his signature on them told DOI “his signoff does not mean that the work was necessarily inspected.”

And a former superintendent at Van Dyke told DOI work orders are not always created — especially for “those for which vendors were hired.”

He blamed this on what he called “a concerted effort to keep the work order numbers down and to get as many work orders closed out in time” for an inspection by federal housing officials.

The ex-manager said he and other supers “were advised that [NYCHA’s] general manager wanted them to ‘think outside the box’” to keep the work-order numbers down

DOI found this lack of backup documentation for assigned work raised serious questions about corruption.

Its report notes that investigators looked into whether Matrixx had engaged in a kickback scheme with NYCHA workers, but discovered no evidence of payments via check.

In May 2017, DOI sent its findings to NYCHA and recommended that the agency tighten oversight of the under-$5,000 contracts by requiring work orders for all such contracts and making vendors to submit “statement of service” forms signed by NYCHA staffers certifying the work was done and inspected.

In recent interviews with THE CITY regarding NYCHA’s use of no-bid contracts, NYCHA General Manager Vito Mustaciuolo said the authority has adopted all of DOI’s recommendations.

But NYCHA’s comfort with hiring Matrixx continued after the DOI’s first micro-purchase warning about the company in 2017, with the number of under $5,000 contracts awarded to the firm rising to 122 in 2018, up from 97 the previous year, records show.

The authority has also hired Matrixx for even bigger, competitively bid contracts totaling $5.1 million. Just last month, for instance, NYCHA’s board extended one of those contracts into 2020, approving an additional $658,000 in payments to the firm.

This story was originally published by THE CITY, an independent, nonprofit news organization dedicated to hard-hitting reporting that serves the people of New York.

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