Saturday, March 26, 2011

The Myth Of Bloomberg’s Management Expertise Reexamined: What Happens When Government Doesn’t Manage Its Programs

Perhaps Mayor Michael Bloomberg will actually be flying through the air tonight, “taking,” as the Times puts it, “a few free swings” at the notoriously mismanaged “Spiderman” musical, but such leaping stunts from Hilton balcony heights will be sharing headllines this week with stories about Bloomberg’s own mismanagement on the job.

Word is that the Bloomberg administration is busy making acknowledgments that it screwed up (and consequently needs to make some serious readjustments) when it delegated to the private sector complex technical projects for which the administration should have retained responsible for itself. In its ill-fated relinquishment of these responsibilities to others, the administration much vaunted for its management expertise lost control of the management, cost, and scope of essential work and tens of millions of dollars of fraud ensued. All of this is surfacing with announcements Thursday night that the administration is now shifting (contritely?) to a policy of “insourcing” from what it had been a policy of “outsourcing.”

Mythical Management Stories

Before we get started on this story it would be good to review the operative myths of Bloomberg management expertise that hang in the air, courtesy mostly of Mr. Bloomberg, together with a perpetually tractable city press corps. (As he is concurrently a media mogul himself, Bloomberg even literally owns a piece of it, forget about figurative ownership.)

Let’s start first with this reminder: When Bloomberg was campaigning to change the city charter so that hizzoner could be specially bestowed a unique third term, Noticing New York furnished articles debunking Bloomberg’s claim that he, in fact, had the self-purported unique financial expertise making it essential he remain in office through the financial crisis. (See: Friday, October 24, 2008, Bloomberg Qualified Financial Crisis Leader? He Can Learn Says Schumer!, Saturday, October 25, 2008, More Discredit of Bloomberg as Qualified Financial Crisis Leader.

The Source of Government Expertise: The Private Sector vs. Government Itself

Beyond that third-term-garnering canard, the promoted myth has always been that Bloomberg is administratively an exceptionally good mayor of the city because he comes from the business world and is therefore equipped with superior proven talents. But is that really that case? To ask the question is not to say that Bloomberg is a poor manager or that he, with his team, isn’t a reasonably good one. The fair question to ask is whether he is as good as he promotes himself to be.

And maybe something else needs to be questioned in this respect as well: It is very possible, perhaps even probable, that the talent requisite for running government is special enough in itself that one shouldn’t necessarily presume that talent imported from the private sector is superior. On this point, last spring when Bloomberg had a high-profile deputy mayor slot to fill, he filled it with someone who had government experience, not private sector experience when he appointed Stephen Goldsmith, a former mayor of Indianapolis, “to the powerful post of deputy mayor for operations.” Mr. Goldsmith’s career in government dates back to 1978 when he became a county prosecutor. And what of the qualifications of Ed Skyler, the man Bloomberg had in place in the powerful deputy mayor for operations post preceding Goldsmith? 37-year old Skyler worked his way up to run much of city government as the youngest deputy mayor.”

Skeptics may wonder however, whether, Bloomberg’s pick of Goldsmith was principally because Goldsmith was “a management guru” according to the New York Times or, as the Times also noted, “an adviser to George W. Bush during his 2000 campaign for president.”

Bloomberg’s Hires From the Government Sector

Even when Bloomberg hires people in his `private-sector' incarnation he has shown a predilection for hiring people from government, the first most notable example being when Bloomberg hired (at Bloomberg, L.P.) his apparently top and apparently most trusted aide, Patti Harris, now the city’s First Deputy Mayor while continuing to fulfill private sector duties for Bloomberg. That predilection continues to show up as Bloomberg hires at Bloomberg L.P. people exiting his City Hal administration, an example being Former Deputy Mayor for Development Daniel Doctoroff (although even at Bloomberg, L.P. Doctoroff has been somehow permitted and utilized to play a continuing role in city development projects.)

Ms. Harris’ paramount role in Bloomberg’s life, whether she has been pay-checked on the private-sector or City Hall government side, is as his top political adviser and strategist. Hired before Bloomberg announced his interest in politics Harris, with her previous City Hall experience under Koch, was key to Bloomberg’s first run for mayor wherein he successfully captured that office. Ergo, we might note that in Harris, like new Deputy Mayor of Operations Goldsmith, Bloomberg has hired someone capable of advising him on the pursuit of the next political office he might have his eye on.

Based on Bloomberg’s pre-government curriculum vitae the expertise we could expect Bloomberg might have brought to government, besides general private sector management expertise, would be salesmanship expertise. Perhaps, more specifically, like Cathie Black, the woman Bloomberg recently hired as Schools Chancellor for her private sector expertise, media-company salesmanship expertise. The other kind of expertise we might expect from Bloomberg’s CV (and we will get back to this in a moment) is computer systems development expertise.

Salesmanship Expertise

Black came up through the advertising sales side of the magazine business. Like Bloomberg, Cathie Black puts some premium focus on self promotion. In a New York Magazine cover story profile of Black (The Very Public Schooling of Cathie Black -“Just Smile” Mayor Bloomberg hired magazine executive Cathie Black as schools chancellor to sell his educational philosophy to the public. But she’s having a hard enough time selling herself, Feb 6, 2011) Chris Smith (who also wrote the excellent Mr. Ratner’s Neighborhood, Aug 7, 2006) provided some assessments of Black’s management skills and how she got to whatever pinnacles she achieved:
Some corporate executives and former colleagues praise Black’s ability to run a tight ship, while others say her managerial talents are at best ordinary. “I never thought of her as a brilliant manager,” says a magazine editor who worked with Black for years. “I thought of her as a competent person. She was always kind of a mystery to me, because she kept getting big jobs and seemed to do all right with them, but it was never quite clear how that happened.”

Colleagues, however, sometimes wondered whether Black’s energies were devoted to promoting her magazines or herself. “She would be in her office all day, and much of her time was spent writing notes: ‘Dear Dr. Kissinger, what a pleasure it was to sit next to you at dinner last night,’?” remembers an advertising associate.

* * * *

One guest, a longtime colleague of Black’s, was reminded of a different setting. “I remember going into her home library, and it’s all these books: Swim With the Sharks Without Being Eaten Alive, What They Don’t Teach You at Harvard Business School. All these self-help business books, hundreds of them: ‘How to do the direct eye contact,’ ‘How to learn how to shake a hand,’ ‘How to learn to tell people you’re listening.’ All these tricks!” She was less of a superstar manager, in this view, than a gifted saleswoman of magazine ads—and herself.
Computer Systems Development Expertise

The core of the Bloomberg, L.P. business, the success from which it was all built, is the computer system that was put together to deliver financial data that became the Bloomberg terminal business (presenting huge conflict of interest with Bloomberg’s role as mayor) and then ultimately the larger (perhaps itself money-losing) Bloomberg media empire.

One might therefore presuppose that Bloomberg knows how to manage the development of sophisticated and complex computer systems. Does he?

The 411 on 311

Almost everyone, whether they are a Bloomberg detractor or not, considers that one of the greatest successes of the Bloomberg administration was its introduction of the 311 complaint system. In fact, Bloomberg himself promotes it as an important success and Bloomberg was around for a photo-op to personally answer the system’s 100 Millionth Call. (See: Bloomberg Answers 311 For 100 Millionth Call, by Jaya Saxena, May 10, 2010.)

One place where Bloomberg promotes his 311 system accomplishment is on his self-adulatory, a site almost too ludicrous to be believed and which we will have to spend a moment considering. The site devotes a page with links to how the 311 system won a Digital Government Achievement Award in 2010.

That particular page is bylined “,” whatever that means. Which brings us to the our next point for consideration.

Digression on the Self Adulation of,,

Though it is in fact only one url site, is set up to look as if Bloomberg has multiple operative sites: “” representing Mike as a businessman, “” representing Mike as a philanthropist, and “” representing Mike as public servant (i.e. mayor). Up top there are buttons that bring up a separately masthead design for each of Mike’s purported incarnations. In so doing, Bloomberg actively glories in what makes many of us very uncomfortable, that Bloomberg is wearing too many hats and that there are insufficient protections to keep these roles safely separate.

As per prior Noticing New York coverage the concept of Bloomberg as philanthropist needs to be carefully examined.

The mastheads just mentioned are so precious I am producing them below ad seriatim, preserved for posterity. On a roll, Bloomberg actually has six buttons producing various mastheads. The other three are: “Independence” (essentially a stand-in for the "No-Labels" party Bloomberg likely wants to run on and may have bankrolled to start), “One of 2010's top philanthropists” (that makes two philanthropy mastheads, and an OpEd praising labor with a steel union hard hat. (Mike as Public Servant, i.e. "Mayor") (Mike as a Businessman) (Mike as a Philanthropist)

“Independence” (Watch for the New No Labels Party)

“One of 2010's top philanthropists

OpEd praising labor, with a ironworkers union hard hat.

This is not to mention the Run Mike Run site already actively promoting a Bloomberg run for president.

Back to the 411 on 311

The 311 system is a commendable achievement but if you think about it, given the rapid advances in computers that had occurred by the time Bloomberg took office (January 1, 2002) it was a computer system whose time had inevitably come.

Neither Bloomberg nor New York invented the 311 system. The actual history on this?:
In 1999, Chicago created a “311” call center, which takes citizen complaints and refers them to the appropriate department for resolution.

* * * *

New York, Baltimore, Albuquerque, Dallas and other cities quickly copied Chicago. (For a map of the cities currently using 311 click here.)
(See: Customer Service & the 311 Transformation- and BTW if you click on the link you will see how widely spread the system is to other lower-echelon cities.)

As the above article indicates the cutting edge matter to consider in this area is not now whether these 311 systems are widely spread throughout the country, but that the cities using them, (including New York) have not been advancing their development for the full range of capabilities that are possible.

Is Mike Good With Computer System Development?

This brings us to the stories that concerned us when we started off at the beginning of this post: How good is Bloomberg at managing the development of sophisticated computer systems? Of all conceivable places, this is where the Bloomberg administration seriously fell down on the job with a spectacularly embarrassing management failure. This is why the administration is now announcing that it will be switching to a policy of “insourcing” from “outsourcing.”

At the end of last year it came out that the city was the victim of a “$80 million information technology fraud scheme involving development of the CityTime project, “an automated system devised to streamline employee timekeeping.” The New York Times wrote that the ongoing federal investigation was:
casting a pall over an initiative that the mayor had championed as a hallmark of efficient, computerized management, the case does little to help the opinion of the administration’s outsourcing practices.
(See: Director of City Agency at Center of Fraud Case Is Suspended, by David W. Chen and John Eligon, December 16, 2010.)

Here is more from that story:
Mark Mazer, a consultant, orchestrated the scheme, which got under way in 2005. He awarded contracts to people he had ties to, and took nearly $25 million in kickbacks, prosecutors said. Mr. Mazer, his colleague Scott Berger and the men whose companies he directed business toward, Dmitry Aronshtein and Victor Natanzon, were charged with filing fraudulent time sheets for consulting work. Mr. Mazer’s wife, Svetlana, and his mother, Larisa Medzon, were also arrested, accused of money laundering by funneling the kickbacks through a series of shell companies.
It is ironic that a fraud involving a system to reliably monitor city employee attendance was perpetrated in part with the submission of false time sheets.

Here, from the Times site, is an assessment of the performance of the Mayor’s Office that comes with help from a FOILed letter from within the administration itself:
The indictment raises questions of the city’s oversight of the CityTime project, and how the Office of Payroll Administration lost control of the project under the office’s executive director, Joel Bondy. Mr. Bondy has been suspended without pay by Mayor Michael R. Bloomberg and Comptroller John C. Liu.

* * * *

Although he was a subcontractor, Mr. Mazer held an informal position of authority in the city’s payroll administration office, with . . . the power to shape and approve contracts and work orders, the authorities said.

Some city officials had huge concerns as far back as 2003 about the integrity of the project, whose costs have ballooned by hundreds of millions of dollars.

In a scathing letter made available in December 2010 through a state Freedom of Information Law request, the city official in charge of overseeing the project, known as CityTime, accused the company that designed CityTime, SAIC, of repeatedly delaying the project in order to get paid more, failing to hew to basic industry standards and rewriting contracts on its own. The official even predicted, sarcastically, that SAIC would try, in a year’s time, to charge the city “8,000 hours” for shoddy work.

The letter, dated Feb. 19, 2003, offers a devastating critique of the company, and raises questions about the city monitors of the project — the mayor’s and comptroller’s offices. And the consultants hired to ensure quality control, it appears, were doing very little of it.
The Times story goes on. Can one simply just expect “a certain level of professionalism and compliance with acceptable industry standard practices” when outsourcing huge sophisticated projects to private sector vendors? Hmm. We read this:
In the letter, Richard R. Valcich, executive director of the city’s Office of Payroll Administration, assailed SAIC, a giant engineering company based in McLean, Va., for conducting numerous reviews without approval from the city, other than to “further delay the project and, of course, increase SAIC’s costs.” Mr. Valcich also said “a certain level of professionalism and compliance with acceptable industry standard practices is expected of a contractor for the execution of a $100 million-plus project.”
(See: CityTime, Dec. 21, 2010.)

This Weeks’ Headlines About Bloomberg Administration Policy Change

It may seem unfair (and not conducive to governmental transparency) to jump on the Bloomberg administration just as it is admitting its own mistakes this week, but these things are important to understand and this is a window into serious questions about how governments should manage their important projects. Deputy Mayor Stephen Goldsmith (the fellow discussed above) was the administration representative tagged with getting the word out with both a press conference and a Daily News OpEd piece. (Daily News OpEd: To tighten belts, let's insource: Deputy Mayor Stephen Goldsmith says city workers can do more, by Stephen Goldsmith, Thursday, March 24th 2011.)

The basic ideas Goldsmith was getting out were in his Daily New OpEd:
I have concluded that much of the solution lies not in more outsourcing to the private sector, but rather in employing city workers to perform more of our IT work. So in the weeks and months ahead, we will decisively shift more work from consultants outside government to our talented public employees. This will save taxpayers millions of dollars a year.

* * *

And we are going to start challenging all components of technology contracts, and ensure that the city does not pay a markup to a consultant for work we could just as well do internally.

* * *

Insourcing the management of projects and important decisions about scope and cost will allow us to save taxpayer dollars, enhance service delivery and ensure that IT vendor resources throughout the city are delivering on time and on-budget for New Yorkers.
According to Crain’s coverage of the press conference (noting it was “something of an about-face” for the administration) Goldsmith’s expression of promised savings at the press conference was 100-fold of what he promised in the OpEd:
“I think the eventual savings will be in the hundreds of millions of dollars,” Mr. Goldsmith told reporters at City Hall. No formal estimate of the savings has been calculated, but “there are some folks we're paying contractors' [higher] rates to that we could easily get done on our side.”
And Goldsmith said:
the change promises not just to save money but to reduce fraud. “Whenever you have a vendor, you have to have a high-quality city employee supervising the vendor,” Mr. Goldsmith said. “This level has caused us not only to pay more, but has caused us to lose too much control.”
City Comptroller John Liu also weighed in:
“Comptroller Liu has consistently expressed his concern that too many projects were spiraling out of control and that privatization and outsourcing are not a panacea,” said Mike Loughran, a spokesman for the comptroller. “We think this newfound understanding by City Hall will be in the best interest of New Yorkers.”
At 7:04 that night WNYC had on the air a franker Goldsmith quote with an interesting ring to it (not available on the web):
I think the bigger problem is they become the City. Right? We lose control of the scope and we lose control of the price and we need to bring more of the management on our side of the table.
Crains went back a year pre-scandal for this prescient quote from the union side:
Last year, Henry Garrido, an assistant associate director at District Council 37, said, “They continue to hire contractors left and right to do a lot of the work that could be done in-house.”
WNYC had this in the above quoted report:
Union leaders are praising the decision. District Council 37 president Lillian Roberts calls it a "beginning."

[Roberts says the City currently has 17 thousand contracts worth $10 billion dollars.]
The same night, WNYC’s Bob Hennelly reported on his interview with Goldsmith on the subject in its Financial 411 noting that the CityTime payroll program was supposed to cost $63 million but ballooned to more than $700 million: Financial 411: Insourcing Vs. Outsourcing, Thursday, March 24, 2011.

Questioning an Excuse IFF-Muss-ly

If you listen to the Hennelly report you will hear him disparaging the idea of the city attempting to maintain quality assurance by “having a contractor on top of a contractor to make sure the contractor was doing the job.”

Apparently Goldsmith when talking with Hennelly slipped him an excuse for the problems. In Hennelly’s words:
What happened here is that, you know, the department of information telecommunications and technology was only founded in 1994. That’s not a long time in terms of these huge contracts so just in the last few years it really has gotten to the place where it has technological capabilities inside the city workforce that can, indeed, ride herd on these outside contractors.
I am not sure that is exactly true. Back in the 70's a close friend of mine was involved in setting up the city’s computerized “Integrated Financial Management System” (IFMS- pronounced “IFF-Muss”) which was a fairly sophisticated computerized system designed to restore management controls after the state and city fiscal crisis. In theory this “mastermind of the City of New York” . . “that makes Hal, the computer in the film ''2001: A Space Odyssey'' look like a pocket calculator” should have supplied Bloomberg and cohorts with resources to avoid the rampant out-of-control fraud of the CityTime scandal.

Applied to Development in New York City

Do you want to know what was most on my Noticing New York mind the entire time I was considering all this information about the ill-advised course taken with the Bloomberg administration’s outsourcing of these sophisticated and technically complex projects? It’s the penchant of the Bloomberg administration to do essentially the same thing when, by policy, it hands over large swaths of the city like Atlantic Yards, Willets Point, Columbia's West Harlem takeover, and Hudson Yards, to private developers (or paves the way for the leveling of Coney Island), essentially subcontracting the public’s warfare to those developers and just hoping for the best. It is the same thing: Government walking away from the job that only government can really do well.

Surely, with these subcontracted handouts to the private sector, the public similarly loses money, but this time billions instead of hundreds of millions. Similarly, just as Deputy Mayor Goldsmith says: “the bigger problem is they become the City. Right? We lose control of the scope and we lose control of the price and we need to bring more of the management on our side of the table.” And if this loss of control doesn’t lead to what is technically “fraud” it leads to essentially the same kind of losses for the public as the unleashed developers ultimately deliver mega-messes that differ significantly in quality, scope, and nature from what they promised on day one.

(This is one of two sister Noticing New York articles being posted simultaneously on the subject of what happens when government neglects its duty to manage the work of government. To read the sister article, click here.)

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