NYC lagging on vendor payments during critical time, housing service providers say

Across New York City, housing and shelter providers who contract with the city are saying that year-plus city delays in reimbursing them for key subcontracting services such as food, medical and security are putting the squeeze on their budgets. They are saying that it’s holding them back from expanding their capacity at a time when an influx of migrants has put an unprecedented burden on shelter needs.

According to Catherine Trapani, who heads the service-provider umbrella group Homeless Services United, this has come in the wake of the city requiring, in order to avoid corruption and increase transparency, that service providers rebid their subcontractors at least every three years, and that’s going too far. "The process is redundant – these vendors have largely already been cleared to do business with the city, and the costs are already approved by the Office of Management and Budget,” said Trapani. “Furthermore, existing conflict of interest policies offer additional safeguards."

Trapani believes that the upshot of the city's demands has been a gut-punch to nonprofits. "The city forced the entire service provider community, about 400 contracts, to rebid all their subcontractors at once, so the market was flooded with providers asking vendors to put in bids,” she said. “All of this meant a huge backlog in approvals."

Trapani also mentioned that about a year later, "the city still hasn't figured out a streamlined process for this, so providers have been paying food, security and medical bills out of their own coffers,” she said. “There's no end in sight, and it's hampered us." 

She highlighted the recent influx of tens of thousands of asylum-seekers, all of whom are guaranteed by New York City law an immediate right to a certain standard of shelter, along with preexisting shelter seekers. "If we can't pay the bills on what we're already committed to doing, how are we supposed to open anything new?" she asked. She also noted that the payment delay on the city's part "has hurt the city's overall readiness."

Trapani was echoed by top staffers at several providers under the HSU umbrella, who spoke for this story anonymously, saying they didn't want the city to single them out for punishment at a sensitive time when they were waiting desperately for city payments. 

"It's a confusing process that takes way too long, and it appears that the city office that handles this is understaffed or overburdened, with no uniformity to the process," said one staffer. 

This staffer recalled the challenges they faced getting their budget approved by the city during the summer. "We were trying to get our contracts registered and budget approved with a number of vendors we've been using for years, but suddenly the city wouldn't allow it and told us we had to get our (subcontractor budget approval) 65a form redone, which was very difficult," said the staff member.  

The staff member added that it’s especially difficult when it comes to nailing down security services. "It's a difficult thing to get. You're expected to work in shelters for barely more than minimum wage, and now the city is asking us to rebid,” they said. “So we're way behind on all of our contracts and paying bills out of the cash we have, so now we're behind the eight ball. It's not a good thing. My team has put an incredible amount of work into trying to give the city what it wants, and yet, their process is still unclear. Sometimes they'll approve, sometimes they won't. Sometimes nobody will get back to us for months at a time, no matter who we call." 

At another provider, an executive said they had 20 outstanding 65a approvals dating back to May. "My team follows up with the city every week," said the executive, "but we may go months without hearing back, and when we do get feedback, it seems arbitrary, like 'You only submitted the first couple of pages.' Then we have to resubmit and wait another couple weeks. Meanwhile, the city is demanding that we open new sites without any of these approvals in place. We're in an emergency situation, but the city doesn't seem to recognize that."

An executive in another agency highlighted that having a delayed 65a process can impede billing and said that as of mid-November, their agency is still waiting on funds. "Let's say we have a $10 million budget. If $5 million of that is for subcontractors, it goes into a line called 'unallocated,' and we can't bill that until this 65a process is complete," said the executive. "We've been waiting on millions of dollars since July of 2021, and in the meantime, we're forced to borrow on our line of credit and incur interest expenses at a time when it's not good to be borrowing."

Providers said they understood the need for the city to hold their budgets accountable, but they wanted the city to institute a more consistent, streamlined process. They prefer for this to be done via a portal where the status of each subcontracting ticket could be tracked – or at very least, a single reachable point person, not merely sending their 65a forms to an unnamed email address from which they seldom heard back.

"There's no consistency," said one provider. "The increments when they want us to rebid are all over the place."

Another provider believes that the city should allow agencies to bill contract amounts monthly. "They should allow us to bill the entire contract amount normally on a monthly basis, then let us get to the point where we spend down the remainder by year's end,” said the provider. “If you're going to pay us anyway, why are you forcing us to borrow and incur interest over an administrative mechanism? And once all our vendors are in your system, don't make us do it again."

To these concerns, a spokesperson for the New York City Department of Social Services defended the existing process. "Contractual obligations, including those pertaining to subcontracting, are in place to protect against corruption and bolster transparency,” wrote the spokesperson in an email. “We continue to work with providers to ensure compliance, which will accelerate approvals, and we have enlisted the assistance of additional investigators to further expedite the approval process and provision of funds to providers.”

The spokesperson also pushed back on the providers' narrative. "The submission process has remained largely consistent since its rollout this Spring. However, many providers have not been meeting their contractual obligation to provide the three bids for third party agreements. As such, we have requested subcontracting plans from these providers to ensure compliance in the future. We are choosing to work with vendors to correct these infractions rather than simply denying the subcontractors. Furthermore, we have enlisted the assistance of additional investigators to work through the backlog of subcontractor applications and issue approvals more efficiently," they wrote.

But Trapani countered the statement by pointing towards the city. "What we are struggling with is a bottleneck due to the city's decision to implement a redundant procedure for the entire universe of around 400 DHS (Department of Homeless Services) contracts all at the same time.” she said. 

Trapani also noted that the city did this “without considering the limited pool of vendors who are reluctant to do the work submitting multiple bids for multiple jobs all at once and limited staff to process everything on the city side."

Another provider responded to the city rep by saying that they hoped the city was finally feeling "some pressure to expedite the process and add some flexibility" to their rebid demands, "since organizations have been dealing with some vendors for more than three years."

Asked if the city had any plans to streamline the process, such as setting up a portal where tickets could be tracked by providers, or a timeline for doing so, the DSS spokesperson replied via email, “The City is deeply committed to streamlining procurement processes and making it easier to do business with the City, as evidenced by the action taken on the Joint Task Force to Get Non Profits Paid on Time…This administration will continue to evaluate each bureaucratic hurdle to find the right balance of risks for the responsible and effective use of taxpayer dollars.”

The spokesperson also shifted the blame toward providers. “Providers working with the same vendors for many years is part of the problem. They continue to work with these vendors while failing to follow the contract provision regarding third-party vendors, which perpetuates risk/compliance issues,” they wrote. “... we have been very flexible with approving vendor procurement plans to provide them with enough time to re-procure and/or transition to new vendors.”