Poor Management, Federal Rule, Undermine ServicesBy Michael Powell
Washington Post Staff Writer
Sunday, July 20, 1997; Page A01
In many of its neighborhoods, Washington is a place of exquisite human suffering. New tuberculosis cases jumped 36 percent last year. The city now has the highest rates of tuberculosis, new AIDS infection and infant mortality in the nation.
Yet for six years, the city's Commission on Public Health fumbled and delayed spending $89 million in federal grant money intended to provide housing for AIDS patients, screen for breast cancer, examine pregnant women and treat tuberculosis patients. Poorly trained officials simply failed to monitor the federal grants from 1991 to 1996.
"How the hell can you deal with HIV and sickly babies if you can't get the money out to the people who need it?" said Harvey I. Sloane, who was fired as acting health director last week after speaking out about the department's problems. "Not to spend that money in a community with our needs is really tragic."
Sloane's lament speaks to a broad problem for the District. Poor management, the legacy of federal rule and what several former mayoral advisers describe as Mayor Marion Barry's history of handing out jobs and contracts to build a political power base have undermined services and cost Washington hundreds of millions of dollars each year.
Those conclusions arise from interviews with the city's chief financial officer, financial control board members, federal and city officials, urban analysts and former Barry aides and are buttressed by dozens of city and federal budgets, federal court decisions, reports and audits.
If the city spent the federal grants it receives each year, required competitive bids on contracts, immediately renegotiated dozens of expired leases and collected its taxes, records indicate the District government could have an additional $307 million to spend each year.
The city could find even greater savings if it brought spending in line with cities of similar size. For instance, Washington spends $2 billion more than Baltimore to provide similar city services.
Although the city contends that it suffers from a chronic shortage of cash, a three-month Washington Post examination found examples of poor management and lost revenue throughout the municipal government:
City officials failed to spend $55 million in federal block grant money intended to rehabilitate housing for the poor, build sewers and parks and pay for day care. The city's record ranks it among the worst in the nation at spending federal housing grants.
The city loses $30 million to $40 million each year, budget analysts estimate, because contracts are poorly written, are not competitively bid and are plagued by cost overruns. It takes 216 days, on average, to process a city contract.
The city is losing $1 million a month because it cannot process Medicaid managed care contracts.
The Department of Administrative Services, which purchases much of the city's supplies, awarded 59 percent of its contracts without competitive bids in 1995. By contrast, New York City awards 96 percent of its contracts on a competitive basis, for a savings of an estimated 10 percent to 20 percent per contract.
The city fails to collect as much as $60 million in business and sales taxes every year. "We're dangerously near the point where people think the tax system is entirely random," said Matthew Watson, who was the city auditor from 1975 to 1981.
District officials have not taken advantage of falling real estate values to renegotiate 20 leases for city offices that expired months and even years ago. Budget analysts project lost savings of $10 million a year.
The city has failed to sell its vast stock of surplus and unclaimed property. City budget analysts project the city could have made $15 million through such sales.
The city's Water and Sewer Authority has not collected $16.5 million in overdue water bills from owners of commercial and residential properties.
"You might look upon the fiscal and managerial crisis as an iceberg," said Andrew F. Brimmer, chairman of the control board. "The fiscal crisis catches the eye, but under water is the vast, vast bulk of the problems, which are substantially management and performance -- or our lack of it."
Chief Financial Officer Anthony A. Williams recently put a price tag on each cost-cutting reform that Barry has promised -- from updating computers to consolidating departments -- but not delivered. The cost of mayoral promises unkept, he said, came to $154 million.
Williams, who was appointed by Barry but can be dismissed only by the control board, says the management problem is rooted in a mind-set that hobbles reform.
"D.C. government has retrenched by focusing on its core, loyal base: its employees and a few favored contractors," Williams said. "The public doesn't fit in that picture."
Barry, who has served as mayor for 15 of the last 19 years, acknowledged that he bears some responsibility for the city's poor contracting and personnel practices and that his government has failed to spend a share of its federal grant money. And he said that some of his appointees are poor managers.
"Of course, we have management problems, some at the top, in the quality of some of my directors," Barry said. "We've lost a lot of good people to [reductions in force] and early retirements, and you find yourself promoting people who wouldn't be your first choice."
Barry insisted that the city is burdened by too many responsibilities -- such as mental health, prisons and child welfare -- that elsewhere are shouldered by state and county governments.
"It's a management nightmare for anybody," Barry said. "Management 101 would tell you that. From a management point of view, this is a vast wasteland out there."
But, Barry said, such problems pale next to his transformation of Washington.
Just last week he named three new cabinet members, drawing them from Chicago and New York, and luring a respected D.C. Court of Appeals judge to take over the legal department. He has cut $400 million from the city budget since taking office in 1994 and slashed union salaries by 12 percent, created a new health agency and a sewer authority, saved money by turning some of the jails over to a private contractor and pushed Medicaid reform. And D.C. General Hospital recently received a high score from a national accreditation board.
And, despite the inefficiencies and high costs, he said, the city can't withstand losing another dime.
"Can't cut any more," he said. "We're down to the bone."
City Fails to Spend Grant Money
That's a great idea, Barry said. Then he sent the ministers to meet with his Department of Housing and Community Development, where officials shook their heads and told the ministers that they could not afford to help with the project.
In fact, the housing department was plump with cash. It had a $55 million backlog of federal money, intended to rehabilitate housing, roads and sewers. The unspent money had piled up since 1994.
"It's like they have a storeroom full of life preservers but they would prefer to watch people drown," said Edmonds, whose coalition is named the Washington Interfaith Network.
Washington's failure to spend federal grant money may seem difficult to understand. Washington, after all, was the only major city in the nation last year to experience a decline in new housing construction.
But Duryea C. Smith, a senior housing administrator, offered a simple explanation: The agency has too much money.
Each year, Smith explained, his agency gets a lot of money from the federal Department of Housing and Urban Development and the city. There's the federal block grant, about $23 million each year. There's city money -- about $5 million this year, but more in years past -- and $9 million from rentals. And a couple of new federal programs have been added in recent years.
And it was even tougher in the 1980s, Smith said, when the city economy boomed, the mayor and council gave his agency tens of millions of dollars, and his staff lacked the expertise to spend money quickly and efficiently.
"It's like if you received a stipend from the time you were a teenager to now, and you didn't know what to spend it on except for popcorn and chewing gum," said Smith, who has been with the agency for 25 years. "Now fast forward: We're spending at a decent rate each year, but we have this huge backlog of money."
In other words, he said, the agency now has the ability to spend $20 million or $30 million a year but cannot find enough worthy projects to expend the entire $55 million backlog. "We love money from HUD, no doubt," Smith said. "But we just can't catch up and spend it all."
Such problems haven't plagued other East Coast cities.
New York City's housing agencies receive a $184 million block grant each year and $180 million in city appropriations, and they have 30 percent fewer employees per capita than the District's housing department. They spend all their money, and from 1987 to 1993, they financed the largest building rehabilitation program in the nation.
The same holds true for Philadelphia, Baltimore and Boston: fewer employees per capita, little problem spending money, and more housing rehabilitated than in Washington.
The District has acres of abandoned and decrepit housing. Housing experts say that $55 million could pay for the rehabilitation of at least 1,500 apartments and houses and restore surrounding parks and sewer connections. And city officials scrambling to spend the excess have earmarked almost $20 million for various projects.
Williams, the chief financial officer, has little patience with the housing agency. He suggests turning over most of the money to a pool of competent community groups and private developers.
"Build a good coalition, fund it and let the rest of the agency collapse in on itself," Williams said. "You won't disrupt service, because they aren't providing any."
For now, the Interfaith Network's plan to build homes for working-class people has stalled. The housing agency refused the request for $3 million for sewers, and now the mayor has backed away from his promise to give the churches land.
Asked to explain why he opposed the $3 million request, Smith, the senior housing administrator, gave a somewhat contradictory response. Although his agency routinely cannot spend its money, Smith said he prefers not to grant money outright.
"We're not like other cities; we like to loan the money and get it back," Smith said. "If you sink that much money into the ground for roads and sewers, it never comes back into our [bank] account."
The same bank account from which, he said, he cannot spend money fast enough -- the same bank account to which the federal government will send a fresh $23.5 million block grant in October.
The Rev. Edmonds offers his own coda: "They have employees. They have money. They have people who could use the money. There just doesn't seem to be a willpower to produce in this government."
But Barry said the problem is more straightforward: "When we had the fiscal crisis, the government really got constipated."
City Officials Inherited Bad Behavior
So how did management of Washington come to this pass?
Dwight Cropp, a former top Barry adviser and fourth-generation Washingtonian, says the explanation can be found in the city's tumultuous struggle for civil rights and home rule and in Barry's decision to emphasize jobs rather than employee training and tough management.
In the years before home rule, Cropp said, Washington was a virtual congressional satrapy. Congress underwrote the city's budget, and strictures against political payroll padding were, at best, faintly observed. "We inherited a lot of bad behavior," Cropp said.
The first elected home rule government took power in the 1970s. And many in the top tier of its leadership hailed from the civil rights movement -- including three men elected to that first council who were to have lasting political influence: Barry, John A. Wilson and David A. Clarke. They shared, Cropp said, a view of government as a redistributive tool, with a moral obligation to uplift the poor, spread the wealth and pull blacks into jobs long denied them in a segregated city.
"Government wasn't seen as providing a service but providing an income," Cropp said.
To this, Cropp said, Marion Barry added his vision: He could build a black professional class -- and turn government into his political machine. From 1980 onward, he put thousands of people on the payroll, handed contracts to allies, increased welfare benefits and started an ambitious summer jobs program for young people.
His goals sometimes clashed with those of the black professionals, many with impressive credentials, who flocked to work for a black mayor in the nation's capital. They had helped Barry navigate the city's first fiscal crisis and found a government in desperate need of computers, training, tougher accountability and a rational process for awarding contracts.
"Marion knew that to make the kind of changes we needed, a large number of nonproducing D.C. employees would have to suffer," Cropp said. "To assault the entrenched bureaucracy would mean assaulting the black middle class. So he refused."
Sam Newman, an African American and former director of emergency services for the city, recalled the toll taken by such decisions.
"Government became a brotherhood and a sisterhood. People would say, `I don't want to fire this person; I can't write him up,' " Newman said.
Barry also took a keen interest in hiring and promotion, an influence he retains to this day, say several agency officials. "Nobody above [a $35,000 salary] walks in without some . . . committee of Marion's vetting you," said Otis H. Troupe, who served as city auditor from 1981 to 1994.
Barry shrugged off such criticism. He said sound policy, not politics or race, guided his decisions. He conceded that the real estate boom of the 1980s lulled him into a sort of complacency.
"Money just flowed and flowed. Our budget grew 8, 9 percent each year," Barry recalled. "Contracts went out sole source, no one complained. . . . In retrospect, I should have zeroed in. But money covered up all the defects."
In fact, there were warning signs. Whistle-blowers complained of lease and contract giveaways. Officials used repair money to pay employee salaries. And no one paid much attention to contract reform.
"Decisions on all major contracts were made in the mayor's office," recalled Cropp, who was then director of intergovernmental affairs and a member of Barry's cabinet. Cropp, the husband of Acting Council Chairman Linda W. Cropp (D-At Large), retired from District government in 1989 and now is a professor at George Washington University. He warns against viewing the city's plight as born only of mismanagement.
"The media likes to say it's sheer incompetence and mismanagement," Cropp said. "No, no, no. Someone thought this through very clearly and made the decision that good management wasn't in their interests."
Contract Award Problems Putting Needy Out of Jobs
It seemed that a $400,000 contract had slipped through the cracks at the Department of Human Services. Because someone in the department had failed to process the signed contract, they no longer could pay her.
So, Wade, who runs some other programs as well, sent 41 mentally disabled people back to group homes, where they now sit and draw welfare. And the city was left with unspent federal training money.
"It's a cruel game being played," Wade said. "If I sound like I'm discouraged and have lost faith in the city, well, I have."
No piece of government turf has proven more resistant to reform than the awarding and spending of contracts.
The problems are legion: Officials awarded just 50 percent of city contracts on a competitive basis in the last two years. Only 1 percent of the staff that handles contracts is professionally certified in procurement. And the city spends millions of dollars too much on leases.
City Administrator Michael C. Rogers said matters are improving, but he acknowledged frustration with the slow pace in many departments.
"Everyone says contracting is someone else's responsibility," Rogers said. "It's part of the unfortunate culture in this government."
A recent audit uncovered example after example of city officials attempting to slip large contracts by the financial control board, which must approve all contracts. Auditors found that the Water and Sewer Authority split a $2.175 million contract into six small contracts "to circumvent competitive bidding procedures." And Human Services officials split a $1 million contract into 10 installments to avoid review.
"Some of these contracts are pure subterfuge," said Brimmer, the control board chairman. "They split up the contracts to escape our scrutiny."
Barry insisted recently that 90 percent of the city's contracts are now on time and bid competitively.
But Brimmer said the progress is far more halting than Barry suggests. And, although he gave some credit to Rogers for speeding the contracting process, Brimmer cited two principal reasons for the improvement: Control board members and the chief financial officer now routinely catch and block no-bid contracts, and the federal government and the control board staff have taken over much of the awarding of city contracts.
"Matters have improved a bit, but not nearly to the degree suggested," Brimmer said. "Our staff is actually doing contracts, and that's because the city hadn't done their job."
City officials have had no more success renegotiating the exorbitant leases.
The city's Department of Housing and Community Development spends $1 million a year above the market rate to rent its office at 51 N St. NE, according to city records. In two dozen other cases, city officials pay very high rents, even though leases expired months ago and a number of the buildings are half-vacant. And the city often foots 100 percent of the cost for heat and electricity -- even though it occupies just a portion of those buildings.
"We own a huge amount of property," said Williams, the chief financial officer. "Yet we lease a huge amount of property at above-market rates."
Some see in this the hand of pure politics. Barry's critics, the control board members among them, note that mayoral supporters hold many contracts and leases. There was, for instance, the city's decision to sign a $23 million, 20-year lease for a warehouse in an out-of-the-way corner of Northeast Washington. A now-deceased supporter of the mayor owned the warehouse, and he received a monthly rent equal to any found in the city's central business district.
"Marion Barry has always purchased the next election out of the pocket of the taxpayers," said Troupe, the former city auditor. "Contracts and leases . . . have been the point of this government."
That said, the border separating politics and prosaic poor management is a porous one, note longtime analysts of Washington's government. Unlike laws in other cities, Washington's laws do not explicitly forbid sole-source contracts. Many experienced contract officials have left government, and those who remained had little training and almost no supervision.
The city recently sent 100 procurement officers to a week of classes. At the end of the week, they took a test on contract regulations. About 70 failed, city officials said.
Barry said recently that the city was finishing a review of the contract officers, and he vowed to fire anyone who didn't measure up. He blamed many of the problems on former mayor Sharon Pratt Kelly, who left the city with more than $35 million in unpaid bills from contractors, he said.
Management problems, said Sloane, the former acting director of public health, have plagued the Health Department. Beginning in 1991, during the administration of Kelly and continuing under Barry, health officials took months to transfer federal money to city accounts. Workers lack the expertise to write contracts. And no one in the department closely monitored the community programs that deliver services to the poor.
Sloane, with the help of city administrator Rogers, recently turned over much of his agency's contract power to the federal government.
"Repeatedly, month after month, you just can't get grants out to the community," Sloane said. "People lose papers. Contracts are rewritten. Training is terrible. It's really difficult to understand."
D.C. Officials Go to Great Lengths to Preserve Jobs
The mayor, by contrast, allocated not a dime of oversight money to the controller's office, which is responsible for monitoring millions of dollars in federal grants.
Barry has proposed to increase his share of this money from $1 million to $1.3 million next year, budget documents show. Williams, the chief financial officer, said he would block that proposal.
Going to almost any length to preserve jobs and make payroll is a longtime dictum of District government, carefully observed by mayors Barry and Kelly.
Over the last 20 years, city officials took at least $80 million in surpluses from city water and sewer revenues and used the money to underwrite their payroll, audits show.
Those decisions caught up with the city this year. Faced with decaying pipes, officials pushed through a 42 percent rate increase and eliminated a charitable discount on water rates for churches and nonprofit agencies.
"They didn't go after corporations [for overdue water bills], and they neglected repairs," said Terry Lynch, director of the Downtown Cluster of Congregations. "So now they're socking it to the churches and orphanages."
The municipal unions helped Barry secure power and reaped loyalty's reward: work rules that cost the city $10 million to $20 million, say control board analysts.
The city gives sanitation workers an environmental pay supplement for dirty work, and bonuses to work in snowstorms. Police officers, although poorly paid by suburban standards, get automatic 4.2 percent raises after 18 months, and 28 days' notice before any change in their schedules. Many city workers get three "funeral" days each year.
And personnel rules require so many layers of review that some departments have gone years without dismissing an employee for incompetence.
The mayor has promised work rule reform. But the labor contract reached this month addressed only money. Negotiations on work rules were put off until later.
Mayors in Other Cities Overhauling Government
"The old view that you could do sole-source contracts is out," Barry said. "It required a whole new mind-set. It took a whole paradigm shift."
But if recent months are any measure, such talk hasn't penetrated far into the city's political-managerial culture.
In January, the Department of Administrative Services submitted 11 contracts to the control board. Seven of those contracts, for such basic services as nursing support at the Lorton Correctional Complex, were awarded without competitive bidding.
In March, top city officials tried to give $10 million to a mayoral supporter who ran a Medicaid HMO, over the objections of the city's Medicaid chief. Chief financial officer Williams blocked the move.
And last month, control board officials discovered that three multimillion-dollar nursing and food services contracts at D.C. General Hospital had expired and that the companies had not been paid since fall. The board was forced to extend the contracts without bids, simply to provide basic services for patients.
Few are better positioned than Williams to judge the distance between the rhetoric and reality of change. He has served as chief financial officer at the U.S. Department of Agriculture and as deputy state comptroller in Connecticut. He also has directed development agencies in St. Louis and Boston.
Across the nation, Williams said, mayors have overhauled the engines of government. They have insisted that government can fix potholes, award contracts effectively, save a few dollars and take care of favored constituencies.
"Machines and good management are not antithetical," he said. "When a political machine works, it delivers to its customer base.
"In Washington, we've got the machine, but things don't work."
Staff writers Amy Goldstein and Vernon Loeb contributed to this report.
© Copyright 1997 The Washington Post Company