Addressing Pervasive Issues with New York City’s Human Services Contracting: The Equity in Contracting Act
Executive Summary
New York City’s human services providers are in crisis. First, there is rampant underfunding, which is caused by the lack of universal practices regarding indirect costs and pervasive delays in funding. This underfunding limits the efficacy of city services, and has even forced providers to shut their doors. Second, human services employees – who are disproportionately women and people of color – work for low wages and are not protected by the city government. Solutions established thus far have not addressed delays in funding, nor have they provided targeted protections to employees. Solutions must prioritize improving the efficacy of city services, recognize the unique position of human services employees, and provide targeted solutions for these employees. The Equity in Contracting Act addresses delays in funding by setting approval guidelines for agencies and developing a comprehensive contract tracking dashboard accessible to both the Comptroller and human services providers. It provides protections for employees by creating advisory boards made up of human services employees and service receivers, fullying funding PPE for employees, and requiring providers contracting with the city to recognize employee unions.
Rationale for Action on the Problem
In response to the rising need for and rising cost of social services in New York City, the City government has increasingly contracted services out to non profits; since 1990, human services contracting rose by 82%. That being said, these contracts are often underfunded; the Mayor’s Office reported in 2017 that out of the 10,000 requests for assistance from non profits they received within a year, 18% of the organizations were completely insolvent and 50% were struggling with deficits.
There are two reasons why human services contracts frequently face funding difficulties. First, there’s a lack of transparency surrounding costs and funding. Due to a lack of a concrete definition or protocol from the city, many nonprofits have found it difficult to calculate indirect costs (costs for facilities, training, evaluation, etc.), leading them to be taken out of their personnel and non-personnel costs. Lastly, there are widespread funding delays, as contracts have to go through multiple city agencies before final approval. In 2018, Comptroller Scott Stringer found that 90.8% of contracts submitted to his office for final approval were late, 50% by more than six months. Additionally, providers often do not know where in the process their contract is, and do not know about delays until they are slated to receive money, so they’re forced to start projects without funding. Although Mayor DeBlasio announced in 2019 that his administration approved 90% of contracts on time, a framework for future success is critical. This underfunding impacts the efficacy of city services, because when organizations are not properly funded they are forced to scale back on their work. In the most severe circumstances, organizations can shut down because of prolonged funding issues; in 2015, the well-known Federation for Employment and Guidance Services shut its doors.
However, there is another problem related to human services contracting: the lack of support for human services workers. These workers are at the frontlines providing resources for the city, and 80% are women and people of color (POC). However, salaries within the human services sector are remarkably low; the average salary in New York City is $29,600 annually, well underneath the United Way family survival living estimate. These workers are expected to protect our city, but are not protected by the city in return. Thus, human services contracting is a social justice issue, as the lack of support for minority and female workers upholds existing structures of inequality within the city.
This issue is only becoming more pressing as more and more New Yorkers rely on social services during the Covid-19 pandemic. According to Council member Helen Rosenthal, who has been a leader in the City Council in advocating for human services providers, “Human Service Contractors are perennially underfunded by the City and the State. These funding shortfalls have continued and grown during Covid-19, when the demand for social services (like food pantries and senior services) has grown exponentially and will continue to grow.” Thus, now is a critical time to reform how New York City treats human services contractors and their employees.
Existing Solutions and Proposals
In the past few years, the government has taken several steps to address the myriad of issues regarding human services contracting.
In 2013, the Federal Office of Management and Budget mandated that any contract receiving federal funding – most contracts receive funding at the local, state, and federal level – receive at least 10% of their total payment rate as an indirect rate at all levels.
In 2016, Mayor DeBlasio created the Non-Profit Resiliency Committee to address many of the issues surrounding human services contracts. In 2019, the Committee released a Cost Manual that established clear definitions and rates for indirect costs, established multiple ways of calculating indirect costs, and clearly established guidelines.
Much of what’s been done thus far has addressed the issue of indirect costs, but different sectors of the city government have developed proposals to address funding delays. The Deputy Comptroller for Contracts and Procurement, Lisa Flores, has expressed the necessity of setting strict timelines for agency approval to prevent contracts getting backlogged during the approval process and suggested the development of a platform that would allow human services providers to see where in the approval timeline their contracts are.
There has been little meaningful discussion at the government level on how to protect human services employees directly. However, Council member Rosenthal expressed during an interview, “Government funding should cover the cost of PPE and incentive pay for the social service program employees who work every day with clients, during Covid-19, face-to-face. These employees come to work every day to serve the public and the government should pay them accordingly.”
Policy Recommendation: The Equity in Contracting Act
When developing policy to address human services contracting, the city government should prioritize specific evaluative criteria. The first is efficacy. The biggest impact of funding delays is the effect on the efficacy of city services. Therefore, any policy put forth to address funding delays must improve human services providers’ ability to provide comprehensive services to the city. The second criterion is intersectionality, outlined in Hankivsky’s An Intersectionality-Based Policy Framework. An intersectional framework considers the interrelated identities of race, gender, and class within policy and understands the structures of power hierarchies within the law. When looking at human services through an intersectional framework, policy must recognize that employees are disproportionately women and POC, ensure these groups have autonomy, and put these groups at the center of the decision making process. This idea is further outlined in John Powell’s theory of targeted universalism, which uses targeted strategies to achieve universal goals. Targeted universalism recognizes that when all groups affected by a policy are painted with the same brush, current divides may be exacerbated. With human services providers, policy must provide provisions that directly benefit employees; it is not enough to reform the system from the top and assume that benefits will trickle down to the employees on the ground.
The Equity in Contracting Act provides comprehensive solutions to address the two goals outlined above: delays in funding and the underpayment of employees.
Addressing funding delays.
Setting deadlines for contract approval in all city agencies. Deadlines are a critical first step to incentivize all city agencies to approve contracts within a reasonable amount of time and prevent contracts from getting lost in the system.
Creating a comprehensive, all-inclusive dashboard accessible to both the Comptroller and human services providers. First, this dashboard would allow the Comptroller to effectively audit city agencies in real-time, see where delays are happening in the system, and which city agencies are unable to follow the new regulations. It would also allow nonprofits to understand where in the process of approval their contracts are, so they are prepared for funding, solving the problem of providers starting their work without funding. This dashboard should be developed through collaboration between the Comptroller’s Office and the City Council, and should be easily accessible to all human services providers.
Addressing the exploitation of human services workers.
Developing advisory boards. After the state of New Jersey reformed its human services contracting system, it established advisory boards of human services employees and human services receivers. New York City can establish these boards to center the voices of human services employees and create a feedback loop. Human services employees can discuss issues in the current policy, and the government can address those issues accordingly.
Providing full funding for PPE. During the coronavirus crisis, human services employees are playing a frontline role providing services to New Yorkers. As this position puts them at a disproportionate risk of contracting COVID-19, the city should fully fund personal protective equipment for these employees in order to ensure that they can protect themselves.
Requiring human services providers to recognize employee unions. The vast majority of human services employees are non-unionized. However, the collective bargaining power of unions can provide resources critical to human services employees. First, unionized employees on average have salaries 20% higher than nonunion employees. Unions will provide a space for human services employees to bargain for a living wage. The City Council can mandate that the city can only contract with providers that have recognized their employee’s unions.
This policy is the best solution to human services issues for several reasons. First, it's the most effective solution. Unlike the existing solutions and proposals, it creates a framework for long-term reform by providing the Comptroller a simple method to audit city agencies in real time. Additionally, the feedback loop created by the advisory board opens the door to future reforms down the line. Furthermore, it addresses an issue with human services contracting – delays in funding – which has not been meaningfully addressed so far. Therefore, this policy will likely increase human services providers’ ability to complete their jobs effectively.
Additionally, it is the preferred solution under an intersectional framework. This policy recognizes that human services employees and service receivers are the groups most affected by city policy, and ensures that they have the ability to dictate future policy. Additionally, the PPE and union provisions provide targeted benefits to employees, which are critical under the theory of targeted universalism. The policies outlined in the “Existing Solutions and Proposals” section reform the human services system in general, without providing targeted solutions for employees.