New York City can run more cost-effectively, but it’ll require confronting entrenched interests.”
Not since Vice President Al Gore smashed an ashtray on David Letterman has a politician made cutting waste as entertaining as Zohran Mamdani’s recent viral video. Strolling through what looked like Gracie Mansion, pulling cash from couch cushions while naming savings, Mamdani expressed a simple idea: “The City was paying for a lot of work from outside contractors that was costing us far too much, so we’re bringing a lot of that work in house, and saving our budget millions.”
Cutting vendors rightly energizes the populist left, the technocratic center and parts of the right. But, at least thus far, Mamdani has announced contract savings that only amount to pocket change, maybe 1% of the City’s giant budget gap.
To get better results, the City will need a larger and stronger cadre of government managers and experts to lead major construction and technology projects. But building that top-tier talent will require the mayor to change his budgeting approach and push the civil service system to its limit. He will also need to push Albany to change that system in law.
These tasks would be hard for any leader, and they will be especially hard for an egalitarian mayor with sympathies for organized labor. But Mamdani has already proven practical in policy and “ruthless” in politics. He will need to bring both qualities to bear if he is to achieve excellence in governance.
Capacity gaps
Outsourcing sometimes makes sense, as when the government is buying standard goods that are easy to judge on price and quality, like cars or computers. The City also saves by contracting with nonprofits to deliver human services.
But outsourcing can be disastrous for big custom projects that require careful assessment, like planning and building a park or a benefits system. Decades of outsourcing expertise have decimated governments’ capacity to manage that kind of work. Agencies that lack strong staff don’t evaluate what they’re buying and become locked into ever-deepening dependence on vendors whose fiduciary responsibility is to their owners, not the public.
The pattern plays out across New York’s biggest investments. The best transportation example is the “most expensive mile of subway track on earth”: the Second Avenue Subway extension. According to exhaustive work by the Transportation Costs Project, the relevant management shrank from an in-house shop of 1,600 to a skeletal staff of 124, responsible for overseeing $20 billion worth of projects. That staff relied on consultants who earned perhaps three times more money, were not tightly managed and built knowledge that public employees needed and never gained.
While the MTA is a State authority, the City’s own capital program shows similar deficits. Nearly 80% of Department of Design & Construction projects are behind schedule, and by an average of three-and-a-half years. One big reason is the City’s own weakness. One audit found that project data is fragmented, inconsistent and so incomplete that nearly half of the $157 billion capital plan isn’t even in the city’s tracking dashboard.
The story is similar for MyCity, the one-stop online portal for city services that Mayor Adams began rolling out in 2023. According to a withering comptroller audit, MyCity was “initially intended to be developed in-house,” but was shifted to vendors “due to a lack of staff resources.” The City then engaged 50 vendors (many with checkered histories) through more than 120 contracts and delivery orders, spent over $100 million, could not verify whether key contractors had actually delivered their work, created custom technology when off-the-shelf options were available and built a childcare portal that scored 7 out of 100 on a standard mobile performance test. Mayor Adams budgeted about three out of every four dollars for the City’s technology office outside payroll, mostly to vendors, a ratio that has barely changed under Mamdani. This is a contract management operation without the capacity to manage contracts.
Success stories
Governments can build the muscle to do the work better, with or without contractors. Since the 1950s, Milan has had a municipally owned transit engineering firm that has successfully bid for work in Copenhagen and Tehran. The United Kingdom’s buildout of the Government Digital Service saved more than $4 billion and cut central website operating expenses by 70%. Here at home, Maryland Governor Wes Moore has saved millions by getting top staff and cutting contractors.
New York itself has a recent success story. The MTA’s new app for tracking trains works far better than MyCity ever has. And as the state has touted, the app was “developed by an in-house team of tech experts” who can now continue to improve the product on their own, without vendors.
Note well two things: The MTA is a State authority in which the relevant staff operate under the more flexible state civil service law. They were mostly hired based on resumes, not exams, which the State partly suspended in 2022. Second, creating a new app for a discrete task is far easier than fixing legacy systems that vendors have built over decades.
To begin to replicate successes elsewhere, a new budget could layer cost-saving hires on top of existing structures and slots. Mamdani has taken that approach where new hires drive savings quickly — adding 50 auditors to collect taxes and 100 lawyers to defend against tort claims. The City could also hire new FTEs as one-for-one swaps to replace “staff augmentation” contractors who cost twice as much. But Mamdani’s budget does not appear to pursue this path of increasing FTEs to save on contractors. Rather, his OMB is tightly controlling staff additions across the board, filling half of vacancies and eliminating the other half entirely.
This is classic penny-wise-pound-foolish behavior. It is also understandable. Adding highly paid construction and tech engineers is a tough sell even without a deficit. And given that the City has a workforce with 307,247 authorized positions and 15,495 vacancies (last I checked), OMB probably believes that agencies can already bring on board the talent that the City needs.
This is wrong. Many of the mayor’s commissioners have hired only a handful of key staff. And that’s normal: Public sector leaders may manage thousands of employees, but they rarely feel able to hire the people they need. Here’s one story from my own public sector experience: While crafting an overhaul of the City’s approach to $5 billion in school funding two decades ago, I relied on two consulting firms — financed by philanthropy — because City staff did not have the right analytic skills and I was only allowed to hire one person.
Here is how it goes down. Let’s say an agency head wants to add a cadre of engineers. She has a thin layer of truly at-will, “exempt” appointments, often filled through a political pipeline. After that, she must work through the civil service system if she wants to add staff. OMB probably won’t approve new positions, and there probably aren’t vacancies in the relevant title. Indeed, titles like “software engineer” don’t even exist among traditional civil service titles. If a position requires an exam, then the agency must consider candidates in a rigid order based on test scores. As candidates often turn down jobs, the process regularly takes over a year. Agencies try to negotiate around these constraints in different ways, such as using classifications that don’t require exams. But setting up those classifications requires a hearing and state approval, and OMB tightly limits the number of people in those roles.
The system conspires against getting the right people into the right roles to manage and replace contractors. But that does not make change impossible.
What is to be done
Right now, the mayor should direct his administration to do everything in its power to expand the ranks of hires who do not need to take civil service exams. And to find room to hire themselves, agency heads should take a hard look at their top staff and seek to replace those who cannot meet the moment. If they are protected by the civil service system, that will require a protracted process. But city law allows executives to encourage exit by reassigning managers to different duty stations and cutting their pay up to 20%. The City also can make more hires under provisional and temporary authorities that are both more flexible and less protected than traditional civil service roles.
Language of this kind may call to mind DOGE, but there is a vast gulf between Elon Musk’s chainsaw and ordinary incrementalism. In that gulf belong leaders who believe in government passionately and will do what it takes to make government work. This moment requires public-spirited relentlessness.
Better management alone cannot fix a broken system. Lasting reform will require Albany changing the civil service law, making it easier to hire and fire and enabling restructurings that take into account performance as well as seniority. The City should continue to demand civil service hiring based on skill, not politics, nepotism or corruption, but it should enforce those prohibitions mainly through audits and oversight, dropping rigid personnel rules that favor those who can work a byzantine system.
In such an effort, the City would also want to raise take-home pay for the most skilled talent. Top technologists can earn two to three times their City salary in the private sector, and there is a smaller but still meaningful gap for civil engineers.
Inadequate public-sector pay for top talent does not save money. It costs money. Zachary Liscow and two colleagues studied the costs of transportation contracting in California and made two striking findings. First, bigger departments built roads more efficiently, likely because they managed costs down better. Second, higher-quality engineers reduced project costs by 14% — savings worth more than three times an engineer’s salary. These are hard jobs, and knowing how to drive faster, lower bids matters a lot. The state lost top engineers regularly, the authors found — not because average salaries were higher in the private sector, but because the private sector rewards its best performers far more generously.
Raising the top of the pay scale in city government is not a popular agenda for anyone, and certainly not for a socialist. Indeed, Mamdani has reportedly capped pay in his own office at $230,000. Caps on pay make a trivial contribution to reducing income inequality, but are a significant drag on government performance. When acting as an employer, the public sector best advances equality by delivering effective services to all.
Another challenge is political. DC37, the city’s largest municipal union, blocked the City’s effort to join the State in waiving civil service exams for key positions. But Mamdani has already proven willing to break with labor, changing his position on eliminating mayoral control of the schools. He could make a similar choice here.
Mastering the bureaucracy is harder than making videos, but a leader who wants to go down in history must do the hard things. The question is not whether New York can afford to build the government it needs. Creating space for top public-sector talent pays for itself many times over. The question is whether the mayor, admirably pursuing government excellence, will challenge his own administration and coalition to get there.