New York City can run more cost-effectively, but it’ll require confronting entrenched interests.” <\/p>\n
Not since Vice President Al Gore smashed an ashtray<\/a> on David Letterman has a politician made cutting waste as entertaining as Zohran Mamdani\u2019s recent viral video<\/a>. Strolling through what looked like Gracie Mansion, pulling cash from couch cushions while naming savings, Mamdani expressed a simple idea: \u201cThe City was paying for a lot of work from outside contractors that was costing us far too much, so we\u2019re bringing a lot of that work in house, and saving our budget millions.\u201d<\/p>\n Cutting vendors rightly energizes the populist <\/a>left<\/a>, the technocratic center<\/a> and <\/a>parts<\/a> of the right. But, at least thus far, Mamdani has announced contract savings that only amount to pocket change, maybe<\/a> 1% of the City\u2019s giant budget gap.<\/p>\n 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.\u00a0<\/p>\n 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<\/a> in policy and \u201cruthless\u201d<\/a> in politics. He will need to bring both qualities to bear if he is to achieve excellence in governance.<\/p>\n Capacity gaps\u00a0<\/p>\n Outsourcing sometimes makes sense<\/a>, 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<\/a> by contracting with nonprofits to deliver human services.\u00a0<\/p>\n But outsourcing can be disastrous for big custom projects that require careful assessment, like planning and building a park or a benefits system. <\/a>Decades of outsourcing expertise have decimated governments\u2019 capacity to manage that kind of work. Agencies that lack strong staff don\u2019t evaluate what they\u2019re buying and become locked into ever-deepening dependence on vendors whose fiduciary responsibility is to their owners, not the public.<\/p>\n The pattern plays out across New York\u2019s biggest investments. The best transportation example is<\/a> the \u201cmost expensive mile of subway track on earth\u201d: the Second Avenue Subway extension. According to exhaustive work<\/a> 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.<\/p>\n While the MTA is a State authority, the City\u2019s own capital program shows similar deficits. Nearly 80% of Department of Design & Construction projects are behind schedule<\/a>, and by an average of three-and-a-half years. One big reason is the City\u2019s own weakness. One audit found<\/a> that project data is fragmented, inconsistent and so incomplete that nearly half of the $157 billion capital plan isn\u2019t even in the city\u2019s tracking dashboard.\u00a0<\/p>\n 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<\/a>, MyCity was \u201cinitially intended to be developed in-house,\u201d but was shifted to vendors \u201cdue to a lack of staff resources.\u201d The City then engaged 50 vendors (many with checkered histories<\/a>) 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<\/a> about three out of every four dollars for the City\u2019s technology office outside payroll, mostly to vendors, a ratio that has barely changed<\/a> under Mamdani. This is a contract management operation without the capacity to manage contracts.<\/p>\n Success stories<\/p>\n 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<\/a> that has successfully bid<\/a> for work in Copenhagen and Tehran. The United Kingdom\u2019s buildout of the Government Digital Service saved more than<\/a> $4 billion and cut<\/a> central website operating expenses by 70%. Here at home, Maryland Governor Wes Moore has saved<\/a> millions<\/a> by getting top staff and cutting contractors.<\/p>\n New York itself has a recent success story. The MTA\u2019s new app for tracking trains works far better<\/a> than MyCity ever has. And as the state has touted<\/a>, the app was \u201cdeveloped by an in-house team of tech experts\u201d who can now continue to improve the product on their own, without vendors.\u00a0<\/p>\n 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<\/a> in 2022. Second, creating a new app for a discrete task is far easier than fixing legacy systems that vendors have built over decades.<\/p>\n To begin to replicate successes elsewhere, a new budget could layer cost-saving hires on top of existing structures and slots. Mamdani has taken<\/a> that approach where new hires drive savings quickly \u2014 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 \u201cstaff augmentation\u201d contractors who cost twice as much. But Mamdani\u2019s budget<\/a> does not appear to pursue this path of increasing FTEs to save on contractors. Rather, his OMB is tightly controlling<\/a> staff additions across the board, filling half of vacancies and eliminating the other half entirely.<\/p>\n 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<\/a> 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.\u00a0<\/p>\n This is wrong. Many of the mayor\u2019s commissioners have hired only a handful of key staff. And that\u2019s normal: Public sector leaders may manage thousands of employees, but they rarely feel able to hire the people they need. Here\u2019s one story from my own public sector experience: While crafting an overhaul<\/a> of the City\u2019s approach to $5 billion in school funding two decades ago, I relied on two consulting firms \u2014 financed by philanthropy \u2014 because City staff did not have the right analytic skills and I was only allowed to hire one person.\u00a0<\/p>\n Here is how it goes down. Let\u2019s say an agency head wants to add a cadre of engineers. She has a thin layer of truly at-will, \u201cexempt\u201d 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\u2019t approve new positions, and there probably aren\u2019t vacancies in the relevant title. Indeed, titles like \u201csoftware engineer\u201d don\u2019t even exist<\/a> 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\u2019t require exams. But setting up those classifications requires<\/a> a hearing<\/a> and state approval, and OMB tightly limits the number of people in those roles.<\/p>\n The system conspires against getting the right people into the right roles to manage and replace contractors. But that does not make change impossible.<\/p>\n What is to be done<\/p>\n 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<\/a> managers to different duty stations and cutting<\/a> 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.\u00a0<\/p>\n Language of this kind may call to mind DOGE, but there is a vast gulf between Elon Musk\u2019s 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.\u00a0<\/p>\n 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.\u00a0<\/p>\n In such an effort, the City would also want to raise take-home pay for the most skilled talent. Top technologists can<\/a> earn<\/a> two to three times their City salary in the private sector, and there is a smaller but still meaningful<\/a> gap<\/a> for civil engineers.\u00a0<\/p>\n