New York State audit reveals MTA has not done enough to consolidate procurements across its agencies to save money
According to a new audit released by New York State Comptroller Thomas P. DiNapoli, the Metropolitan Transportation Authority (MTA) has not done enough to consolidate its procurements across its agencies to save money as was expected under its transformation plan.
“The MTA faces continued pressure to implement its capital programs and savings initiatives, which would benefit from furthering its stated goals of transforming its procurement process,” DiNapoli said. “More savings may be possible if it does more to coordinate purchasing among its agencies instead of the status quo of having them procure their needs independently. Consolidation, efficiency and savings in this area was promised years ago but has yet to be fully realized.”
According to the audit, MTA spends more than $7 billion a year on procurement, covering everything from construction contracts to office supplies. Under the public authorities law, the MTA was required to create a transformation plan by June 30, 2019. One part of the plan was to consolidate procurement for the MTA’s five operating agencies, MTA Construction & Development and MTA Headquarters to save money and avoid redundancies. That consolidation of MTA’s procurement function went into effect in October 2021.
There are four units in MTA’s procurement function:
- Procurement operations (PO)
- Material management and distribution
- Supply chain strategy
- Rolling stock strategy
The report notes that as of May 2022, MTA had approximately 1,050 employees in procurement function, with one Chief Procurement Officer instead of five (one for each agency). However, the actual practice of buying goods and services had not changed as of September 2023, two years after the effective date of the consolidation.
Per the report, PO, which handles direct purchases of things like parts for train cars and buses, has not changed its procurement processes. It reported cost savings of $152 million in 2022, but the audit looked at $37.7 million of that total and concluded none of it was due to transformation or consolidation. Instead, the savings was from canceled orders and services that were no longer needed. Just $4.29 million of the sampled savings was the result of PO actions.
The report notes material management and distribution, which manages 85 warehouses and storerooms for MTA Transit, Metro-North Railroad, Long Island Rail Road and MTA Bus, stocked about $800 million in materials for these agencies and still uses procedures for the operations and management of its inventory assets that date back to the 1990s. However, it did expand MTA Transit’s inventory management dashboard to all agencies to increase efficiency.
According to the report, procurement function was supposed to implement a category management strategy but did not change its procedures or most of its practices to reflect the new business model. Supply chain strategy, however, did show that three MTA agencies that use car parts are using category management to negotiate a price reduction from a major supplier. Supply chain strategy claimed it saved $3.75 million consolidating uniform purchases and $3.2 million on rail car part purchases, but it could not document the savings. Rolling stock strategy officials indicated that, partly due to lack of staff, the unit did not achieve results since consolidation.
DiNapoli’s audit recommended that MTA define the initiatives that are related to its transformation plan, so that progress on the plan’s goals can be monitored. It also recommended that procurement function clearly define the cost savings and cost avoidance it achieves and develop new procurement procedures that can be used across MTA divisions to further efficiency and savings.
In response to the audit, the MTA generally disagreed with the findings and stated that it continues to work on increasing efficiency and savings, and that it is not required to define what savings stem from the transformation plan.
