Can External Oversight Keep NYC Tech Projects on Budget?
Economic development corporations weigh in on New York City’s plans to outsource management of its costliest technology projects.
New York City’s plan to have a nonprofit economic development corporation manage city technology projects may be a viable oversight method, according to experts. But in order for the program to be successful, leaders will need to collaborate with a wide array of stakeholders.
Mark Cafferty, president and CEO of the San Diego Regional Economic Development Corporation, believes a nonprofit management structure has to be tailored to an entity’s unique needs in order to thrive.
“I imagine that the fact that New York [City] has created a designated corporation is a healthy indicator of strong growth within its technology sector -- which aligns with much of what I have been hearing and reading about the city,” Cafferty said in an email to Government Technology. “Ultimately it is the collaboration and complementary aspects of the new agency that will determine its success.”
According to The New York Times, Gotham’s plan is as follows: If a technology project costs in excess of $25 million, or if more than one agency is involved and the project costs more than $5 million, an entity called the NYC Technology Development Corporation will have control over the project from beginning to end. The corporation was set up in July.
The nonprofit is modeled after New York City’s Economic Development Corporation, which is able to make business deals on the city’s behalf without the same oversight and scrutiny city agencies face.
Economic development corporations are found in cities and counties in numerous states. They typically exist as legal entities that are governed by a board of directors for the purpose of driving job creation and income growth. But some work on matters beyond business.
New York City officials hope such an organization will help address a recent history of difficulties with technology projects. Overbilling and fraud were a problem with CityTime, the electronic timekeeping system for NYC employees. That led to a $500 million settlement from the vendor involved. The NYC comptroller also issued a critical audit of the Big Apple’s recently modernized 911 system.
Not a Replacement
The NYC Technology Development Corporation won’t replace the New York City Department of Information Technology and Telecommunications, but it will assume some of its functions, according to The New York Times.
“In some ways, it’s introducing another party to the already complex governance structure,” one expert told The Times, on the condition of anonymity. “Perhaps a competent party -- but that’s a best-case scenario.”
In an email to Government Technology, Jeff Edwards, president and CEO of the Economic Development Corporation of Utah (EDCUtah), said the most similar entity he’s seen in the state is the Utah Science Technology and Research Initiative (USTAR) at the University of Utah.
The economic development initiative was designed to strengthen Utah’s research efforts and technology commercialization to promote high caliber job growth. Ultimately the effort ended up being a state entity that was entirely funded with state money.
But it operates by a governing authority that has mainly technology and science industry members.
Edwards added that Utah committed $250 million over five years and spent a majority of the money on research teams and two new buildings. He felt a nonprofit entity managing technology projects might result in more positive results.
“In my experience, nonprofits have usually been better at delivering real-world solutions than government processes,” Edwards wrote. “I do think that a public-private partnership is well suited to this task if it has a broad base of support from all sectors.”
Despite the potential benefits, the work is not likely to be easy. Cafferty told Government Technology that just as economics and community development work hand-in-hand, so must technology and other economic factors.
Cafferty also noted urban economist Enrico Moretti’s book The New Geography of Jobs. Moretti wrote “for each new high-tech job in a metropolitan area, five additional local jobs are created outside of high tech in the long run.”
In addition, Edwards believed funding could be a significant challenge if government agencies are still in control of the purse strings when it comes to technology projects.
“The amount of money needed to significantly alter the landscape on tech development is large, so [I’m] not sure how a nonprofit would be able to raise enough funds to make a difference,” Edwards said. “If the money is a pass-through from public coffers, then the nonprofit may get hampered by the same political processes that hamstring public agencies.”
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