90% of Philly government contracts are late, leaving nonprofits waiting for pay

For years, nonprofits that do business with the Philadelphia city government have complained about being paid late, at times having to dip into reserves or even borrow money as they waited for the city dollars that were owed to them.

Government officials have acknowledged that the problem exists. But the scale has not been revealed — until now.

Over the last five years, 90% of contracts that the city inked with outside vendors were finalized after the start date, meaning those contractors began work before they were able to be paid, according to the Pew Charitable Trusts, which partnered with a civic consulting firm to analyze more than 12,000 professional service contracts as part of a yearslong study.

More than a quarter of those contractors experienced delays of five months or longer. Many of the organizations — such as homeless shelters, behavioral health service providers, and after-school programs — operate unpaid because they cannot pause services without affecting vulnerable populations.

Nonprofits reported fronting money to prop up city services while struggling to make payroll, cutting programs, and paying un-reimbursable interest on bridge loans.

The late contracts added up to more than $3.4 billion in city money annually during the period Pew studied, from July 2019 to January 2025.

The biggest driver of the backup, the researchers said in a report released Tuesday, is the city’s reliance on one-year contracts, the result of a 100-year-old state law that was adopted into the city’s governing document. Changing the law could cut the number of contracts moving through the system by 60%, Pew found.

» READ MORE: Philly’s inconsistent contracting system left some nonprofits waiting months to be paid, report says

The 137-page report, authored by the New York-based firm Bennett Midland, describes an overwhelming volume of contracts bogging down the city government across departments. And it outlines inadequate support systems for nonprofits that are struggling to do business with a city in which late payment is the rule, not the exception.

Katie Martin, project director at Pew, said late payment is “an ongoing, decades-long challenge.”

“The way that Philadelphians touch government is often through these nonprofit partners,” she said. “The most vulnerable Philadelphians are overwhelmingly receiving services through nonprofit partners who are being funded by the city.”

Mayor Cherelle L. Parker’s administration is partnering with Pew for the rest of this year to improve the process and address a backlog of contracts. Her team is working with several philanthropic groups and foundations that directly assist nonprofits.

Camille A. Duchaussée, the city’s chief administrative officer, said in a statement that the Pew report validates “operational gaps” that the city has already identified and is working to address.

The city, she said, is committed to “strengthening our contracting practices and supporting efficient, transparent and timely service delivery to Philadelphians.”

Shortly after Parker took office in 2024, executives at a half-dozen Philadelphia homeless shelters told The Inquirer that it had been months or years since they had been paid. That year, City Council convened a task force to examine how the city does business with nonprofits. And the Parker administration undertook an effort to quickly finalize more than 500 contracts and pay out $221 million in outstanding invoices.

» READ MORE: Overspending in Office of Homeless Services could prompt change to Philly’s contract process

But the problem long predated Parker’s tenure as mayor.

The Philadelphia Home Rule Charter, the city’s governing document, requires that City Council approve any contract longer than one year, a provision that is based on a 1919 state law. It is out of step compared with peer cities, according to Pew — New York, for example, allows for contracts of up to nine years.

Philadelphia’s requirement has, in practice, resulted in a system in which the city typically inks five-year agreements that are technically one-year contracts with four renewals.

That means that contractors have to go through the “conformance” process every year, despite their contracts typically being unchanged. Conformance, which is approving and finalizing a contract, takes an average of 52 days, Pew found.

Over the period that Pew examined, six in 10 contracts were routine renewals.

“It’s a massive amount of additional work,” Martin said, “both for city government and for the vendors who are working with the city.”

The study’s authors’ top recommendation for city government is to pass legislation allowing for multiyear contracts. Doing so would require amending the charter, meaning Council would have to pass legislation and voters would need to approve the change through a ballot question.

Pew offered more than a dozen other recommendations for reform.

One is to diversify contract start dates. Martin said one major burden for the city is that more than half of contracts start at the beginning of the fiscal year in the summertime, resulting in a crush of work for city staff. Workers told researchers that they “dread” the beginning of the fiscal year.

Other recommendations include moving more contracts through expedited processes that are already in place, and tasking the chronically understaffed city procurement department with leading the process of finalizing professional services contracts. Currently, the procurement department oversees compliance with the law; however, departments have their own contracting staff and procedures.

There is also more the city can do to support vendors, Pew said.

The researchers wrote that the city should create a centralized document system, establish a dashboard for vendors to track their contracts more easily, and bolster technical support, especially for smaller nonprofits.

Duchaussée said the Parker administration has already created a new vendor support unit and is standardizing forms across departments.

Martin cited earlier research from Pew that said nonprofits account for more than a third of the city’s gross domestic product.

“It’s a huge benefit to the city overall,” she said. “So that’s why we’re continuing to support this work through the end of the year: so this is not a report that sits on the shelf.”