DSBE Contracting Program

On September 20, 2012, Philadelphia Mayor Michael A. Nutter signed Executive Order No. 3-12 which reauthorizes the City’s Office of Economic Opportunity (formerly known as MBEC) as well as the City’s antidiscrimination policy and program for contracting and subcontracting opportunities on City contracts for minority business enterprises, woman business enterprises, and disabled business enterprises (M/W/DSBEs).

Some of the differences between Executive Order No. 3-12 and the prior Executive Orders on the same topic include the following:

the prior term “good faith efforts” is replaced by a new term “best and good faith efforts”
the prior term “commercially acceptable function” is replaced by the term “commercially useful function” which is borrowed from the regulations for the U.S. Department of Transportation DBE program
OEO no longer certifies M/W/DSBEs but accepts certifications from other certifying agencies and maintains a a M/W/DSBE registry (this has been the case since March 2010)
the two-step appeal process for bidders whose bids are rejected as non-responsive is eliminated and rejected bidders now have only a single and final appeal to the OEO Executive Director

Executive Order No. 3-12 applies to City of Phila. bids advertised and/or opened on or after September 4, 2012.

As always, contractors bidding for City contracts to which Executive Order No. 3-12 applies must carefully abide by the solicitation and commitment requirements of the City’s M/W/DSBE program, and should seek the assistance of experienced legal counsel if they believe that they will be unable to satisfy specified M/W/DSBE participation ranges, or if their bids are rejected as non-responsive for failure to satisfy the specified M/W/DSBE participation ranges and to show best and good faith efforts.

Executive Order No. 3-12 can be found here.

Posted on October 18, 2012 by Christopher I. McCabe, Esq. in City of Phila., DBE/MBE/WBE Comments Off

City of Phila. Local Business Entity Preference

Are you a contractor located in the City of Philadelphia and doing business with the City? If so, you may qualify for a bidding preference that could help you land even more City contracts.

A well-known secret of City contracting is the local business entity (LBE) preference. Under the LBE preference, the bid price of a certified LBE is adjusted downward by 5% so that a bid price of $100,000 is treated as $95,000 for purposes of determining the lowest bid price for contract award. After contract award, the LBE is still paid its full bid price.

A contractor can become certified as an LBE if, in the preceding 18 months, (a) it has had its principal place of business in the City, or (b) it has had an office in the City and either more than 1/2 of the contractor’s full-time employees, or more than 50 of the contractor’s full-time employees, have worked in the City at least 60% of the time. The contractor must also have a valid business privilege license for the same preceding 18 months and must have filed a business privilege tax return in the preceding 12 months. The City’s LBE certification is good for 5 years, but is subject to an annual recertification.

It is critical that a contractor awarded a City contract due to its LBE status maintain its LBE status during the term of the City contract. The failure to do so will result in revocation of the LBE status, the imposition of liquidated damages, and a 3-year debarment. The City’s LBE regulations provide that:

The certification made by an LBE in its bid … shall be deemed incorporated into any contract resulting from the bid for which a preference is granted. If the Procurement Commissioner determines that the LBE fails to comply with its certification at any time during the term of its contract, the LBE certification will be revoked and the LBE shall be deemed in substantial breach of such contract, shall be required to pay liquidated damages of 10% of the awarded contract amount, and may be debarred by the Procurement Commissioner in accordance with the Procurement Department Debarment Regulation for a period up to three years.

The City will enforce this regulation and penalize those who abuse the LBE preference. In September 2010, the Philadelphia Inquirer reported on the imposition of liquidated damages for an LBE which could not establish the bona fides of its LBE status.

The City’s LBE regulations can be found here. The City’s LBE application can be found here.

As for whether the LBE preference has benefited the City and its taxpayers economically, this remains an open question. Business columnist Joseph N. DiStefano of the Philadelphia Inquirer recently commented on the City’s LBE, highlighting a large construction contract that the City awarded last year to an LBE. His column can be found here.

Posted on September 13, 2012 by Christopher I. McCabe, Esq. in City of Phila. Comments Off

Paid Sick Leave Now A Requirement for Some Phila. Contractors and Subcontractors

Some City of Philadelphia contractors and subcontractors now have a new requirement to contend with, along with all of the other assorted rules and regulations that govern their contracts with the City.

Effective July 1, 2012, under the newly amended “Philadelphia 21st Century Minimum Wage and Benefits Standard,” for profit service contractors or subcontractors on City contracts of $10,000 or more in a 12-month period, who have annual gross receipts of more than $1,000,000, must provide their employees with some level of paid sick leave. A service contractor is one with a City contract “for the furnishing of services to or for the City, except contracts where services are incidental to the delivery of products, equipment or commodities.” This would appear to encompass public works contractors, service providers, and professional firms providing service to the City.

A contractor covered by the new law will be required to provide full-time, non-temporary, and non-seasonal employees with at least one hour of paid sick leave for every 40 hours worked, up to a maximum of 32 hours per year, for employers with more than five but less than 11 employees, and up to 56 hours per year, for employers with at least 11 employees.

However, a contractor can obtain a waiver of the new sick leave requirement by submitting an application to the City’s Office of Labor Standards. The application must set forth detailed reasons for an employer’s inability to comply with the new law. For example, the new requirements may be waived, in whole or in part, by a bona fide collective bargaining agreement. Thus, the many City contractors who are also union contractors will likely be unaffected by the new requirement.

In order to ensure compliance with the new requirements, City contractors should first determine whether it applies to them. If so, these contractors should then amend their leave, record-keeping, and posting policies.

The Philadelphia 21st Century Minimum Wage and Benefits Standard can be found here.

Posted on July 31, 2012 by Christopher I. McCabe, Esq. in City of Phila. Comments Off

Philadelphia Prison Contractor Fined $1.85M for Evading Minority Contracting Rules

The City of Philadelphia has once again taken enforcement action against a City contractor for a violation of the City’s minority contracting rules. The City’s inspector general conducted an investigation of Prison Health Services, the City’s contractor for prison health care services, and charged the contractor with using a woman-owned firm as a mere pass-through entity in order to satisfy the City’s minority contracting rules. Prison Health Services agreed in a settlement to a fine of $1.85 million.

The City’s inspector general, Amy Kurland, was quoted in the Philadelphia Inquirer as follows:

“In reality, that company did nothing except give its name to Prison Health Services so Prison Health Services could get the contract,” she said.

Mayor Nutter had even harsher words:

Mayor Nutter called the PHS settlement “a significant moment that sends a very, very strong message to everyone who does business with the city.” “If you engage in inappropriate or illegal activities,” Nutter said, “we will find you and root you out.”

The settlement with the contractor was the third such enforcement action taken since May 2011, when the City debarred a contractor for violation of minority contracting rules on work at the Philadelphia International Airport. My post regarding the City’s prior enforcement actions can be found here. The Philadelphia Inquirer article on the City’s enforcement action can be found here.

If you are a City contractor and you think you can evade the City’s contracting requirements, think again! You will get caught eventually, and you will likely pay a hefty price. Don’t make that mistake. Get advice before you proceed down a path of no return.

Posted on July 26, 2012 by Christopher I. McCabe, Esq. in City of Phila., DBE/MBE/WBE, Phila. Inspector General Comments Off

$590 Million Deal on Philadelphia Sludge Plant Exposed

In 2008, the City of Philadelphia reached a deal to award a multi-million dollar contract to a private firm to operate a City sludge plant, known as the Biosolids Recycling Center. After reading a recently-issued opinion by U.S. District Court Judge Stewart Dalzell, it would appear that the deal and the manner in which it was obtained have a stink as bad as the sludge.

According to a front-page report in The Philadelphia Inquirer, the winning contractor used a team of not-so illustrious political consultants to secure the deal:

To win the prize, the contract winner, Houston’s Synagro Technologies Inc., had a team of political consultants, including a man later convicted of bribing a Detroit city councilwoman to help win Synagro a $1 billion contract in that city by a single vote.

Synagro also brought in an Atlanta man, Hiriam Hicks, who Dalzell said paid a Philadelphia community activist $55,000 to round up 175 people – some of them from homeless shelters – to cheer on City Council as it approved Synagro’s contract by a 15-2 vote, with the backing of Mayor Nutter.

Judge Dalzell’s opinion, according to the Inquirer, goes on to recount a variety of insider machinations that cemented the deal and resulted in a broken promise of a substantial payout for one of the hired consultants. The opinion came in a suit brought by the consulting firm of Mr. Hicks who alleges that his firm was stiffed on a promise to pay it $400,000 a year over the life of the deal. Needless to say, Judge Dalzell’s opinion shines a much-needed light on the City’s process of awarding contracts where sealed, competitive bidding is not required. It’s not a pretty sight or for the faint of heart.

The Inquirer article can be found here. Judge Dalzell’s opinion can be found here.

Posted on June 14, 2012 by Christopher I. McCabe, Esq. in City of Phila. Comments Off

City of Phila. Retains Firms for $6.5 Billion Airport Expansion Project

The City of Philadelphia has selected a joint venture of three companies to manage the planning and construction of a $6.5 billion and 12- to 15-year expansion project at the Philadelphia International Airport. The lead firm is CH2M HILL, a Denver-based engineering and construction firm with offices in Philadelphia. The management contract is valued at $25 million for the first four years. The Philadelphia Inquirer article on the selection can be found here.

Posted on June 7, 2012 by Christopher I. McCabe, Esq. in City of Phila. Comments Off

Philadelphia Revokes Certification Of MBE Supply Firm; Second Action In 12 Months

In January, the City of Philadelphia’s Office of Economic Opportunity revoked the 25-year-old certification of a minority-owned supply firm and announced that it would seek to bar another contractor from receiving City contracts for three years. The OEO’s action was reported in The Philadelphia Inquirer. The OEO’s revocation was the second time in 12 months that the OEO took enforcement action stemming from abuses in the City’s minority-contracting efforts.

The OEO alleges that the MBE supply firm acted essentially as a “pass-through” entity – contending that a prime contractor agreed to use the MBE supply firm for materials, but instead bought materials from a second firm and paid a 3% fee to the MBE supply firm. The Inquirer further reported that City investigators found that the prime contractor and the non-DBE firm had generated false invoices to cover their tracks. The City alleges that the non-DBE firm had used the MBE supply firm as a sham minority contractor on at least fourteen other city contracts.

Last year, in May 2011, the OEO had announced the voluntary 20-month debarment of a significant locally-based general contractor for failure to comply with the City’s contracting requirements. The Philadelphia Inquirer article on this suspension can be found here. The suspension in May 2011 was the first time the City had suspended a contractor, but it certainly won’t be the last.

The City’s enforcement actions mean that City contractors can no longer evade the OEO requirements on City contracts. The OEO will closely monitor contractors for compliance, and serious sanctions may be imposed on contractors for non-compliance.

Posted on May 14, 2012 by Christopher I. McCabe, Esq. in City of Phila., DBE/MBE/WBE Comments Off

OEO Changes Policy on City Contracts for Non-Stocking M/W/DSBE Suppliers

After long treating M/W/DSBE supply firms the same as M/W/DSBE subcontractors, and giving City contractors 100% credit for the use of M/W/DSBE supply firms, the City of Philadelphia Office of Economic Opportunity has now changed its tune. Apparently, the OEO will no longer give full credit for use of an M/W/DSBE supply firm, unless the firm is a “stocking” supplier, meaning that it actually has in stock the supplies which it plans to furnish to the prime contractor on the City contract.

The new policy was reported in The Philadelphia Tribune in February. Angela Dowd-Burton, Executive Director of the OEO, was quoted in the Tribune article as follows:

“They [the M/W/DSBE] don’t have the inventory, and the probability is they’re just picking up the phone and collecting a fee…So, we’ve decided that whatever commission you get from making that call, that’s the only participation we’re going to report on.”

“Contractors will ultimately have to find participation from minority- and women-owned businesses that actually hire people and use contractors that do work, as opposed to someone that is providing more of a clerical function.”

The new OEO policy will undoubtedly affect many M/W/DSBE supply firms, as it is rare that any supplier will have in stock all of the needed supplies for a construction project. Where custom or special order equipment is involved, as is the case on many public works projects, it is unlikely that any supplier will have the equipment in stock.

The OEO is reportedly encouraging the use of subcontractors for the ordering of construction supplies. It is hard to see how this makes any difference, however, as it is unlikely that a subcontractor will have in stock the supplies that the supply firm does not.

As for City contractors, they must now pay greater attention to the firms that they propose to meet the City’s M/W/DSBE contracting goals. If those firms are suppliers, and not working subcontractors, the City contractor may need to think twice before using the supply firm to avoid risking disqualification for failure to meet the City’s contracting goals, or seek clarification from the OEO before submitting a bid.

Posted on April 30, 2012 by Christopher I. McCabe, Esq. in City of Phila., DBE/MBE/WBE Comments Off

City Issues FY2012 1st Quarter Report for M/W/DSBE Contracting

In January 2012, the City’s Office of Economic Opportunity issued its First Quarter Report for Fiscal Year 2012 for contracting activity by minority, woman, and disabled-owned business enterprises (M/W/DSBEs) on City and City-related contracts. The report can be found here.