NEW ORLEANS -- Mayor Mitch Landrieu and the City Council say they have reinvigorated a woman- and minority-owned business program that had fallen out of favor at City Hall over the last decade.
But recent complaints from contractors and project bidders show there are still serious questions about just how dedicated city leaders are to setting aside significant public work for so-called “disadvantaged business enterprises,” or DBEs.
The DBE program was a focus of former Mayor Marc Morial’s administration in the 1990s. A classic example of affirmative action, it set a goal of 35 percent participation in all city contracts by companies owned by minorities and women.
But it was also exposed as a bastion of political patronage, at times abused by rich and connected black business owners who appeared to face little disadvantage, and by white men who put their companies in their spouse’s name.
Former Mayor Ray Nagin all but ignored the program, leaving a single staff member in charge of tracking DBE participation in every city contract.
Landrieu moved to breathe new life into the DBE effort, adding staff to the Office of Supplier Diversity and doubling the number of certified DBE firms from 300 to 600. His office says the overall DBE participation in city contracts has risen from 16 percent to 34 percent since he took office, just shy of the 35 percent goal.
Landrieu proudly highlighted these efforts in his State of the City speech earlier this year.
“Now we award contracts based on what you know, not who you know,” Landrieu said. “And everybody gets a fair shake. We have strong DBE requirements for billions of dollars hitting the ground, not just with the city, but also at the airport, the Sewerage & Water Board, and RTA. And others are following our lead: The Recovery School District has modeled their DBE program after ours.”
The City Council followed suit, unanimously passing an ordinance in June that would give the 35 percent DBE participation goal more teeth, with clear enforcement mechanisms.
“If we say that 35 percent has to be disadvantaged and 50 percent has to be local, then if you have a contract with the city of New Orleans and you don't live up to that, then there's got to be a consequence,” said Councilwoman Cynthia Hedge-Morrell.
But no sooner had city leaders taken those strong actions than problems with enforcement emerged.
One case involves the city’s $3 million-a-year property tax collections contract.
The prime contractor, Strategic Alliance Partners, has had the work since 2005. When Nagin was mayor, SAP got the contract and the agreement included no language about DBE participation.
Yet the city had a policy, starting in 2004, that contractors should make their “best efforts” to meet DBE goals. And for the first five years of the contract, SAP had a DBE subcontractor, Professional Asset Recovery.
But on May 4, 2010, Landrieu’s first full day in office, Professional Asset Recovery was fired.
Without a DBE in place, SAP owner Blake Jones turned to a woman-owned company called GT Asset Management, which had been performing delinquent collections under the contract since 2007. Jones helped the women get their DBE certification in 2010 so they could fill the void left by Professional Asset Recovery.
GT Asset co-owner Nada Guffey said Jones promised her and her partner, Deonne Thomas, a 25 percent share of the contract if they got their certification. It would have been short of the city’s 35 percent goal, but it would have certainly shown an effort.
But after GT Asset got its certification in 2010, it remained a subcontractor of a subcontractor. The most the firm made in a year was $360,000, 11 percent of the $3.3 million the city paid to SAP.
Jones is a longtime friend of the Landrieu family, and he and his law firm, Scheuermann & Jones, have donated more than $22,000 to the mayor's campaigns.
Guffey and Thomas said they complained to the city Office of Supplier Diversity in November 2011. By this time, the office had a director, Norman Roussell, and a compliance officer, Arkebia Matthews.
Roussell confirmed that the women met with him and that he launched an investigation. In fact, he said he asked Matthews to gather records to check DBE compliance on all city contracts.
“It was my goal to have, on file, a City contract database specific to DBE participation,” Roussell said.
But Roussell left the city job in 2012, and he said he didn’t know if the project was ever completed. When he left the post, Matthews took over as director.
Through a city spokeswoman, Matthews said she reviewed her emails and found no communications from Roussell about a GT Asset complaint. Regardless, the administration says there was no way to enforce DBE compliance in the tax collection work, because the 2005 contract included no DBE provision, and one was not added when Landrieu renewed the deal with Jones in 2011.
“When this administration inherited contracts with no DBE requirement, then we had really limited options,” Deputy Mayor Emily Arata said. “But what we’ve done is we’ve issued new RFPs with DBE provisions and we’ve worked with the City Council to give the DBE office real teeth.”
When Guffey and Thomas complained again this summer, Matthews dismissed the complaint, saying there was no policy in place regarding the replacement of DBE subcontractors when the contract was awarded in 2005 or when it was renewed in 2011.
“Therefore (it) will not be counted against SAP,” Matthews wrote
“It's hard to promote DBE participation when you don't have an office backing your DBEs to make sure compliance is taken care of,” Guffey said.
Two weeks ago, a selection committee picked SAP’s lead subcontractor, Archon Information Systems, to take over the tax collection contract. Archon’s owner, Bryan Barrios, was the original executive director of SAP before forming his own firm in 2008. His firm has given $10,000 to Landrieu’s campaign and his proposed DBE subcontractor is Errol Conley, one of the lawyers at Jones’ law firm.
The Landrieu administration says the mayor has completely removed himself from the selection of professional services contractors, with an appointed committee scoring proposals and selecting firms in open hearings – in stark contrast to Nagin, who fought the council to keep that selection process secret and under his full control.
But there was another contract where the administration had full control over who did the city’s emergency repair work, and public records show that City Hall chose an out-of-state, non-DBE firm and largely bypassed the local DBE company that had won the contract.
When a boiler broke or a city structure was damaged, City Hall had two contractors to choose from: Willie Taylor’s local firm called Commander Corp., and a Chicago-based firm named FH Paschen Tectronics.
City records show that from May 2011 through January 2012, the city’s Capital Projects and Property Management departments gave FHP Tectronics more than 150 jobs and paid it $2.7 million. Over the same time frame, records indicate that Taylor got 18 jobs for $94,669.
Taylor called for a meeting with department leaders and the Roussell from the Office of Supplier Diversity.
“When I have a general contract, I have to adhere to the 35 percent DBE, and here you are, you have two contractors and one of them is getting 97 percent and we're getting 3 percent? They met none of their own criteria.”
Property Management Director George Patterson said in an email to Taylor that the city was only obligated to give him $25,000 worth of work. The city official said he had no problems with Taylor’s work performance, but contended that Commander lost 70 percent of the jobs to FHP because of its “refusal to adhere to/agree to the 365/24/7 emergency requirement.”
Taylor said that was a trumped up charge, that he was always ready to dispatch crews to a job within the required two hours and never refused any jobs. But the city says it had major concerns with his work performance and behavior and didn’t need his firm anyway in order to meet the DBE goal for on-call jobs, thanks to FHP Tectronics giving 37.5 percent of its work to DBE subcontractors.
“The DBE program is about providing disadvantaged businesses with opportunities,” Arata said. “Then that business has to perform. Unfortunately, Commander Corp. has underperformed on numerous city jobs.”
Among the problems in 2011 alone, Arata said Taylor’s firm was slow to respond to heating problems at Alvar Library and left several gas leaks, failed to build a shed properly at Arthur Monday park, and did poor roof and door repairs at the Public Works Maintenance Building.
More recently, True Wall Enterprises, a DBE subcontractor doing masonry work on the Youth Study Center, complained about lack of payments from general contractor The McDonnel Group. McDonnel alleged poor performance and tried to get True Wall to sign over its payments to another firm that would take over the masonry job, and True Wall complained to the Office of Supplier Diversity.
Arata said the city declines to get involved in performance disputes between contractors and their subs, particularly if the decision to remove a DBE subcontractor has no bearing on them meeting overall DBE participation goals. Arata said The McDonnel Group still has seven DBE firms on the project, keeping it on track to meet its 35-percent goal.
In addition to these problems with existing contracts, a committee that includes top Landrieu aides recently recommended a developer for the World Trade Center project to the New Orleans Building Corp. They selected Gatehouse Capital, which had not identified a DBE to participate in the project.
When asked about it at a public hearing July 31, Gatehouse’s Marty Collins was glib: “There's all forms of this stuff in terms of local participation,” he said. “We're completely acclimated to it, endorse it, let's move on.”
“But at this point you haven't identified specific folks to do that, as a best effort?” Deputy Mayor Cedric Grant asked.
“No, sir,” Collins answered.
Gatehouse said it was just too early to name specific DBE subcontractors. The firm promised to exceed the 35 percent goal and seek 40 percent DBE participation once it wins final approval and starts the project, and has since held well-attended outreach programs to try to identify DBEs.
But Grant and three of the four other selection committee members criticized Gatehouse’s DBE plan in August.
In fact, Chief Administrative Officer Andy Kopplin called it “lame.”
Nonetheless, four of the five scorers gave Gatehouse at least 30 of 35 possible points on their score sheets.
Hedge-Morrell, the lead sponsor on the city’s tougher DBE ordinance, said she’s confident the city is committed to the DBE concept, but worries that it doesn’t always do enough to enforce its own laws.
“Everybody on this council is committed to making sure that this ordinance is adhered to,” Hedge-Morrell said. “I believe the administration is also committed to that. We need to find out what the glitch is.”