A law-abiding construction buyer has the right to dictate contract terms, including participation for certain types of businesses. Cincinnati is no exception,
DON MARSH, EDITOR [email protected]
A law-abiding construction buyer has the right to dictate contract terms, including participation for certain types of businesses. Cincinnati is no exception, yet critics of a public/private project’s Small Business Enterprise (SBE) Program are showing city officials that contract-awarding rights carry sound contracting responsibilities Û like assuring procurement transparency and changing SBE Program rules that fail target beneficiaries.
Cincinnati Manager Milton Dohoney, Jr. has defended validity of a contract for Northside Construction Supply, a cement and ready mixed concrete distributor on The Banks Project. He outlined in a recent memo how the firm performed a commercially useful function as a subcontractor for 2009 infrastructure and parking garage concrete work at the commercial and residential development, flanked by Paul Brown Stadium and Great American Ballpark along the Ohio River.
The memo responds to claims from the National Association for the Advancement of Colored People, Cincinnati Branch, that Northside functioned as a pass-through business, distorting SBE economic inclusion figures. In an early-spring media release following the city’s 2009 Banks SBE audit, the group alleged, Northside is marking up cement by 5 percent or 10 percent and walking away with the cash, and contended, This practice is common and legal, but unethical. It undermines the ability for real companies to build capacity. Northside is adding no real value to the Banks Project.
Cincinnati Councilman Charlie Winburn, referencing the mark-up figures and reiterating NAACP Cincinnati’s value concern, said in a subsequent Banks Project letter to Dohoney, There were no jobs created or workforce development as a result of this pass-through ÷ nor did it build SBE or minority capacity.
However well intentioned the Banks SBE Program might be, it does not appear to promote target beneficiaries’ capacity, for example, to place and finish concrete slabs and structures. Instead, for aggregate dollars spent annually, Program guidelines cite a goal of awarding SBEs directly or indirectly, through subcontracting, subcontracting and/or procurement, contracts and procurement that represent at least 30 percent for Construction, 15 percent for Commodities and General Services, and 10 percent for Professional Services. SBE goal attainment reflects dollars spent, not contract awarded.
Banks SBE guidelines prohibit broker participation in the supplier/nonprofessional service category. Qualifying entries in the category must provide documentation verifying that the firm or business is a distributor or an independent manufacturer’s representative for another firm, or maintain, in the ordinary course of business, inventory for each commodity for which the firm or business is seeking certification, subject to site visit review.
A certified SBE, Northside Construction Supply qualified for Banks work as it has a distributor’s agreement with a cement supplier and, in last year’s phase, sold ready mixed directly to the concrete contractor, using outside trucking services for deliveries. Interpreting Banks SBE guidelines, the city manager noted, An SBE is considered to perform a commercially useful function when it is responsible for the execution of a distinct element of a contract and carries out its responsibility by performing, managing and supervising the work involved.
The Banks Project master plan runs 15 years. That seems like ample time for Cincinnati officials to revisit SBE Program guidelines so that target beneficiaries might work a few more trowels and share in the pride of having had a hands-on role in an important project.