Circle of Friends

Outside looking in: MBEC has kept minority contractors on the wrong side of the fence. Illustration By: Joe Ball

MBEC's inefficiencies may have cost the city millions.

by Amy L. Webb

As if the embattled Minority Business Enterprise Council (MBEC) didn’t have enough troubles already, now a group of minority contractors is charging that they’ve been left out of one of the city’s biggest construction boons in recent years.

MBEC has been the focus of political bickering for weeks. The head of the African-American Chamber of Commerce, A. Bruce Crawley, has criticized Mayor John Street for appointing a gay lawyer to head the agency rather than a more mainstream minority leader. MBEC’s last director, the embattled James A. Roundtree Jr., left his post and also left Street, his former ally, to answer questions about fraud and mismanagement.

"There are all sorts of interesting politics, but still our contractors have no jobs," says Ben Ramos, director of the Greater Philadelphia Hispanic Chamber of Commerce. "Hispanics. Asian-Americans. Women. The city has basically forgotten us, and nobody seems to mind."

Ramos is referring to the demolition contracts awarded through the Neighborhood Transformation Initiative (NTI), the mayor’s sweeping blight-removal program that was launched in April 2001. Under its original plan, NTI was supposed to demolish 14,000 buildings and develop 16,000 new housing units -- which would have meant hundreds of lucrative contracts for local contractors.

NTI was supposed to serve a dual purpose: While cleaning the city, it would also provide a great opportunity for minority businesses. Every NTI bid packet includes a section on minority participation, and it outlines target ranges for every project. In most cases, 35 percent to 40 percent of the subcontracting work must be done by a minority-owned firm, and 12 percent to 15 percent must be completed by a female-owned firm.

But to be considered for work, that firm must have been certified as an official minority business by MBEC long before the bidding started. As it stands, the same three primary contractors -- two of which are not minority firms -- have been awarded the majority of NTI contracts. And because of certification problems in MBEC, fewer than 20 minority subcontractors ever got in on the deal. The majority of those were black-owned firms. (The city provided City Paper NTI contracts from July 2002 through October 2003. Despite repeated requests, the city said that it could not locate the NTI contracts from October 2003 through March 2004.)

"So far, I haven’t heard of a single Asian or Hispanic contractor getting to work on NTI demolitions," Ramos says. "Tell me something: In this city which is so diverse, how is that possible? There should have been dozens of opportunities. Instead, it’s the same group of companies that keep getting the contracts over and over."

In a review of NTI contracts, City Paper found that the three primary contractor firms chose from a very small pool of minority subcontractors when submitting their bids. The primary contractors are Mazzocchi Wrecking Inc., JPC Group Inc. and Molly Construction Co. Only Philadelphia-based Molly Construction, owned by Melinda De Nofa, is classified as a minority firm. But under the NTI contract, minority-owned primary contractors don’t count toward the specified ranges.

In a bid packet opened on June 6, 2003, for example, Mazzocchi and JPC each placed bids on a demolition project. Each was required to list the minority subcontractors it planned to hire and the estimated cost. Both companies list Accurate Building Contractors, a black-owned firm certified by MBEC. The difference came down to which company would take a smaller cut -- which could also mean giving Accurate a smaller percentage -- of the total contract.

From July 2002 until March 1, 2004, the city paid JPC $12.7 million, Mazzocchi $6.9 million and Molly Construction $5.1 million to do the bulk of NTI’s demolition work citywide. The project manager, Hill International, has been paid more than $5 million to oversee the bidding, demolition and construction process. It is unclear why more contractors didn’t get into the selection pool, but some blame MBEC for not getting more firms certified sooner.

"There’s no doubt that the city overspent for demolition work," says the African-American Chamber’s Crawley. "If you don’t have multiple bidders, generally you pay more per unit. For a while, it was a sweet deal for the lucky firms who got the contracts. Blame MBEC for the mess."

MBEC is the city agency in charge of administering a process to ensure that firms are viable and minority-owned. To apply for certification, firms need to turn in business plans with company financials, a statement of operating management and company financial statements for three years. In addition, the applicant must supply copies of personal tax returns, personal financial statements and identification (driver’s license or state ID) along with a lengthy questionnaire. All of that must be correctly signed and notarized in order for consideration. There is no application fee.

"The certification process is tedious," Crawley says. "Under any other circumstance, you’d hire a consultant to do this kind of paperwork. Then you get everything together, and you sit."

Currently, MBEC is budgeted through the city’s general fund. It has a staff of only 12, which is charged with reviewing applications and conducting investigations to make sure that a minority applicant is really the owner of his or her own firm and not fronting for a shrewd white businessman trying to get in on contract bids. Five staff members make recommendations to the certification coordinator (that position is currently vacant), who makes a recommendation to the assistant director and director of MBEC, who has the final say. The process should take 60 to 90 days, but depending on how many applications are filed and how many staff members are available to work, certification can take much longer. Right now, there are 200 firms on a waiting list.

MBEC’s former head for 10 years, James A. Roundtree Jr., had been criticized for not restructuring the department to make it more efficient. He also came under fire for not disciplining one of his employees, who made anti-Semitic comments during a business meeting. Another staff member was charged with credit-card fraud.

Roundtree would not comment for this story.

"Saying that we don’t have some problems with the MBEC process would be wrong," says Barbara Grant, spokeswoman for the mayor. "We wanted to do something that would help minority contractors to do business with the city, and NTI was identified because of all the demolition work involved. But MBEC as a certification program only seems to not be working."

The city is instead looking forward to changes proposed by MBEC’s newly appointed director, Michael Williams, who was not available for comment. The city also gave a portion of the NTI budget to the African-American Chamber to fund its own Emerging Contractor Program. According to NTI disbursement records, the chamber received payments of $278,382 in September and $725,000 in November last year for "contractor training." To date, the chamber has received $1.6 million to do what, essentially, MBEC was also supposed to be doing -- ensuring that minority firms get work. The chamber’s program helps minority contractors get their finances in order, secure bonding and insurance, find a line of credit and complete paperwork.

The program was supposed to be administered through the African-American Chamber but in partnership with the Hispanic and Asian-American chambers. So far, the program brought in 50 minority contractors and graduated 21 last September. "We’ve had a lot of trouble," Crawley says. "There’s still been a lot of foot-dragging, but NTI and Hill International are finally starting to hire some new minority contractors." To be sure, Crawley has recently lambasted the mayor for appointing Williams head of MBEC and says that not enough black business leaders are being tapped.

That may be true, but Hispanic and Asian firms are still vying for work. "My understanding is that [the Hispanic Chamber] was supposed to be a partner on the Emerging Contractor Program. Unfortunately, we’re not getting opportunities and there’s a sentiment that you have to be African-American in order to get in the program."