D.C. Mayor Vincent C. Gray vowed to hit the reset button on a long-standing program that was designed to provide advantages to companies based in the District but has been vulnerable to fraud.
Mr. Gray said his reforms to the Certified Business Enterprise (CBE) program will focus on greater resources to ensure compliance and enforce penalties against out-of-state firms that flout the program's guidelines, typically by partnering with D.C.-based firms as a "pass-through" to win city contracts.
The program was established in 1977 to make sure small and local businesses could compete for D.C. government contracts and city-backed development. Qualifying companies are given preference points during procurement processes in which their bids are scored numerically and compared with those of competing companies. To qualify for certification, a company must be a "bona fide" D.C.-based business and maintain its principal office in the city. It also must meet one of four criteria — 50 percent of its assets must be located in the city, more than half its sales or revenues must be derived from business in the District, at least half of its employees must be D.C. residents or at least half its owners must be D.C. residents.
But officials readily admit the program has been afflicted by "bad actors" who have attempted to work the system by making it seem as though local partners of joint ventures had a bigger stake in projects than they really did. A representative from Forrester Construction testified before the D.C. Council last week after a series of reports in the Washington City Paper said the Maryland-based company took the lead role in construction of the new Anacostia High School despite having the minority stake in the joint venture with its local partner, EEC of D.C.
Harold B. Pettigrew Jr., director of the Department of Small and Local Business Development, said the mayor's reforms will be carried out through legislation, new regulations and operational changes at his agency.
Specifically, the agency will be authorized to enforce the CBE program's regulations and add 10 full-time employees to make sure government agencies and private projects are in compliance. The agency will also conduct "spot checks" to make sure companies are in compliance with the program in the long term.
Mr. Pettigrew repeatedly pointed to a dearth of resources as the genesis of the program's lack of oversight. He said that as of 1985 the program had certified about 450 local businesses. Now, more than 1,100 companies are certified under the program.
"The resources of the program have never matched its ambition," Mr. Pettigrew said.
When a reporter asked officials to quantify the extent of abuse within the CBE program, Mr. Pettigrew said it was unclear and cited a lack of resources to research the subject.
Mr. Pettigrew said it was important for the city to codify its reforms in law, since certain project requirements were usually documented in contracts. Legislation to carry out the announced changes will be delivered to city lawmakers through D.C. Council member Vincent B. Orange, chairman of the Committee on Small and Local Business Development, by the end of the month, officials said.
Officials outlined the reforms at Mr. Gray's biweekly press conference on Wednesday mere steps from the rattle of the CityCenterDC construction project that spans more than four blocks along New York Avenue in Northwest. The massive mixed-use project — primarily funded by $700 million from Qatar's sovereign wealth fund — has provided $50 million in business to qualified CBEs since its ground breaking in April 2011 and should provide up to $195 million by its completion, according to the mayor.
"We don't want the program described as something that someone has taken advantage of, that people have manipulated joint ventures, that people have skirted compliance. ... Those are the things that we want to address, " Mr. Gray said. "And today begins in earnest — in a formal way — that process."
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