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Pass-through vendors skirt D.C. contract laws; government a lucrative client
Question of the Day
Efforts by Washington, D.C., to include local, minority-owned and small businesses in city contracts have led to a system in which goods manufactured by major companies, including sensitive medical equipment, are routed regularly through residences where self-professed entrepreneurs — whose only client is the government — mark up and resell them.
Since 2010, the D.C. government has paid $64 million to companies with no traditional office space, many of which operate merely as pass-throughs for larger businesses outside the city, according to an analysis The Washington Times conducted of city financial and real estate records.
In all, one in seven local, minority-owned and small businesses receiving city contracts under preferential status, known as Certified Business Enterprises (CBEs), is in a home. After visiting dozens of such entities, The Times found that lax oversight of the city’s 1,200 CBEs — a third of which have received D.C. contracts — is a poorly kept secret.
The findings echo a rare point of agreement among D.C. politicians: The way officials regulate these local companies and limit the pool of eligible bidders on city contracts is in need of reform.
Last month, two months after praising his performance, Mayor Vincent C. Gray accepted Harold Pettigrew’s resignation as director of the Department of Small and Local Business Development. But to clean house thoroughly, the city must determine which of the small companies that have received D.C. contracts are located in the District and, when they are, whether they provide meaningful services in exchange for their profits.
How it works
Take Premier Suppliers on 49th Street Northeast, in the home of Johnny Johnson. On a recent visit to his three-bedroom, 3½-bath house, a sign on the front door read, “Deliveries in the back!” There, next to a pile of garden tools, a pack of Pall Malls sat atop a large box from Humanscale, an office furniture and equipment company in Piscataway, N.J.
Inside the rear entrance, an assistant said Mr. Johnson was upstairs getting dressed, and invited reporters to sit in his living room, adorned with family pictures and a big-screen TV.
“We don’t manufacture anything. That’s just the setup. We’re a pass-through,” he said. “This stuff is blatant.”
D.C. regulations state that companies’ locations are verified by random inspection. But Mr. Johnson described being in business with a Maryland-based partner who, after dividing the company, went on to win a D.C. contract as a CBE. “He utilized my address to get the contract to go through until he bought an investment property in the District.”
The D.C. Fire Department has been buying medical equipment from a house on East Capitol Street, records show. On a recent afternoon, trash, liquor bottles and a tire mingled with signs supporting Mayor Gray and President Obama. Duct tape fastened the front gate shut; tarps and furniture barricaded the windows and doors.
The “welcome” mat for All N 1 Medical Supplies and Treasures is misleading. “Do not be a fool!” a sign read. “Cameras inside takes your picture. The police will find you! Oh yes!”
Nevertheless, the District bought $100,000 of medical devices through 2012 from All N 1, whose owner, Evie Washington, listed this vacant home as her place of business as of July, according to city records.
Fire department officials did not return calls for comment.
© Copyright 2013 The Washington Times, LLC. Click here for reprint permission.
About the Author
Jeffrey Anderson is an investigative reporter for The Washington Times. He can be reached at firstname.lastname@example.org.
Luke Rosiak is a projects reporter on The Washington Times’ investigative team. He formerly covered lobbying and campaign finance for two watchdog groups as well as transportation for The Washington Post. Luke can be reached at email@example.com.
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