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Other CBEs get by through the establishment of multiple business locations, with one in the District. C&E Services Inc., a construction and maintenance company, has headquarters in Vienna, Va., according to the firm’s website. But a company with the same name is based in a house in Southeast. Jim Biggs, brother of the company’s president, splits time between the offices.

“We have our office here for our preference points,” Mr. Biggs said one afternoon, after morning visits found the office vacant. “I’d someday like to do a real building.”

C&E does construction work, he said, but the District contracts with too many CBEs to buy goods when the city’s white-collar economy means those goods come from elsewhere.

“The D.C. Council should be [running] this program for services rather than goods,” Mr. Biggs said. “Purchasing something — that could come from California. But if I need 20 men, they’re not going to come from California.”

Yet many CBEs with service contracts, such as construction, don’t do the work either, he said.

“We’re a real business, so we have secretaries, offices, administrative costs. But sham companies get certified and put their name on a joint venture. They’ll take 1 percent because they don’t have any costs, and they didn’t put money in. But it doesn’t help the companies grow.”

Political interception

In March, the D.C. Council approved legislation introduced by Vincent B. Orange, at-large Democrat, to reform CBE policies and practices.

Mr. Gray vetoed the bill and later named 17 business leaders to develop a list of necessary reforms. Many of those business leaders come from the construction industry, which critics say are frequent abusers of the system.

In a letter this month to D.C. Council Chairman Phil Mendelson, at-large Democrat, Mr. Gray said a major goal of the reform effort “is to ensure that CBEs participate meaningfully in the program and to prevent subversion by non-CBE businesses.” He wrote that while additional enforcement powers are needed, “more important are reforms to how CBE businesses and joint ventures are certified, reviewed and monitored, which will eliminate incentives to ‘game’ the system.”

That is all well and good, Mr. Johnson said, but local, small and minority-owned businesses are not the only ones profiting at taxpayer expense from a flawed system. He told the story of Lifepak, which manufactures defibrillators preferred by the fire department.

“We went through our international supplier, who got it from Lifepak. So it gets marked up twice and we still won the contract.”

That wasn’t the surprising part, though: His competition in that bidding war included Lifepak directly, which was giving one price to the company in New Jersey and a much higher one to the District.

“Lifepak must have had the contract for so long that sometimes the big guy gets greedy,” Mr. Johnson said.