- The Washington Times - Sunday, April 1, 2007

A new D.C. regulation gives one company an insurmountable edge in bidding for city road-paving contracts worth millions of dollars, the heads of a rival company say.

The new contracting rule gives hiring preference to local businesses that have been in the District for 20 years. Fort Myer Construction appears to be the only road-paving company that meets the new rule, Capitol Paving executives say.

The new rule “has created a monopoly in bidding on contracts for work in the District of Columbia,” Capitol Paving President Francisco R. Neto said in an affidavit recently filed in federal court in the District.

Mr. Neto said he faces laying off workers because of the rule.

In a separate affidavit, Capitol Paving Vice President Phuong D. Tran said the preference change “has the practical effect of reducing and ultimately eliminating competition in the paving industry in the District of Columbia.”

Capitol Paving is challenging the regulation in federal court and has sued the District to overturn the law. The company is seeking an injunction to bar its implementation.

In court papers filed March 23, D.C. officials, who declined to comment on the case, defended the rule. They argued the provision has an “obvious and legitimate” rationale.

“The rationale is to reward a business’ longtime dedication to the District through the poorest years of the local economy,” the D.C. Office of the Attorney General said in court papers.

Fort Myer officials last week dispute Capitol Paving’s lawsuit. Company attorney John Bosley said Fort Myer plans to intervene in the lawsuit in support of the District.

“There are a lot of constitutional [arguments] being batted about,” said Mr. Bosley, adding Fort Myer “clearly” disputes the Capitol Paving lawsuit.

The District began a program to set aside city contracts to small, local and disadvantaged businesses in 1992. The program started after D.C.-based O’Donnell Construction successfully sued the District to overturn a similar program that awarded contracts based on race.

The current set-aside practice, known as the Local Small Disadvantaged Business Enterprise program, give companies “preference points” to win city contracts, based on the business’ location, size and other factors.

The program is based on a point system. The new rules gives 10 points, or a 10 percent edge, to contractors doing business in the District for at least 20 years.

For example, a longtime resident business that submits a $1 million bid on a city contract could be chosen over a less-established competitor’s bid of $901,000. That’s because under the new rule, city officials take the 10 percent discount and view the $1 million bid as $900,000 for the purposes of comparing offers. However, if the longtime business wins the contract, the District still would pay $1 million.

Capitol Paving said in its lawsuit that such a system results in the District’s “entering into contracts that are not the lowest bidders for the work.”

In open-market competitive bidding, the government generally is supposed to accept the lowest qualified offer to ensure taxpayers get the best deal.

In court documents, Capitol Paving says in its bid on a recent citywide alley-construction contract, Fort Myer stands to get the job, despite its offer being about $600,000 more expensive.

Fort Myer, which has bounced back from a bribery scandal that barred it from bidding on federal contracts in 2004, is the city’s largest road-paving operation.

D.C. officials say the new, so-called “longtime business preference rule” would be an incentive for businesses such as Fort Myer to remain in the District in the event of another economic downturn.

Capitol Paving would be eligible for the longtime business reward within a year, but in court records, officials say the company might not be able to survive until then.

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