Committee Hearing, March 12, 2007

COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON COMMERCE and ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, March 12, 2007, 1:24 p.m. - - - Bill 060226 - Providing for the development of and setting forth provisions relating to Economic Opportunity Plans in connection with certain City contracts and projects. Res. 070106 - Hearings to examine current invoicing and disbursement procedures and policies in City procurement and contracting so as to determine measures that may be required to implement and ensure best practices and standards for prompt payment. COUNCILMEMBERS PRESENT: W. Wilson Goode, Jr. Chair Jannie L. Blackwell Blondell Reynolds-Brown Carol Ann Campbell Darrell L. Clarke Frank DiCicco Juan Ramos Frank Rizzo - - - V A R A L L O Incorporated Litigation Support Specialists 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2 3/12/07 COMMERCE AND ECONOMIC DEVELOPMENT BILL 060226 WITNESS C. Nichols, Deputy Finance Director..... 8 MBE Director J. Hagan, Acting Procurement Comm. ..... 14 John Macklin, Jr., Vice President....... 19 National Association of Minority Contractors John Childress, Executive Director...... 29 African-American Chamber of Commerce Varsovia Fernandez, President and CEO... 38 Hispanic Chamber of Commerce. Nick Chenoy............................. 41 Asian-American Chamber of Commerce Cheryl McKissack, President............. 56 McKissack & McKissack Bill Peebles............................ 61 Angelo Perryman, President and CEO...... 64 Perryman Building & Construction Jihad Ali, Auburn Properties Development 79 Herb Riley, RA Consulting Services...... 92 Bruce Crawley, Millennium 3 Management 115 Anthony Fullard, " " " 132 Janelle Williams, Janelle Williams, Inc. 155 Judith Robinson, Owner, Broker.......... 163 Complete Real Estate Services Phillip Harris, President............... 166 Financial Integrity Resources Management Ronald Jackson, Sr. .................... 174 Isaac Stevens & Associates. * * * 3 3/12/07 COMMERCE AND ECONOMIC DEVELOPMENT RESOLUTION 070106 WITNESS John Dougherty, Iron Workers Local 401 188 Edward McHugh, President............... 207 Philadelphia Ironworkers District Council Lonnie Stanley, Kimmel Group........... 214 Sharon Williams........................ 225 Licensed Private Detective Jihad Ali, Auburn Properties Development 232 4 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Good afternoon. We're about ready to get started. This hearing is called to order. This is a public hearing of the Commerce and Economic Development Committee on Bill No. 060226 and Resolution 070106. My name is W. Wilson Goode, Jr., chair of this committee. I note that a quorum is present. To my left is Councilman Frank Rizzo, Councilwoman Carol Ann Campbell, Councilwoman Blondell Reynolds-Brown, Councilman Darrell Clarke, and Councilman Frank DiCicco is here in attendance as well. The title of the bill: No. 060226, an ordinance amending Title 17 of the Philadelphia Code, entitled "Contracts and Procurement," by adding a chapter providing for the development of and setting forth provisions relating to economic opportunity plans in connection with certain City 5 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 contracts and projects, all under certain terms and conditions. The title of the resolution: No. 070106, a resolution authorizing City Council's Committee on Commerce and Economic Development to hold hearings to examine current invoicing and disbursement procedures and policies in City procurement and contracting so as to determine measures that may be required to implement and ensure best practices and standards for prompt payment. Our first witness on the bill 16 is Carolyn Nichols. (Witness comes forward.)

Before you start your testimony, Councilman Clarke would like to make some opening comments.

Thank you.

Thank you, Councilman. Thank you, Mr. Chair. Mr. Chair, just briefly, I 6 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 just wanted to say that this is something that a number of individuals have been working on for some time. The intent is to clearly provide opportunities to all of the citizens of the City of Philadelphia and the surrounding areas. And I want to thank all of you during the past several years have been very supportive of this initiative, and we look forward to proceeding. Essentially, what we want to do is to codify some of the existing regulations associated with providing opportunities across the board. Currently, under some of the legislation that we do for various projects out at PIDC and some of the quasi-agencies, we're requiring those agencies to attach a equal opportunity plan, and we found it would be relatively successful and at a minimum identifying a reasonable goal for participation on MBE/WBE and DBE. And 7 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 we think that it's appropriate to have similar language associated with all contracts related to City -- municipal contracts. So this particular law will hopefully put in place guidelines in an actual form that will allow the attachment of this particular process to all contracts. And if those particular contracts are -- those particular requirements are not adhered to, then any respondents will be deemed as nonresponsive. So it's our hope today -- and you will hear a number of individuals testifying -- that we will be in a position to pass what we believe is sweeping legislation that will truly give all citizens an opportunity to participate in lucrative municipal contracts. And thank you, Mr. Chairman.

Thank you, Councilman. 8 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Good afternoon, Miss Nichols.

Good afternoon.

Please state your name for the record and proceed with your testimony.

Thank you. My name is Carolyn Nichols, N-I-C-H-O-L-S, and I'm Deputy Finance Director and Director of the Minority Business Enterprise Council. Good afternoon, members of City Council's Committee on Commerce and Economic Development. As you well know, MBEC is responsible for implementing and administrating the City of Philadelphia's policies to ensure non-discrimination in City contracting and for promoting economic development of minority-, women-, and disabled-owned businesses through certification of the strategies to maximize their opportunities to compete for City contracts. 9 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Bill No. 060226 proposes to amend Title of the Philadelphia Code 4 by adding a new chapter providing for 5 the development of and setting forth 6 provisions for economic opportunity 7 plans relative to certain City 8 contracts and projects under certain 9 terms and conditions. 10 Generally speaking, the bill 11 seeks to establish standard, uniform 12 content, procedure, and policy for 13 applicable City contracts, grants of 14 financial assistance, and City-funded 15 development projects that exceed 16 certain amounts in costs and/or 17 consideration to the City. Recently, the Procurement Commissioner and I, along with a representative from the Law Department, met with representatives from the offices of President Verna, Councilman Clarke, and Councilwoman Reynolds-Brown offices to frankly and openly discuss the impact of the bill on the bidding 10 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 process and MBEC operations. We worked together collaboratively and discussed viable strategies to enhance the successful implementation of the bill's provisions in an effort to eliminate any unintended adverse consequences to the contracting process. As an outcome of the meeting, an amendment was developed by the Administration that will be submitted today for your consideration. And I might add: I understand that there are more amendments forthcoming from Councilman Clarke's office as well. I would like to highlight at least two of the changes that we propose. The first amendment includes a proposed change of the dollar-amount of a covered contract in Section 17-1502 from 150 to $250,000. As a practical matter, the increased dollar-amount for a covered contract would capture contracting opportunities that would 11 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 derive more benefit from the enhanced oversight of economic opportunity plans as set forth in this bill. MBEC could effectively -- more effectively perform its role in implementing the bill's provisions and avoid the potential for delays and backlogs due to the volume of plans that might require review in a smaller contract amount. Please be assured that bids falling under the $250,000 threshold will be continued to be assessed by MBEC for contracting opportunities for minority-, women-, and disabled-owned business enterprises. MBEC historically has established M/W/DS BE participation ranges for 95 percent of all public work bids, including those bids under $250,000. The second amendment I want to discuss is the proposed change to the effective date of this bill as set forth in Section 2. We are requesting 12 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that this bill become effective within 90 days of all approvals by City Council in place of 60 days. An increased time period would enable MBEC to develop the prototypes of the Economic Opportunity Plan from MBEC's existing forms that bidders and proposers can utilize in compliance with this bill. In implementation of this bill, the bidder and/or proposer will be required to include the prototype economic opportunity plan with their submissions subject to the review and approval by the contracting City department, MBEC; and when applicable, designated representatives of City Council.

Specifically, the role of MBEC is to develop the Economic Opportunity Plan prototype, review the bidder's Economic Opportunity Plan submission that would include the bidder's identified solicitation and commitment efforts as part of MBEC's review 13 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 process to ensure the bidder's compliance with contract provisions relative to participation for minority-, women-, and disabled-owned business enterprises. The requested 90-day time period prior to the effective date of the legislation would also provide MBEC with additional time to collaborate with the Procurement Department and other City departments to work out the logistics of revising all pertinent forms, providing notices, including notices on the City's Procurement Department's website, and informing stakeholders, which includes the vendor community, of the proposed changes to forms and/or procedures in order to comply with the provisions of this bill. The utilization of economic opportunity plans as proposed in the bill has the potential to become an effective mechanism to ensure that 14 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 contractors and developers take all necessary and reasonable steps to ensure M/W/DS BEs have meaningful opportunities to compete for and participate in the performance of City contracts. In conclusion, I look forward to working with City Council in the implementation of this bill. Thank you for allowing me to provide this testimony. I'm available for any questions of the committee. Thank you very much.

Thank you for your testimony. Miss Hagan, please state your name for the record and proceed with your testimony.

yes. My name is Janet Hagan -- that's H-A-G-A-N -- Acting Procurement Commissioner. Good afternoon, Councilman Clarke and members of the Committee on Commerce and Economic Development. I 15 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 am Janet Hagan, Acting Procurement Commissioner, and I'm here to testify in support of Bill No. 060226, which seeks to amend Title of the 6 Philadelphia Code, entitled "Contracts 7 and Procurement," by adding a chapter 8 providing for the development of and 9 setting forth provisions relating to 10 economic development opportunity plans 11 in connection with certain City 12 contracts and projects, all under 13 certain terms and conditions. 14 The Procurement Department 15 will include a prototype Economic 16 Opportunity Plan developed by MBEC in 17 all bid documents covered by this bill 18 unless a waiver is granted. To better appreciate the impact of this legislation, I would like to bring to your attention the following data: In City Fiscal Year 2006, the Procurement Department awarded 332 service, supply, equipment SS&E bids 16 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 and 171 public-works bids. Seventy of the SS&E contracts awards were over $250,000. Fifty-one percent of these larger awards were for service category contracts. One-hundred-and-eleven of the public-works contracts were over $250,000, which represents the majority of all awards in this contracting category. I believe that the requested 90-day period prior to the effective date of the legislation is critical to the successful implementation of this bill. The Procurement Department will work closely with MBEC in providing for appropriate forms and bid notices. This concludes my testimony. I would be happy to answer any questions for the committee, but I have one comment that I didn't include in the testimony. As Councilman Clarke did say that they are going to have some additional amendments, we're prepared 17 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 to support the bill with the modest amendments that the City proposed on March 9, 2007. However, we have not had an opportunity to review these further amendments with our staff and legal counsel and would respectfully request an opportunity for further study of the bill as amended. Thank you.

Questions for this panel? Councilman Clarke?

Thank you, Mr. Chairman. So are you suggesting that -- and maybe you're not suggesting. You're assuming that we're going to do the amendment, the more aggressive amendment, and prior to passage of the bill, you would like to have an opportunity to review from a legal perspective the amended bill before the City can sign on --

Yes. 18 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

-- in its entirety.

We're in support of the bill as was amended. And since we haven't had an opportunity to take a look at the additional amendments, I would respectfully request that we be given that opportunity to that we can go over it for the successful implementation of the bill.

After the additional amendment?

Yes.

All right, okay. Thank you. Thank you, Mr. Chairman.

Are there any questions for this panel? Any further questions for this panel? (No further questions.)

Thank you for your testimony.

Thank you.

Thank you. 19 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

John Macklin. (Witness comes forward.)

Mr. Macklin please state your name for the record and proceed with your testimony.

John Macklin is my name, and I want to... thank the Council for allowing me this opportunity to share my views relating to this ordinance. My name is John Macklin, Jr. I am the Vice President of the Eastern Region of the National Association of Minority Contractors, which covers the states of Maine, New Hampshire, Massachusetts, Rhode Island, Connecticut, New York, New Jersey, Pennsylvania, and Delaware. I'm also the President of the Philadelphia Chapter of the National Association of Minority Contractors. The National Association of Minority Contractors, established in 20 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 1969, is the oldest and largest nonprofit MBE construction trade association in America. We were organized to address the needs and concerns of minority contractors and suppliers. Membership is open all to all people of all races. The organization's mandate -- building bridges and crossing barriers -- focuses on specific construction-industry concerns common to MBEs and WBEs. Our goal is to assist our member firms build capacity through training and education to monitor, track, and have an impact on construction-related legislation and to assist our corporate and government partners in securing capable MBE firms for the many construction, facility maintenance, and capital-improvement projects across this country. Covering 50 states, the District of Columbia, and the Virgin Islands, NAMC's membership includes 21 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 general contractors, suppliers, subcontractors, construction managers, manufacturers, local MBE contractors associations, state and local governmental organizations, attorneys, accountants, and other professionals in the construction field. Funding is from membership dues, government and private-sector grants, and through contributions from our corporate partners. Our success is America's success story. For 37 years, we have been the leaders in representing minorities in construction. We stand ready to serve our partners. Our reason here today is in support of ordinance Bill 060226, amending Title 17 of the Philadelphia Code, "Contracts and Procurement," by adding a chapter providing for the development of and setting forth provisions relating to economic opportunity plans in connection with 22 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 certain City contracts and projects, all under certain terms and conditions. Since 1982, when the first piece of legislation (Bill 1477) for inclusion of minorities and women on City contracts was passed by City Council, with amendments in '84, '85, '87, and '89, we have had some success in creating small businesses. The key to any legislation is the commitment from the top to enforce these ordinances and the City Council's oversight committee to ensure their compliance. The commitment to enforce and to ensure from oversight committees has just been lip service. It has failed its obligations to the small and minority business community. We owe the competitive advantage that Blacks held in the work experience they gained during slavery and, in no small part, to the efforts of two ex-slaves after emancipation. 23 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 As William Hooper Council organized the Colored Normal School (now Alabama A&M University) in Huntsville, Alabama, in 1875 to teach trades, and Booker T. Washington founded his self-help program at Tuskegee Institute in Tuskegee, Alabama, in 1881, which has had the same mission. Fortunately for Blacks, both men succeeded. C. Blacks in the South subsequently outnumber Whites 5-to-1, and until the passage of the Davis- Bacon Act in 1931, the federal government's policy of accepting the lowest bid on construction projects allowed Black laborers to compete freely for federal work. The Davis-Bacon Act put a sudden end to this democratic capitalism. In addition to guaranteeing 24 3/12/07 COMMERCE/ECONOMIC DEV.

- BILL 060226 the failure of most Black and Hispanic construction firms, the Davis-Bacon Act keeps young unskilled Blacks and Hispanics from getting labor jobs and from acquiring building-trade skills and earning a higher wage as a result of their work experience. These are the socially unacceptable and alienated young people who have no other option for work that offers a route to independence. The infamous Davis-Bacon Act is an unconstitutional throwback to Jim Crow. It was passed by Congress in 1931 and signed into law by a Republican president, Herbert Hoover, in direct violation of the equal- protection provision of the Fifth Amendment with the racist intent of favoring White workers in unions over Black workers on federal construction projects. The Davis-Bacon is anti- taxpayer, anti-Black, anti-capitalist, 25 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 and a guarantee that the most inefficient worker will be paid the highest wage, which, in turn, guarantees the lowest profit. Just like legal slavery or segregation laws, it will not allow employers to choose their own workers. In effect, this law creates set-asides, jobs for Whites. In truth, it was created to keep Blacks unemployed and to tax them for their unemployment. It has turned out to be a potential example of entitlement socialism, and it has backfired in the pocketbooks of White taxpayers. The Davis-Bacon Act costs American taxpayers $2 billion in inflated labor costs and more than $100 million in administrative costs annually to small contractors. It was designed to protect White union workers who could not compete with cheaper, more skilled Black labor by imposing prevailing-wage 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 requirements. It was passed explicitly to prevent efficient, cheap colored labor from competing with less skilled, more costly White workers. This is government-sanctioned institutional racism and what the Davis-Bacon critics call "classic protectionism legislation" for building and construction trade unions. It has continued to contribute to Black and Hispanic marginalization and the perpetuation of marginal poverty, has increased unemployment, and has fostered anti-capitalist and explicit racism. This brings me today to today's problem that Blacks and women contractors are having with the School District's program, the Electrical Sheet Metal and Carpenters Unions, Licenses and Inspections, the Minority Business Enterprise Council, the Philadelphia housing agencies, and other agencies who are supposed to 27 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 ensure that Black, minority, and women businesses receive a fair chance at procurement opportunities. All of these entities have contributed to retrogressing instead of progressing the development of small, Black, and women businesses in the City of Philadelphia over the past years. 10 It is a crime and a shame what 11 is happening to our Black, small, women 12 businesses, and as such, so-called 13 ordinances that this government and 14 City Council is considering in having 15 approved and passed that hinders the 16 growth of businesses I just mentioned. 17 While we fight to get just, 18 impartial, and fair legislation passed 19 on one side, the other side is 20 introducing ordinances, and some are 21 getting bassed that have a negative 22 impact on Black-, minority-, and 23 women-owned businesses, and no one in leadership is saying a word. Why? Bill 060289, the Sheet Metal 28 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Licensing; Bill 060959, the Electrical and Telecommunications Licensing, Collective Bargain Requirements Signatory Agreement between the School District and the Building Trade Council these are the symbol of what is wrong. 8 percent, more than twice the rate of Whites. Black- and Hispanic-owned construction businesses are disadvantaged by the legislation because they cannot compete with taxpayer-subsidized wages for White unionized workers.

Small firms owned by ethnic minorities cannot underbid the larger firms. This effectively protects established interests and eliminates competition for government contracts. I would like to thank the committee for this opportunity to offer NAMC's views on this important subject. 29 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 I would be pleased to answer any questions the members of the committee may have.

Thank you for your testimony, Mr. Macklin. Are there questions for this witness? (No questions.)

Thank you very much. The next witness is John Childress. (Witness comes forward.)

Good afternoon, Mr. Childress. Please state your name for the record and proceed with your testimony.

My name is John Childress, Executive Director of the African-American Chamber of Commerce. First off, I would like to thank City Council and this committee for hearing our testimony. A special 30 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 thanks to Councilman Clarke for introducing this legislation and also a special thanks to you, Councilman Goode, for the -- for championing this effort for so long and for really making it such that it's come up to this level. We feel that we are all in agreement with regards to the fact that this is a good thing. This legislation is good, it's long overdue, but that also additional measures are needed to ensure that businesses owned by minorities, who represent the majority of Philadelphia's native population, are guaranteed their right to earn an equal share of the economic pie. I think that is very important. There are a lot of conversations going on around now that it's election time, is this a great city? what makes a great city? And we question what makes a great city. Is it the Avenue of the Arts? is it the 31 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 stadiums? is it the museums? is it the business? And our response to that is: No, it's not. It's none of those things. What makes the city great is the people. And right now, over half of the people of this city are suffering; they're suffering because they do not have access to economic opportunity to improve themselves. They're without jobs, they're being left out of economic stimulus and community improvements, and largely becoming victims of crime. Over 35 percent of the City's black adult population is without a job. Now, once again, understand how that differs from the unemployment rate, which only counts people who have been unemployed for the last six months. It is widely known that minority-owned and women-owned 32 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 businesses have suffered for a long time in this city. 3 percent of the previous year. Now, we all know those numbers were compiled in years where MBEC had less-than-ideal compliance and follow-up, so we all know that the actual numbers are much, much lower. No one even counts the contracts that are going to nonprofits, the hundreds of millions of dollars that are being disbursed through DHS and Community Behavioral Health. But there are examples of how we can do better. The African-American Chamber of Commerce along with the Greater Philadelphia Hispanic Chamber of Commerce have participated in a program with the School District of Philadelphia, which in just three years 33 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 has taken their participation percentage from under percent to 4 over 25 percent, so we know that it can 5 happen. 6 So I ask you again, is 7 Philadelphia a great city? Well, to 8 answer that, I'll give you an analogy. 9 I have a son and I have a 10 daughter. If I feed my son but I let my daughter go hungry, would I be considered a great father? If I protect my daughter from harm but I let my son become the victim of a violent crime, am I a great father? Now let's apply these same principles to Philadelphia. If this city lets more than half of its residents go hungry or become frequent victims of crime, how can we claim to become a great city? How can we ensure that all of Philadelphia shares in this economic pie? Well, the bill before us today is a huge step in the right direction. 34 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Uniform guidelines for economic opportunity plans establishes a foundation from regiment. From this foundation, we can build a real participation plan that will allow all Philadelphians to share in this wealth. This bill also continues to elevate this issue to the level it belongs. The lack of participation in City contracts for Blacks, Hispanics, and Asians in this city shuts off opportunities and leads directly to increased crime and poverty.

So when you see the murder rate rising and increased violence in our communities, understand that this lack of opportunity to the economic system is a major cause of this crisis. So we say to all elected officials, and not just the Councilpeople who are on top of this issue here, but if you are serious about stopping the violence in this city, then give us some real 35 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 opportunity to make that happen. But even with the passage of this bill, we are not close to being done. This gives us a tool for measurement, but what are we measuring? What are the goals for participation and how are we going to hold these people accountable for not meeting these goals? The greatest laws in the world are powerless without enforcement. In order to ensure that this effort bears real fruit and is not just another symbolic gesture in inclusion, we call for a minimum of percent 17 participation in contracts over 18 $150,000 confirmed by actual dollars 19 spent and not dollars awarded. 20 Now, we understand that some 21 areas, you're going to say, Well, 22 there's not a lot of good minority 23 companies, so you may be lower here and 24 you may be higher in another area, but 25 citywide is an average that is 36 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 certainly an obtainable goal. Additional resources for MBEC to provide certifications in under 90 days. We make it far too difficult for a company to say, Hey, I'm minority-owned or I'm women-owned. Sometimes it can take months. Strong compliance checks and real penalties for companies that are in violation of goals. We want to see the nonprofit organizations certified and goals set up for that billion- dollar sector as well. We want to see strong oversight from a combination of the African-American Chamber of Commerce, the Greater Philadelphia Hispanic Chamber of Commerce, Minority Supplier Development Council, and the Enterprise Center to oversee this process and correct deficiencies. We also applaud the decision to conduct a comprehensive disparity study so that we can identify the areas 37 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 needed for improvement for significant inclusion and also to build capacity in those areas. While we stand united in applauding this bill as a critical first step in bringing real inclusion to our city, it is only the beginning. Without enforcement and accountability, we are no better than we are in the past. We strongly urge City Council to not only pass this bill but to continue the spirit of the bill and add in goals and oversight. This city cannot afford to shut out 55 percent of its citizens from economic prosperity. The government of the city also sets the tone for the private industry. You must send a message to the private sector as well that "business as usual" is no longer accepted, for if you truly want to make this a great city, then please take care of all of your people. 38 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Thank you. )

Thank you for your testimony, Mr. Childress. Are there questions for this witness? (No questions.)

Thank you.

Thank you.

Our next witness is Varsovia Fernandez. (Witness comes forward.)

Good afternoon, members of Council. I am Varsovia Fernandez, President and CEO of the Hispanic Chamber of Commerce. And I thank you, my peers and stakeholders who are here today, for granting us the opportunity to be hearing and allowing Hispanic business to have a voice in this process. As members of the economic community in Philadelphia, we understand that we all want to do what 39 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 is best for our minority businesses and that there are many things wrong with the various models and activities being done. We wish to suggest that we take a look at the bigger picture and realities of minority businesses and how businesses get done in Philadelphia and strongly recommend that we all based on such observations. The situation with minority businesses in Philadelphia is a large-scope job that will take time and effort, and as minority businesses and minority leadership advocates, we agree that the EOP document is a good start to define and demonstrate the positive intentions we must follow towards achieving maximum diversity and inclusion in City procurements. The Hispanic Chamber understands that this ordinance will establish standards, uniform content, procedure, and policy regarding EOPs, 40 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 and that you will also codify and apply universal requirements for EOP submission, compliance, and enforcement. The ordinance will support and enhance curent City policy and procedure regarding diversity and inclusion in efforts to increase the potential for diversity in both private and public business. And if I just may point out that a great deal of the non-minority is not here today. Therefore, I want to point out that while I am testifying individually on behalf of the Hispanic Chamber of Commerce, to preserve our identity such as the African-American Chamber and others, this is probably a historical movement where all three chambers -- Asian, African-American, and Hispanic -- have come together to actually voice the need that there is to enhance minority business practices in Philadelphia. 41 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 City Council and our constituents may rest assured that we will continue our work every single day in everything that we do to make sure that we get this done right, to make sure that we create and build on the opportunities that are available to all businesses in Philadelphia. Again, thank you for the opportunity to allow me to be here and allowing me to voice our stakeholders' concern.

Thank you for your testimony. Are there any questions for this witness? (No questions.)

Thank you again. Our next witness is Nick Chenoy. (Witness comes forward.)

I am Nick Chenoy representing Asian-American Chamber of 42 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Commerce of Greater Philadelphia. Honorable City Council members, Asian-American Chamber of Commerce of Greater Philadelphia is in support of proposed economic opportunity plan ordinance Bill No. 8 060226. Minority businesses has in the past and continue to have limited access to the City procurement process. Mayor's Executive Order 1-05 calls for goal-setting, good-faith effort, and inclusion of minority businesses in the contracts. Such a non-enforceable requirement has not been successful in the past. This executive order does not include enforcement criteria, and this executive order delegates the monitoring responsibility to the Minority Business Enterprise Council. There appears to be little interaction between the City Procurement Department, which awards 43 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 the contracts, and the MBEC, which sets minority participation requirements. The Procurement Department must be involved in enforcing the goals set by MBEC. The Economic Opportunity Plan should detail specific consequences for not fulfilling the commitments. There should be a financial penalty for noncompliance without justification. An independent committee appointed by the Mayor who will interact with the City Procurement and MBEC to identify noncompliance issues and make recommendations accordingly. The Economic Opportunity Plan should also include additional incentives to the prime contractors for increased minority participation beyond the stated requirements. As this Economic Opportunity Plan addresses the subcontracting opportunities for the minority 44 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 businesses, it does not address business opportunities for minority prime contractors. MBEs presently rely on subcontracting opportunities and have limited access to prime contracts. The U.S. Small Business Administration area program sets aside a percentage of dollars for competitive procurement within the certified minority contractors. A similar procurement process should be seriously considered to include in the EOP. We would like to take this opportunity to express our sincere appreciation for the members of City Council for addressing equal opportunity for minority businesses in the City procurement process. Thank you.

Thank you for your testimony, Mr. Chenoy. Councilwoman Brown?

45 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Good afternoon.

Yes, ma'am.

We've now heard from the leadership of the three chambers here in the City of Philadelphia. Has there been any opportunity where the leadership of the three chambers have sat down to discuss or dialogue shared agendas, shared opportunities, or anything along those lines?

Yes, ma'am. We have taken some initiative. We have met several times and we will continue to do so.

Has there been any discussion with regards to how the three of those organizations as a group can challenge the Greater Philadelphia Chamber of Commerce to do better in this area?

That topic itself has not been discussed, but it is something we'd like to do. 46 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

I raise that because the former leadership of the chamber in A. Bruce Crawley stated in testimony in the past -- his testimony spoke to how the Greater Philadelphia Chamber has not done its part, its share with MBE/WBE opportunities, so it seems to me there is an opportunity there for the leadership of these chambers to deal with that in a collective way.

Yes. I think if the three chambers come together and forcefully insist upon such a thing, I think it will happen, and we are working on it.

And so then finally, the times that you all get together, is it a regular routine effort, or is it based on crisis, or is it based on opportunity, or -- or what?

We've been meeting once in a couple months 47 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 routinely now. And this has been a good occasion for us to discuss also this ordinance, and we have discussed it with the African-American Chamber of Commerce as well as the Hispanic Chamber of Commerce. And our testimony is a result of mutual discussion and also the Enterprise Center.

Oh, okay then.

And so we are working on it.

Well, thank you for your testimony.

Yes, ma'am. Thank you.

Councilman Clarke?

Thank you. Mr. Chairman. Mr. Chenoy, just one question. Thank you. You stated in your testimony that there should be some 48 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 consideration about providing incentives for those respondents that provide more than the goals that we have stated in any particular EOP language. What exactly would that be in your estimation? Would it be financial incentives? Would it be -- tell me what you're talking about.

Well, it looks like you're providing a financial incentive to include minority contractors. The Department of General Services in the State has a procurement process where the point system, and if you have a contract -- if you -- in a contract, there are certain points set aside for minority participation. The larger number, dollar amount you give to minorities, the more points you get. So that helps to make the selection process and also helps to help the minority contractors. 49 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 So the incentive is, if you're going to give a financial incentive for a minority contract -- for the prime contractors, then it should be based on, are you doing it for percent, 7 are you doing it for 30 percent, or 40 8 percent? You know, the 40 percent 9 contractor should be preferred than the 10 25 percent contractor. 11

Don't you 12 think by virtue of requiring that this 13 be included in what's designated as a 14 responsible bidder, our language 15 essentially says if you do not have an 16 EOP plan, you will be deemed 17 nonresponsive. 18 The assumption is that -- and 19 I don't know if you think it should 20 have in very specific terms, but I'm a 21 little concerned about that from a 22 legal-challenge perspective. 23

If I understand 24 correctly, it says noncompliance, the 25 ordinance basically refers to as 50 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 withholding the payment and suspending the contract, and I don't think they're realistically -- they're realistic because suspending the contract only hurts the City work. So there should be a financial penalty on the contractor who do not -- just like -- who do not meet the requirements. And it should be up front, saying that if you do not meet it, this is the penalty you will have to pay.

Do you think we should fine them if they don't comply with the contract?

Absolutely.

And I don't know if you're a lawyer or not; I'm clearly not a lawyer.

No, I'm not a lawyer. This is just my recommendations.

From a legal perspective, do you think that 51 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that could potentially cause some legal problem with respects to a challengeable ordinance?

Well, I'm not a lawyer, sir, but I am sure if you're going to have some incentive to include the minorities, then there should be some penalty not including it.

All right. So let me understand. If we're saying in front of the process is the bid solicitation, RFP, RFQ, you submit your response with an EOP plan, and when those EOP plans are reviewed by the City, the assumption is that the higher percentages of MBE/WBE/DBE that you have in your EOP plan would essentially give you a leg up with respects to the selection process on the front end.

Right.

If that individual somehow doesn't maintain that level of participation or doesn't comply with the EOP plan that they 52 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 submitted, then that contract would be in non compliance and, therefore, terminated. And I just want to be clear. Is it your suggestion that in addition to the termination of the contract that there should be a financial penalty?

Not in addition. In lieu of termination of the contract, because sometimes it may not be practical to terminate the contract.

To terminate the contract? I'm not sure I'm feeling that. Persons in noncompliance, I don't think I want that person to stay on that job anymore. And I think a termination of a contract is, in fact, a financial penalty.

Absolutely, but as I said, if you're not able to terminate the contract because of the contract less than 80 percent of the work is done and we let it go that far, 53 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 you know, so you probably don't have a choice to terminate the contract like the bonding companies, you know? You finish it. And then either you can put the contractor who is noncompliant on the next no-bid list, saying that you can't bid anymore.

Yeah. See, the concern that I have with respects to having a financial penalty in lieu of compliance is sometimes a lot of contractors view things as the cost of doing business, so they say, Well, you know what? I know I'm going to get penalized a little bit, but it's worth it. I'll pay the find and I'll continue to do whatever and not comply or not adhere to the existing regs. I mean, you have this in -- you know, in the City, we're limited in terms of the amount that we're able to penalize an individual, and certain contractors, they go out and they do 54 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 shoddy work, and they know that based on what they're doing, they're going to end up getting penalized. But as a, quote/unquote, cost of doing business, they're willing to make that small payment and continue to do what they want to do. And I'm a little concerned about that 'cause I don't -- I think when a person may weigh whether or not they get the appropriate minority participation or continue to have it on the job versus paying what we now have as the capped financial penalty, they may just opt for the prior and just say, Well, you know, it's just the cost of doing business and I'll just pay the $350 fine or whatever, and I'm still not going to keep any minorities on the job.

Very good point, sir. Keep the dollar large enough.

It's an interesting point, though, and we'll 55 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 look at it.

All right.

Thank you, Mr. Chenoy.

Thank you very much.

Any other questions for this witness? (No further questions.)

Thank you.

Thank you, gentlemen.

Our next witness is Carlos Jones. I don't see him here. Is there anyone else here representing GPOC? (No response.)

The next witness, then, will be Cheryl McKissack. (Witness comes forward.) MS. McKISSACK: Good afternoon. 56 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Good afternoon. MS. McKISSACK: It's a pleasure to be here today. Thank you for this bill. I think it's completely necessary. Just to tell you a little bit about myself, I'm Cheryl McKissack, President of McKissack & McKissack, the nation's oldest minority-owned and female architecture construction and management in the country. We are in our 102nd year of business. I have served as Co-chair for Small Business under the John Street Transition Committee. I've served as the Chair of the Ace Oversight Committee for their new construction, as well as currently the chair for the M/W BE Advisory for Yonkers, New York. And my experience has been that if goals are not put in place with respect to businesses and workforce, they will not happen. And I think that 57 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that has been seen over the years. After having many diversity studies that tell us exactly what we already know, it is clear that unless goals are put in place, minority- and women-owned businesses will not get work, and neither will minority and female workers join the workforce. So an economic opportunity plan standardizing that here in the City of Philadelphia is a positive thing. Having chaired the Committee with Ace, I learned a lot on that assignment. Number one is, a plan had to be put together from the beginning. If it was a standard plan, then everybody would understand what the requirements are from the very beginning. Number two, because there were no ways to really enforce what the plan said, we had to rely upon the good faith of the client or the developer or 58 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 this -- in this particular case, it was Ace, the owner. Fortunately, Ace leadership was behind what the goals were set for this particular project, but had they not been, there was nothing that our group could do. On several occasions at our meetings, we pondered even if we should be there, because if, in fact, we went through all of the outreach, all of the search for qualified firms who were contractors who could work on this particular project, and the owner did not want to contract with these people, then there was nothing that we could do. So implementation enforcement is primary. We felt there should be some clawback terminology in the plan that would inflict some type of financial problems with the owner or developer. You know, I don't know too much about how the developers reap 59 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 their benefits from the City, but I do know we're depending more and more on developers to invest in our cities, but from my understanding, tax credits, things like that, are future events, so maybe, you know, they don't get the tax credits that they claim that they would have gotten. But once you've given away land, you've given away land, so it's hard to, in fact, take back the land if someone is constructing on it. But maybe if there's a financial penalty, that would prove to be positive. But it's important that there is some clawback language. There may be a consideration that the oversight is done by an independent group maybe out of the Controller's Office. You know, I don't particularly understand how the City government works, but an independent auditor -- but there ought to be some way that the City can get information 60 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 from a third party as to what's exactly happening with these particular development projects. And with that, I have nothing else to say.

Thank you for your testimony. Any questions for this witness? (No questions.)

Thank you. (Witness steps away from witness table.)

Councilman Clarke.

Thank you, Mr. Chair. Ms. McKissack? MS. McKISSACK: Oh.

Thank you. (Witness returns to witness table.)

Thank you. Thank you for your testimony. 61 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 I have just been told by our capable staff that the amendment does include clawback provisions. MS. McKISSACK: Wonderful.

So that will be included in the final bill. MS. McKISSACK: Glad to hear that. That's necessary to make it worthwhile.

Thank you. Thank you for your testimony.

Our next witness is Bill Peebles. (Witness comes forward.)

Good morning, Mr. Chair and members of the Council. I have testimony here prepared for you in writing, but I'm going to synopsize it because you have so many people waiting to testify.

Thank you.

I just wanted to touch three key points. That represents people in the city who see 62 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 this as a starting point, an opportunity for minorities and contractors and other workers in the City. The key here is to have the workers look like the population of the City, to in fact have them become professionals. It's a good beginning. We need to work on critical issues and details to make sure that good oversight and enforcement of economic opportunity plans occur. The City can no longer just have persons working on the job and lose their employment once the job is completed and say that as an organization, they've met their civic obligation by hiring these people from the community. Though DAP currently works with Council -- people like Howard Rye -- DAP stands ready to work and address critical issues relative to the 63 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 workforce on the construction opportunities that may fall into the EOP arena. It must be said that resources must be allocated to ensure that the population is ready to meet the standards in the construction area. Now, of course, my testimony is much longer than that, but I just wanted to make sure to get those key points across, and feel free to answer any questions -- I'm free to answer any questions you may have.

Thank you. Your full written testimony will be incorporated into the record.

Thank you, Councilman Goode.

Are there questions from members of the Committee? Councilman Ramos?

You're in support of this bill?

Yes, sir. 64 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Thank you.

Are there any further questions by members of the committee? (No further questions.)

Seeing none, thank you, Mr. Peebles.

Thank you, Mr. Chair.

Our next witness is Angelo Perryman. (Witness comes forward.)

Good afternoon, Mr. Chair and members of the committee. My name is Angelo Perryman. I have passed out a copy of my testimony for your review. My name is Angelo Perryman. I'm the President and CEO of Perryman Building & Construction Services. We are a nine-year-old self-performing general contractor specializing in interior and building, and we're located in West Philadelphia. 65 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 We are a taxpayer and have been here in Philadelphia for the long haul. We are a past "Public Works Contractor of the Year" by the City of Philadelphia and employe on average about 43 people on the average throughout the last three years. I am here in support of Bill 10 No. 060226, including suggested comments on enforcement and/or practices. The construction industry is made up of large and small contractors, subcontractors, and material suppliers whose operations are based primarily on competitive pricing before contract award. Bill No. 060226 plan requirements and waiver process considers minority businesses economic participation as non-competitive. Successful operation of a construction business is based on a simple theme: numbers of opportunities available and contract awards. For us, 66 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that's about as simple as it gets. Without the opportunities, no awards. The results, based on existing procurement rules, are smaller general contractors are being considered as subcontractors, and subcontractors are -- which obviously is not within their core competency -- and subcontractors are being considered for a general contractor's role, which is not their core competency. Smaller vendors are put in the position of trying to sell whatever skills they have available to them to a client that's trying to figure out how to do it. And for the most part, they find few ways to accomplish that objective. Perryman Building & Construction Services' decision to locate in Philadelphia was driven primarily on the number of opportunities as we perceive a city of this size and complexity. Individual 67 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 covered projects and contracts within Bill 060226 are seeking to achieve similar dreams in Philadelphia as our firm was nine years ago. In outline form, I've attached a list of challenges that have affected minority businesses, and I'll just go through them in brief. Information outlining opportunities in minority procurement enforcement. Access to qualified trade labor. The top 60 percent of labor is not available to many small businesses, and that affects your price. Vendor procurement waivers requires strengthening. That is a process that virtually takes an opportunity off the table without full recognition of the marketplace or particular vendors who may be able to achieve the objectives sought. No sole-source procurement 68 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 options are available. Bundling of construction projects remains an issue, which primarily drives home that there is no one really looking at projects to try to basically achieve the objectives of minority and women inclusion. Lack of original business development centers. That basically speaks to those businesses that just have a dream and are willing to work hard and figure out the best way that they can accomplish their objectives of being a business and entrepreneur. Access to affordable bonding. Performance bonding has become one of the obstacles of the day. Nonpayment or penalties of the lien laws which have now been enacted by the Commonwealth of Pennsylvania. To a large degree, the after-effect of the new law is that many of the larger firms who may seek to utilize subcontractors who may be women- and minority-owned businesses are requiring 69 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 bonding as a part of a remedy to the State law. Post MBE award follow-up. A phone call is really not enough.

This -- the bill as well as its spirit of function is to try to get minority business involved, for them to learn, develop their business, and ultimately become a competitor in the open marketplace. Government (indiscernible) recommendations. It would be my suggestion that the City of Philadelphia select within the cabinet of the Mayor's Office, which is the highest position, or within some part of City Council a small-business ombudsman, whose primary function is to try to locate within the overall procurement opportunities which should fall within M/W BE sizes that are there. Create sole-source procurement standards and opportunities for 70 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 minority-owned businesses. Require procuring agencies to outline work which can be packaged to meet known MBE database sources. Create a Better Business Bureau for all Philadelphia procurement, with sanctions for unresolved complaints. Reconstitute separate MBE and WBE utilization goals. The first rules of engagement are trust but verify. That rule applies to economic development, inclusion, and program beneficiaries. The procurement process depends heavily on trust, best effort, and not specific verifiable objectives. Developing minority businesses are in crisis due to a lack of opportunity, and this is happening within a timeframe where the City is going through one of its largest growth periods since the days of the Convention Center. 71 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 As James Brown would say, "I don't want nobody to give me nothing, just open up the door. " Bill No. 060226 has to speak to meaningful results. That's why I'm here. Thank you for the opportunity for presenting my testimony. I am available for any questions that you may have.

Thank you for your testimony, Mr. Perryman. In your testimony, you raised questions about the waiver provisions within this bill, and those are my concerns as well. Under what circumstances do you believe there should be waivers, and do you believe that MBEC should be given that sole authority?

Well, if I had to recommend something, in light of its importance, the waiver process, again, 72 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 takes away an opportunity, and it takes away an opportunity because if you're not on the list, somebody doesn't know you exist. I would recommend a business-based approval committee for any waiver that may be presented to MBEC or to City Council or to the Mayor's Office.

So you believe that MBEC should not have that sole authority and that they will most likely just use the names that are already in their database.

Well, I won't say that they shouldn't have, but they should have as much information as possible before they make a unilateral decision.

But if they are relying upon the database they've always been relying upon, there is no 24 room for growth in terms of opportunity. 73 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Yes.

Okay.

That is true.

Councilman Rizzo?

That was the question that I wanted to ask, but I have one little follow-up. Your presentation was very enlightening today. The construction that's going on around town today, just you specifically, have you had opportunities at some of this that's going on right now? We look, we see the tallest building in Philadelphia being built; have you had opportunities for that?

Well, the tallest building right now is the Comcast Tower. Our firm did the initial mockup for the preconstruction. Since the major work has happened, we have not had an opportunity since that 74 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 time.

Thank you, Mr. Chairman.

Councilwoman Reynolds-Brown.

I thank you also for your informative testimony. I am curious about your recommendation regarding a small-business ombudsman. Do you know that to be a practice in other municipalities or jurisdictions?

Within municipalities, it is something that is -- well, to give a more clarified response: To a large degree, public money has not been looked upon as a major segment of revenue or a business generator. Today it has become a major component of the building industry as a way to grow your business or other opportunities, other places to get 75 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 opportunities, as federal government does have an ombudsman or a guideline for people that basically focus on the overall pie and try to redirect it in a way that reaches the populace.

Mm-hmm. Okay.

The State, as it is right now, does not have one. It has been suggested similarly to the State, the City of Philadelphia doesn't -- at this point, as I understand, a billion 5 in public works of all different segments of the economy, and a billion 5 will draw somebody from another state to come. So we should try to focus on our local businesses.

I see. And, finally, provide some additional discussion of this bundling of construction projects. You stated that that remains an issue. 76 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Well, the primary comment that I would give with regard to that is that if projects can be broken apart, that allows for opportunities for smaller businesses to take a prime contractor role in their performance.

Hmm.

When the Convention Center, which goes back now to 1989, the initial concept was to put together a hundred-and-some-odd bid packages which would allow a massive amount of opportunity -- of chances to achieve an opportunity. Irregardless to minority- or women-owned businesses, it just gives more chances at work.

Mm-hmm.

So the more those things happen, the more chances individuals have to sustain their businesses. 77 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Keep in mind that when we structure our business and we say that we want to go after a certain marketplace, we know that the owner requires certain background staff capabilities, past performance within those capabilities. That builds in itself a cost which has to be converted into a number for an owner to choose you. When you're unable to maintain a prime-contractor role, that means that you have to cut away some of your core competencies in order to survive, so you end up having to redefine your business over and over and over again in order to be effective. If you are a self-performer, as we are, we -- as we said, we hire somewhere close to 40-something people each year. And in doing that, probably 20 to of those people are core 24 people that we can't let go. 25 And in letting those people 78 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 go, then we'd let go our ability to be effective and be considered as a competent business able to perform work as the owner requires.

I see. Thank you for your testimony.

We're losing strong businesses every day because of lack of opportunity. And it can be easily defined as you made a mistake, but what you're doing is really not able to hold your team together.

Thank you for again for your testimony.

Thank you.

Any other questions for this witness? (No further questions.)

Thank you again. Our next witness is Jihad Ali. (Witness comes forward.)

I 79 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 have a follow-up question, Mr. Perryman.

Mr. Perryma n? (Mr. Perryman returns to witness table.)

Sir, Mr. Perryman, do you know the name of the federal ombudsman to contact?

I can provide that.

Would you please provide that information to the Chair?

Yes, I will.

Thank you.

Good afternoon, Mr. Ali. Please state your name for the record and proceed with your testimony.

Good afternoon, distinguished members of Council. My name is Jihad Ali. I'm a -- I often 80 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 describe myself as an advocate on behalf of small businesses, specifically contractors. I've been involved in the construction industry over 30 years. I really started in the construction in the service. I was a marine assigned to marine combat engineers, and I first got involved in construction as a bulldozer operator. And when I was in the service, I got out -- at the time I got out, I think I got on it in -- I got out in 15 1980. And when I got out, the time 16 when I got out to make that transition 17 from a veteran to a civilian worker, 18 the area that I chose to enter was 19 under federal oversight by the federal authorities, and that was the operating engineers, which was a very important case that still is around today because Judge Higgenbotham, who was the distinguished legal scholar, put a lifetime order against them that still 81 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 exists today because the situation, in his words, was so bad that there was nothing that they could do in the immediate future that would change it. And as a result of that legal opinion, today, we have more -- we're constantly increasing opportunities for African-Americans in the operating engineers, which is really unique, that you need to be aware of, because of all the trades, they're the only one 13 under federal injunction. 14 One thing -- I'm here today to 15 testify for this bill because I think 16 that all the Councilpeople here present and some of the ones that are within the sound of my voice, I know that you support everything that this bill is about, which is access to equal opportunity. That's really what this is about. So I'm here to support this bill. I'm sure that your staff did a lot looking at the bill, but one of 82 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 the -- in the research of the bill, but one of the things, as I look down the list that I just caught off of like a preliminary investigation, was that I don't -- I'm not a lawyer and I'm not a person that's familiar with City Council bills and ordinances, which you are. But one of the things that I noticed was that it didn't have a finding and a declaration of policy, so I made a copy that I wanted to extend to the staff. I went to the law library and looked up one of the findings and declaration of policy that is attached to minority-business development agency which is authorized by the State. I'd like to give that to your staff to look up. Because one of the things that -- every law that exists in Philadelphia is to help mostly the social and economically disadvantaged 83 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 persons. And I heard somebody say something about minorities, and when we look at those words, we have to be careful because we've been here before. We were here in -- we 7 started on this road in 1990, and it 8 ended in 1995. Imagine, if you will, 9 that behind me a is 100,000 men and 10 women. With that 100,000 men and 11 women, they are against everything that 12 you're for. And that 100,000 men and 13 women are highly organized, and they're 14 organized to the point that they were 15 the ones that fought the first 16 instance, and the instance was the 17 Bechtel decision. 18 And if we look at -- who would 19 be against this bill that talks about equal opportunity for everybody, who would be against this bill that talks about giving people the right, the right to make a living, to earn by the sweat of their brow an opportunity for their selves and their children. Who 84 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 would be against this bill. Well, we only have to look at who was a party to the lawsuit just to name a few. And even though this lawsuit is different from this policy, the -- it's very similar.

Some of the people associated with this contract were the Associated General Contractors, Building Contractors Association of America, Associated Master Painters and Decorators, Bricklayers, Interior Finish. It goes on and on and on. So what I did was -- I saw one of our distinguished elderly gentlemen, John Macklin, who, at the time, he was a mentor to me, and I was a member of the Minority Business Enterprise Council. Some of you all are familiar with that. And that was headed by John Macklin. I'm not -- I haven't -- I don't know where John Macklin is today, but one thing was, all those men and 85 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 women pooled their resources, and they petitioned the court to be heard on that Bechtel case, on that Contractors Association versus the City of Philadelphia case. And one of the things that came out during that case, which I attended and said in the courtroom was, when they started bringing in all of the experts, one of the experts that had more degrees behind his name than I could count, he gave testimony as to what the bill didn't have in it when they authorized it. So, you know, when I talked about imagine a 100,000 men, it's not to be in fear of them, but just to be aware of them, because we shouldn't be in fear of anybody, because the small minority that has made this country -- the reason why this country is great is because it started with a small group of people. You know, it started with a small group just like the ones sitting 86 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 up here. But one thing, you have to be aware of who your adversaries are. And one of the things that came out in this case was that this expert, he gave testimony to why -- what was the reasons why this thing wasn't -- shouldn't have been successful, and I think we should learn from that. So I made a copy of the case, and I could give that to you, Council, so they can look at it. And one of the other things that we have to see as we go forward is African-Americans, minorities, disadvantaged people, you know, we always say that term, but there's another group that we often forget about, and that's the disabled and veterans. And now, I think, with this time being the way that it is in America and having been a veteran 87 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 myself, you know, a lot of veterans are going to come back and they're going to have a double designation: they're going to be disabled and they're going to be veterans. So as we go forward, we should put that in this bill, some language for the disabled, some language for the veterans. And the other thing I wanted to mention was -- the Councilwoman asked about municipalities and the utilization of advocates, Councilwoman Reynolds-Brown. 41, which I'll mention to your staff at the end of the meeting, it gives authorization for the employment of a small business advocate. And while we're talking about 88 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 the State, I just think it would be a good thought at least to look and align this bill with the State minority business agency, because they're authorized by legislation and they have a lot of power, and I think we should look at that. The other thing was, I think we should be careful about giving anybody absolute control, because as the old saying goes, absolute control means absolute corruption. So we have to be careful of that. And one thing I wanted to mention in closing was, there was an article printed in the paper, which I made copies of for the panel, which somebody can give out. It talks about having friends in high positions and high influence. And sometimes those positions can work against what we're trying to put forth today. And, you know, we have to really -- we have to be real about 89 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that, as they say in some of the street language. We have to keep things real.

And one of the things is, what's your intention and what you're trying to do today, you're going to be opposed by people who are in high positions, and they control municipal authorities, and as the controlling point in municipal authorities, they have absolutely all control, with no 12 oversight. So that's a challenge for us, and the challenge is to be able to craft this thing in such a way that there's no getting out of it. And although that -- what's unique about the article that I'm passing out is that the relationship between a contractor/developer and a municipal head of an authority, which it shouldn't go unforgotten or unmentioned, because that authority is still awarding contracts, and that person is still receiving contracts. 90 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 So what do we do about that? How do we stop that? And not only that, I think the bill should talk about advertising; I think that should be a point of any economic plan because advertising is the thing that makes the developer be able to get the word out. It shouldn't just be on City Council. Another thing I think we should talk about is conflict of interests. " They're going to say, you know, "we" support you, "we're" for you. But the minute you turn your attention away from them, it's all about "I" -- how can "I" benefit from this? What is "my" compensation for that? And unlike the people that's sitting in this room up here, you've 91 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 never had an issue with being just a politician; you are all public servants. Everyone up there that I know from all the times that I've sat here, each one of you has always been for the good of the people -- not black, not white, but the people, all of the people. So I support you in that, and I salute you. But I think that we just need to be mindful. We have history. You know, we have experiences. " So we should be aware of where we're going, we've got some history. We need to study the facts and we ought to take precautions because the opposition is going to -- they're just laying in wait and -- because that was proven in the 1990 case. They laid in wait almost ten years. But before that, I think we ought to learn from 92 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 our past in order to move ahead in our future. I'd like to thank you for the opportunity to come and speak to you today, and I support this bill. I just think we ought to do as I mentioned in my testimony.

Thank you. Any questions for this witness? (No questions.)

Thank you for your testimony, Mr. Ali.

You're welcome.

The next witness is Anthony Fullard, Millennium 3 Management. UNIDENTIFIED SPEAKER: (inaudible).

Herb Riley? (Witness comes forward.)

Good afternoon, Councilmembers. First of all, this is kind of 93 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 like preaching to the choir, because knowing the actions of everyone here and Councilmember Campbell, I thought about something during one of the other testimonies about people's concerns. Last week, you addressed the disabled issue, so this Council does focus on individual things that are kind of non-related to each testimony that comes before it sometimes, and they take the leads on it. I kind of think about this when I see John. I also think about the years when we started out with Congressman Mitchell first going with the (indiscernible) bill, which was the first trying to capture opportunities on the federal level for minority contractors, which kind of filtered into some of the local issues. And, yes, I remember the fights we had with all of those contracting associations, even though minorities were only getting 10 percent 94 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 of the business, but they were complaining. We were paying 100 percent of the taxes but only receiving percent of the business, and a lot 6 of people thought that was unfair. 7 I also saw that kind of rotate 8 into a situation where even in the City 9 of Philadelphia, when there was an 10 effort to try to bring this to a level playing field, there were laws that absolutely surfaced that kind of prohibited that because now, all of a sudden, there was a new-defined minority, and that new-defined minority was white females. White females came in with a vast array of construction firms which have a vast amount of business in the City is done, and they got awarded a lot of business. I worked the statistical survey -- I think he's gone out of the room now -- in 2004, trying to see who was doing business in the City. And 95 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 the breakdown was almost 82 percent of the contractors was white females, and it broke down -- I think it was 5 percent Africans and something like 2 6 to 6 percent and 1. 14 percent 7 was dealing with disabled firms, you 8 know. And I know that's not your 9 effort. 10 The statement that I have to 11 say to you in support of this bill, 12 it's not the bill that's going to fail 13 you, and I'll tell you why I say that. 14 It's what happens after the bill . 15 You know, a lot of what I 16 do -- I work a lot with large companies 17 around the country, and I'll tell you why that's significant. I developed something years ago called a win/win philosophy. I can go into a city -- I don't care where it is in America -- with a large firm, and when I'm going to go before a board like you, a council, or whomever I'm dealing with 96 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 is telling them, I don't care what your minority participation is, we're going to either double it or give you more than you ever had. Why is that significant? Because you can show how easy it's done. And they're able to, when they make that award -- because they're going to be successful because they're going to be very competitive because you can find minorities in any sector of any country. That can be in any of the major procurements that's out here. We just -- those efforts don't come forward. When you make that kind of presentation and you get that award, you have a win/win because now you can talk about how great your program is becoming. And the City wins and the contractor wins because now, instead of them trying to find the bare minimum to get into a city, they're coming and basically saying, "We want to do all we 97 3/12/07 COMMERCE/ECONOMIC DEV. " Most of the contractors I work, they love it that way because it's a natural way of doing business. You know, we always talk about the set-aside. You know, there's no one in the world who suffers more in the world than any minority firm.

But when you start adding the word "set-aside," you kind of back the effort of because now people are realizing that instead of going forth with what's a great opportunity, they're trying to find those little, small opportunities for minorities. So you really -- that's what happens. And where does it happen? Not in your bill. So let me (indiscernible) in closing. Your bill will be great. It's who implements the bill. There are far too many times -- I'll give you some examples, and I've worked with some and I've seen 98 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 some fail 'cause I can sit on either side and do the justification. If a firm comes in and is talking about they have an exclusive product or service, and all of a sudden they get exempt, you don't exempt that firm. Here's what you do: You say, Well, if that product can serve as an example, what other products and services do you sell to the public? We want to see your participation of minority participation for those goods and services that will be equal to what you're getting exempt on. And that never happens. That can change significantly what and how we do business in any city, but those kind of thinking- outside-of-the-box laws don't happen because -- and it's not your fault. The people who are managing those, they are trained for eight hours a day to kind of manage the work in front of them, and they got so many 99 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 things that they're trying to move along. They're doing just that -- moving along. They are not trained to literally sit down and become DBE specialists, if you understand what I'm saying. It's a unique skill, okay? You have the assignment because you're in that position to do the work, and that's not a knock on the MBEC; that's basically any city I've gone into. It's a unique way you have to look at each one of those requirements when it comes before the people who want to make it happen. Okay, everyone don't want to -- they can -- you can easily accept the rationale of, Well, they had exclusive on this, so we can still award it, and there were no minorities we could put on the project. We had something as simple -- and I'll be quite honest -- that came before this council that we missed an 100 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 opportunity, but we may still get it, and you were a very strong advocate on it. When Motorola came and Earthlink came before us and said they were going to award -- 'cause we fought it forever, if you remember. They were going to award $10 million to another firm, and our question was: Why aren't you making that firm honor their minority participation when they have qualified minority suppliers? The City of Philadelphia could have benefitted to approximately $4 million going to minority contractors. Just as simple as asking the question and getting them to respond. Those are the kind of things an MBE office is not trained to do, they're not going to do because that's not what they do. You follow what I'm saying? So it's not a knock on them. 101 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 It's a process that happens. And there are people who, when they catch it, they can, you know, address it, but everyone doesn't catch it and doesn't address it. So those are some of the kind of things as we go forward. That's why I say the bill kind of will fail you unless more people, you know, even if it means -- and I'm not lobbying for consultant jobs, but you sometimes need consultants that sit there and, you give them responsibility for so much of that work because these are people who you need to think outside the box. So when it comes before you, you're now looking at a greater opportunity for everyone involved instead of saying, Well, they said, you know, that's an exclusive on that. You know, I could go on. Councilman, I'll give you another example, and it just came up when we were talking. 102 3/12/07 COMMERCE/ECONOMIC DEV.

- BILL 060226 I had someone call me from out of town about the Comcast building because they were looking for someone to do cleaning. Now, there's no reason why that should have happened. Someone within the Comcast organization should have contacted someone and had them on the job. " Now, I don't know why these opportunities are being missed, but that was one. When I heard it, you know, it just made me think about it. You know, I don't want to go on a lot, but I want you to understand that your best efforts will be just that, your best efforts, unless who supports you to get these things to come forward. So when that contractor comes before and you they present and say, you know, Here's our costs and here's our best effort, you truly have best 103 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 efforts. And I don't care what city it is in the country, like I say. And I will tell all the companies I work with, You create win/win situations, competitive pricing, you guys smile when you come before it because it's an honor to have someone who can do the kind of business that we have been asking. Like the gentleman said, we are not asking for handouts, okay? We're basically saying, Give us the opportunity. We have the technology, we have the experience. Let us be able to be on some of these contracts. And if it's in one area and, you know, I don't have the expertise, find the person over in that area that you can assign those other jobs to. So that's basically my testimony.

Councilman Rizzo.

Thank you. 104 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Since you brought up the Motorola contract, could you describe for me -- we spent $100 million of taxpayers' money on a very much needed communication system not just with Motorola but a lot of subcontractors that supported the install and the engineering and you-name-it of that system. How do you feel the City managed that project in giving opportunities, even though -- let me back up. How do you feel that project, that $100 million expenditure was made by MBEC and what they could have done better, or if they did as good as you think they could have done, what benefit did that $100 million expenditure on the communications system benefit the people we're trying to help?

Let me answer the best I can. As you say, you don't try to answer what you don't know, but I'm 105 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 going to say this. A $100 million procurement comes into MBEC. Their responsibility is to identify what's available for minority contracting. Now, if I write the scope of this and I basically say I have to provide my own radios, I don't know if they have provisions to challenge that. You follow what I'm saying? That would have to come from some other body. They would look at what's left and say, Okay, now they need someone to help put up the radios, you know, on all the poles.

The antennas.

Maybe we can get some of the cable installation, you know, those services. That's the best they can do on that. What needs to happen is to challenge when a major contractor comes before you and says, We have an 106 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 exclusive on A, B, C, and D, because that's not always the case. That's where it needs to be investigated, okay? Because sometimes they have arrangements with minority contractors that provide services to them, and then you can contract with -- they can contract with those companies to help fulfill those obligations on the contract. But the MBEC can't do that. I mean, that's beyond their scope of what they do. That's why I'm saying it's an area where the bill can't get that done for you.

Where I think we can get better is when we give one of these megadeals to a big company like Motorola, that we have a mechanism to make sure that when the radios are being driven from UPS to Philadelphia, that a person has an opportunity local to do that. 107 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Mm-hmm.

When there is a need to buy a zillion miles of wire, that we buy that from a local vendor.

Mm-hmm.

I just asked a person in this room, Why Motorola? Why they didn't get an opportunity beyond their initial piece of business on a particular project? And they said it's all about cost. That's a tough argument. If -- if splitting it up into a million little contracts is very cost- prohibitive, you can't really blame the people involved for trying to be efficient. But there is -- there is -- in my opinion, it's so important to try to give people that live in our own backyard an opportunity to develop themselves. It's not just about making money; it's also experience, dealing 108 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 with some things that they may not have ever dealt with before.

Councilman, let me answer you that. If you have a major contractor come before you and say they can't divide contracts into smaller contracts because it's about cost, that's a contractor that cannot manage their business. Because let me tell you something: Small firms are also competitive because they want a part of that business. They're not going to charge you through the roof. They want to be on your list of contractors so they can get other work from you. And when a contract goes out, they're getting competitive prices from everyone. And any minority contractor understands that. And their pricing is never going to be higher, because if it's not, then that's a guy that don't understand his business. 109 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

To bring this to closure 'cause I don't want to take too long --

Mm-hmm.

-- $100 million, maybe even more, was spent with add-ons, et cetera. How many minority vendors, suppliers, contractors do you think benefitted by that major expenditure, enough?

No. 13

You know.

Okay.

You were very close to it.

Okay. I'm going to answer you. No, not enough.

Not enough?

Because the basic premise of what I said is, the major part of the contract, which was the equipment, the equipment-buying, they have diversity contractors, which means their equipment is with these people. 110 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 They have negotiated agreements that when they come into certain areas and they have to make their requirements, they use these contractors, which already have their own equipment. So they're buying their own equipment from minorities, and they've negotiated a deal them to do that.

Okay. You mentioned Earthlink. Do you feel we're on track? Now, this is a major deal we're doing with the WiFi for the City of Philadelphia. Do you believe that that needs some scrutiny at this point?

You're taking Earthlink, which does have one thing that's unique. What they're doing minorities aren't doing, but all of the supplies and services that they use to get there, minorities can be involved. So that's where you start to look at all of the other things that say, Well, okay, you have to do this. Okay, but where's all the other stuff. 111 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 You going to put an office here. Okay, who you buying your supplies from? If you're going to donate computers to the schools, Alpha Supplies or one of the other big firms, why aren't they the ones that you're getting those computers from? Factor all that in to your "I'm supporting the City," and it doesn't happen. They'll say, Well, we're going to donate to any community center. Well, that's fine if that's going to the center, but use that minority supplier.

As long as it's not coming from Chicago.

Exactly, okay.

I got it.

And even it's coming from Chicago, use a minority supplier there and state it in there and show --

Well, let's, let's -- 112 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Yeah.

Our first choice is one from here.

But I'm saying I'm Philadelphia, I'm here, okay?

I hear you.

So we're on the same team.

Thank you, Mr. Chairman.

Thank you. Mr. Riley, could you add some further comment on the waiver provisions within this bill?

I'm sorry?

Could you add some further comment on the waiver provisions within this bill?

I'm not big on waivers, as you can tell. Waivers kind of mean I haven't done my due diligence properly. That's where consultants can sit down, where some contractor coming in and says, Well, we need a waiver 113 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 because, you know, we need to keep this, you know. If it's a proprietary information, okay, that's proprietary information. Again, I'm going to go back into, okay, for the next two years, some other supplies and services that still support your firm, I want you to commit to putting X, Y, and Z of those dollars that we still need as minority participation into that, okay? And that's how you get all that waiver stuff? No, it's very few stuff that's going to come before you that really needs a true waiver. And I'll be quite -- and I've worked with every firm. I mean, we got all kinds of security and access and stuff. You know, you don't need a whole bunch of waivers. It sounds good, and it sounds like, Oh, my goodness, you know, they're trying to protect their stuff. 114 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Okay, fine, you protect over here, but you release over here. Find some firms that you can, you know, fill the obligations to that city. And it can be done very easily. It's just that the questions don't get asked. We don't aggressively, as I say, think outside the box and develop those models. And they can be developed.

Thank you. Any questions from members of the committee? (No further questions.)

Thank you. Millennium 3 Management. (Witnesses come forward.)

Good afternoon, Mr. Crawley.

Good afternoon.

Please state your name for the record and proceed with your testimony.

Thank you very 115 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 much. My name is Bruce Crawley, and I serve as President of Millennium 3 Management, a communications firm that also provides consulting in the area of institutional supplier diversity programs. At the outset, let me say that I believe that Bill No. 060226 was, by all accounts, drafted with very good intentions, and that the signers of the bill are members of Council who have had a long commitment to ensuring that there is a broad access by citizens from all Philadelphia neighborhoods to the City's procurement processes. At the same time, I'm sure that all of the signers would agree that the very reason why they believe this bill was necessary is that the City's current procurement processes and the agency established years ago 23 in the City Finance Director's office 24 to ensure minority, female, disabled 25 business inclusion has done a 116 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 substantially unsatisfactory job in this critical area. J. million in public-works contracts. percent respectively. 3 billion in public-works procurement. 1 117 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 percent. 1 billion was disbursed in checks by the Procurement Department. 3 percent. As to utilization, the same report indicated that there is clear and statistically significant underutilization of minorities -- read that African-American, Hispanic, Asian, disabled, and white females -- across all procurement categories, regardless of the measure of utilization or the measure of availability used in the estimation process. Similarly, the disparity study concluded that there is significant overutilization of white male-owned firms. J. Miller recommended that the City continue to utilize goals or targets in 118 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 all purchasing categories. Our great disappointment with the structure of this bill is that it seems to put the fox in charge of the chicken coop. The fact is that MBEC was created in 1982 with the same good intentions as are evident in Bill. 060226. Since that time, there's been abundant evidence that the agency has not been able to carry out its mission to achieve anywhere close to a vision of equal opportunity or fair levels of minority inclusion on City contracts. Now that we know that in a city comprised 61 percent of African-Americans, Hispanics, and Asians, those groups collectively received about 2 percent of City contract revenues. Now that we also know that in a city wherein the Census Bureau says that more than percent of those over 24 five years of age is living with a disability, businesses owned by the 119 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 disabled receive amounts of business too small to even calculate over that five-year period. In most categories, they were calculated as having zero percent participation. Now that we also know that in a city wherein female-owned businesses constitute more than percent of all 10 businesses, that women-owned businesses 11 over the five-year period received 12 about 2 percent of City contracts. 13 It seems to us that if we're 14 equipped with that data and go right 15 back to the same infrastructure to 16 manage the problem, then we, as a city, 17 are not serious at all about including 18 all of our people in our economy. 19 Beyond that critical issue, we 20 are also concerned that the bill would give MBEC the power to, quote/unquote, grant a waiver on equal-opportunity plans at its own discretion. On what grounds would MBEC make such decisions? Where is the integrity in such a 120 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 proposal? And we alluded earlier to the fact that there was a significant underutilization of the available capacity in all of these minority categories, and yet they want a bill 8 that will say to us that they can grant a waiver because the people are not able to find qualified minorities and females and disabled to do this work.

We're also concerned that Section 17-1503 would require contract participants to provide meaningful and representative, quote/unquote, opportunities for minorities, women, disabled businesses in an appropriately diverse workforce, quote/unquote. Who will decide what is "meaningful and representative"? And what constitutes "appropriately diverse"? We also see absolutely no 23 language in the bill that specifies that the inclusion we should seek in the workforce and at the contract table 121 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 should be made available to Philadelphians first, and that should absolutely be the case. If we make no provisions to include Philadelphia's people in Philadelphia's contracts, then we are contributing directly to the percent 9 poverty rate the Census Bureau has 10 assigned to us and are at least 11 indirectly responsible for the sense of 12 hopelessness and desperation we see 13 every day on our streets and in our 14 schools. 15 We are especially concerned 16 about the need for specific language 17 with regards to the monitoring process, 18 the lack of a standard for timely 19 payments for minority businesses, and 20 the lack of any substantial emphasis on 21 identifying ways to crease the number 22 of Black, Hispanic, Asian, disabled 23 White female prime contractors. 24 In conclusion, while we agree that the City's current minority- 122 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 inclusion mechanism is in disrepair, we're not convinced at all that Bill 4 060226 in its present form is the best way to repair it.

Thank you for your testimony. Mr. Crawley, is it safe to say that while you generally support the bill, you believe that there are things that need to be added and that the waiver provisions definitely need to be excluded; is that correct?

It needs teeth.

Thank you. Are there any other questions from members of the committee? Councilwoman Reynolds-Brown.

Good afternoon, Mr. Crawley.

Good afternoon.

Prior to your arrival, I posed a question to the leadership of the Hispanic, African-American Chamber, and 123 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 the Asian Chamber of Commerce to hear about opportunities where collectively, they've come together to challenge a crisis or an effort. And I recall the testimony you provided many months ago around the Greater Philadelphia Chamber of Commerce and how they have, at best, some might say, been inept in embracing MBE and WBE in a way that they could and should. So could you just, if you would, comment on the role under your leadership the Chamber took with regards to the Greater Philadelphia Chamber of Commerce and where that ended up?

Okay. I see John Childress is here. He can comment on behalf of the Chamber. But I will say that we, during the time that I was Chairman of the Board of the Chamber, had a lot of very cordial meetings with the people at the 124 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Greater Philadelphia Chamber of Commerce but never sensed any real commitment by them to change the status quo.

Mm-hmm.

We gave them handwritten proposals, we went to numerous meetings, and never did they really embrace a number of proposals that we gave them to move the needles. As we said, the issue that is brought to the table today is not just one that impacts the public sector. The public sector, as well documented, lack of capability in the area of inclusion of minority businesses, but the private-sector is about as bad.

Mm-hmm.

I mean, the private-sector does, according to the last census data, about 0.9 percent of its contracts with African-American 125 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 business owners, 0.9 percent. And, again, this is a city that is 45 percent comprised of African-Americans. So equipped with that information, they -- I talked recently to Joe Frick, who is a personal friend. I know him, he's the Chairman of the Board of Blue Cross, and he and Mark Schweiker are committed to this recent program that they've announced to work with the area of workforce inclusion by bringing in interns over the summer.

Yes.

You know, that's nice. They're aiming for a thousand interns over the summer. The problem that we have is that the private-sector has a great deal more money to spend than the City. I mean, we think, based on census data, that the City of Philadelphia's collective private-sector businesses spend somewhere in the area of $90 126 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 billion a year. And if you go by the Mayor's recent budget, that's 3.9 billion, and about a third of that is in benefits and in salaries. So if you really want to move this needle, this government needs to be able to show the private sector how they ought to be engaged, and I don't think they're adequately engaged. Getting people even a thousand jobs for six weeks during the summer is not the solution to this problem.

Mm-mm.

They have businesses that ought to be inclusive. They ought to get a real strong argument from the people who run this government that by including these people, they're growing the economy, they're including people, they're creating greater productivity in our city. And they still seem to be 127 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 stuck in the '70s and talking about this as equal opportunity and affirmative action and set-asides. And the reality is, this is not a set-aside when you're talking about 61 percent of the population. (Applause.)

You cannot hope to drive an economy if 40 percent of the population is carrying 100 percent of the load, and it just doesn't make sense, but they still don't seem to be there yet.

And so the status of that proposal today is...?

I don't know. I haven't -- I think that the proposal -- we've reached out to them again, not in my role as Chamber Chairman, but since that time, to talk about a way to have a fuller inclusion of long-term and permanent jobs --

128 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Mm-hmm.

-- in this private-sector economy, not just six-week internships. I don't deny anybody the opportunity to have an internship, but having an internship when we've got a functional 50 percent unemployment rate among black males in this city, an internship, when these kids are going to come home from their six weeks of internship, pay to a household where the mother and father are not working doesn't get us there. We really do have to have a greater commitment to growing this entire economy from the Greater Philadelphia Chamber, and the City can show them first that it is doing the right thing and then encourage them with incentives, with tax credits, and all other kinds of things that people bring to the table to step up. I mean, because if this 129 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 economy is improved, it's better for the banks, it's better for the insurance companies, it's better for the people who supply hospital services, it's better for the universities who are the biggest employers in the region.

Mm-hmm.

They have a big problem because the people who live in this city are desperate, and you can't ask desperate people to be nice; they're not going to do it. I don't care if you're in Latin America or Southeast Asia. People who don't work, people who are not a part of those respectable companies are desperate, and they function as desperate people do. And that's what we have here, and nobody seems to be concerned about it.

130 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 And so you believe that incentives might be a considered option for the Greater Philadelphia Chamber to entice them to do better?

Well, I think they should -- I think they should have a better sense of what we're talking about today. And, again, what we're talking about today is not their -- their perspective on this issue. Their perspective on this issue is that we're talking about equal opportunity and set-asides and affirmative action. That's not what we're talking about.

Right.

We're talking about creating an environment where people are fully engaged in the economy so that when they want to recruit a senior executive to come and live in Philadelphia, that person is not turned off by the news reports that they see 131 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 in the paper. We're not going to get rid of those news reports as long as we have economic desperation. Ask the people in New Orleans whose economy is substantially dependent on hospitality and tourism.

Mm-hmm.

And we've got a percent poverty rate, they've got a 12 28 poverty rate -- not that much 13 different, but it is killing their 14 tourism industry. 15 And that kind of economy left 16 to its own devices will kill the major 17 industry focuses that we think we have 18 here including universities, including 19 health care, including the people who 20 are concerned about biotech. You're 21 not going to do it as long as there's 22 desperation in the streets of 23 Philadelphia. 24

Mm-hmm. 132 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 UNIDENTIFIED SPEAKER: Let me also add to that.

Please identify yourself for the record.

Anthony Fullard from Millennium 3 Management, Vice President. We also went through the -- to the Greater Philadelphia Chamber of Commerce and also the GBCA, which is the General Building Association of Contractors, and they had a forum, and they was pretty much laying out the forecast of what is getting ready to hit this sector --

It was three weeks ago.

-- as discussed three weeks ago, and they was in this forum, and they was laying out what is going to hit this sector right here in Philadelphia as the development that's going to go on as it relates to the Convention Center, as it relates to the 133 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 all of the casinos that are going to be built here, as it relates to the universities development that's going on. It's around, we think, about $20 billion, if not more.

Mm-hmm.

But the concerns of ours is, number one, is that we laid out that we hear about all of this construction, how is the industry going to handle this kind of volume of work as it relates to contracting firms. Also, how is the industry going to handle the workforce? because as it stands right now, if this hits this sector, then there's not going to be enough contractors, there's not going to be enough workforce here as it stands.

Mm-hmm.

If you're going to utilize that workforce that is 134 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 actually working now, they will not be able to handle it.

Meet the demand --

And the answer to the question was, is that they would have to wait in line, and we know that no developer, no financial institution is going to wait in line when they want that project built at that time. They are not going to wait.

I'd like to just add a couple of things on since you asked about that.

Please state your name for the record again.

John Childress, African-American Chamber of Commerce. And I wasn't able to answer you earlier, Councilwoman Brown.

Sure.

But we have 135 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 met several times with the Greater Philadelphia Chamber of Commerce on this issue, but there's a big difference between intentions and results.

Mm-hmm.

A big difference between efforts and results. So when we meet with them, just as Bruce said, when I follow along after Bruce with meetings is that they will say the right things and they intend to do the right things, but the results are not there. We have participated in a supplier diversity movement that they had done that Anthony had participated in and then myself, and they had some of the larger corporations in the region as a part of this movement. So when I started, when Bruce hired me, I went and I met, and I asked them, Well, how many companies over a 136 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 year-and-a-half time, how many contracts have you given to minority companies? And the answer was 13. You know, you're talking about billions and billions of dollars worth of companies, and all you get is contracts out of 8 that. 9 So if they say they want to do 10 the right thing, you take them for 11 their word at it, but the results are 12 just not there. 13

Mm-hmm.

So it was our feeling that we need to put together that is effective, and then once we have something together that's effective and that's getting the job done, then at that time, we can talk about, Okay, what can the Greater Philadelphia Chamber do? It's almost like if two companies merge, you know, and one company is in a weak position, that's 137 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 not a merger; that's a takeover. So our feeling is to be strong and make sure that we can put together plans and programs which assist minority Black companies, Hispanic, and Asian companies get the contracts that they need, and at that point, we can forward. Because we cannot go by efforts. The only thing we can do is measure the actual dollars paid, and the dollars paid from the efforts that they were doing was just not there.

Mm-hmm.

So that was the result of that effort.

Mr. Crawley, you cited New Orleans as an example of the havoc that unemployment can play in an economy. Can you cite another municipality where that chamber gets it right with regards to MBE/WBE participation to see what 138 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 lessons we could learn from another municipality, another chamber in another part of the country?

Well, you're saying their best-case, best practices?

Practices, yes, yes, yes.

Well, you know, I don't know if there is a best practice. I know Atlanta has been enjoying a long-standing reputation for favorable relationships with the African-American community, and one of the things that they do is something that we recommended back in 2003, 2004 to the Greater Philadelphia Chamber and to the Administration, and that was to steal their concept of having a public/private economic management board that would be -- that would accept responsibility for how the economy was grown in this region, not just Philadelphia, but within the 139 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 region. Atlanta has done that with some great satisfaction, and what they do is, they bring corporate leaders together with the mayors, with the City Council people, and they sit there together, and they say, This is the economy that we have, this is the economy that we want, and these are the things that we have to do to get between here and there.

Mm-hmm.

What we have in Philadelphia so often is organizations like the Pennsylvania Economy League who do reports, and they just did a poll the other day and talked about great dissatisfaction with the City, and people -- 44 percent of the people wanted to move out of the City and all this stuff. But at the same, time there's no follow-up, there's nobody 140 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 responsible for managing the local economy. And if we identify holes in the economy, we identify lack of opportunity and loss of opportunity, there should be a collective public/private collective where people say, Well, we're in a position to create some jobs, I'm in the private sector, we're at the University of Pennsylvania, we're at Temple, we're in the high-tech industry, wherever you think you can do it and plan to do it. And those kinds of things have worked well in Atlanta, and that's a part of the reason why they have the reputation they enjoy, but they're not perfect, but at least they're doing those kinds of things.

Mm-hmm.

Dallas is -- is recognized as a city doing the right thing. Chicago has done the right thing. Chicago's not perfect but the 141 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Mayor's Office in Chicago has been absolutely adamant and up front and unforgiving in their commitment to ensure that there's inclusion in the business practices of that city. And, you know, you need that. I mean, it has to come down from the top. People have to understand it's the policy. And when the private sector understands it, then --

They figure it out.

-- you know, they're more amenable to making the changes that they have to make if they see you do it first in the city's administration.

My final question is: Where is Select Philadelphia in this mix that you just described?

I don't know if Select Philadelphia includes this as 142 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 part of its mission.

Okay.

Select Greater Philadelphia is an arm of the Chamber funded by the private-sector that is engaged in wanting to bring what they think are the hot industries to the city and to entice them to come to Philadelphia. But the things that we're talking about have the decided impact on whether those companies are going to be enticed to come, and I don't know that it's a part of their agenda. (Addressing Mr. Childress) Have you seen that as a part of their agenda?

Not at all.

I don't think that it is, and so it's a big problem.

M-hmm.

Again, they see 143 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 this as sidebar, they see this as something that's really not a part of their main business agenda. When it is the entirety of their agenda and until we get them there, until the media stop covering minority business discussion as if it's an intrusion on mainstream business goals -- and we got some CEOs in this city who talk like that, and we've got media outlets who cover what they say like that. I remember stories where a mainstream insurance company was complaining to the Inquirer, and they got a lot of public-sector contracts from the City and from the State government, and they were complaining to the very sympathetic Inquirer that they had to do some business with some minorities. You know, it was the (indiscernible) thing that they had to do, when, if you dug just a little deeply, you would see that the reason 144 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that they got their contract in the first place was politically-inspired. And, you know, it wasn't that they were the very best in the City to do the work, and then they felt comfortable telling the Inquirer that it should not be the case that they have to share some of that contract. And that's why we get back to putting RFPs together so that all of the contracts as primes don't go to white males. I mean, you can, with your unbundling and your packaging of RFPs, create packages on every contract that is compatible with the capacity of those people. We've been talking to Councilwoman Carol Campbell about the disabled, and one of the issues that we see across the country is that people understand, for example, that disabled have a greater -- disabled business owners have a greater tendency to start 145 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 businesses than other people because they can't get employment opportunities at the same level that ablebodied people are able to be employed. They're discriminated against in that workplace. They also have a greater tendency to work at home and do home-based businesses. They also have a greater tendency to work off computers. So if we're going to do a -- if we're going to say we got a commitment to disabled business owners, then we've got to do RFPs that include the possibility of people tearing out a piece of that contract that's for home-based businesses for people who can't or won't be able to come in and work in a traditional setting. And until we get there, until we have websites that accommodate that and all those things, until we get there, we're just flapping our lips 146 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 about including the disabled. And the same thing applies to African-Americans, Hispanics, and Asians.

Agreed. Thank you very much for your testimony.

Councilman Rizzo?

It's interesting that you brought that up, Mr. Crawley. I just had an experience that I thought was a good one. I went to get my driver's license renewed, and I noticed in the PennDOT driver's license center that the majority of the people employed there were from the handicapped community; I don't know if anybody else has observed that. But that was very impressive to see how well they performed how, nice the folks were, but more so, that they created an environment, that niche 147 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 there that really seems to be working well. And it was good for me to see government doing such a good job at that. Thank you, Mr. Chairman.

Mr. Childress, while you're sitting at the table, can I ask you to comment on the waiver provision within this bill?

As I had mentioned earlier, one of the things we'd like to see is that type of oversight from a committee such as the African-American Chamber of Commerce and other interested parties like the Hispanic Chamber. We feel that committee should be overseeing in terms waivers as well. We do not think that any time you're giving a waiver, you're saying you're going outside of the law, outside of the regulations. And it should be interested parties that are qualified that can oversee that 148 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 process.

And so you do not believe that MBEC or any government agency should be the sole authority in regard to granting waivers?

No. No sole government.

And furthermore, can you imagine any projects that we might encounter where there should be zero percent participation?

Well, I cannot because as the testimony you heard earlier was that even if the minority businesses are not in the main business of what the RFP is for, there are support businesses as well such as office space and different things so that there's always some way you can have inclusion. And, you know, I would certainly challenge anyone to present 149 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 an RFP which would only be good with a zero percent minority participation.

So there could always be an economic opportunity plan as long as it's above zero percent, which it always should be.

I believe so, yes.

Thank you. Any more questions for this panel? Councilman Clarke?

Thank you. Good afternoon, gentlemen. PANEL: Good afternoon.

One question. Some of the issues you spoke of earlier, in particular some of the more significant projects, the Convention Center Authority or the Convention Center, which was State-sponsored, pretty much totally State-funded, and the two gaming facilities that the placement and the 150 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 authorization are State-regulated although privately financed, has the Chamber or any of the other advocacy groups had an extensive level of discussions with State-elected officials about crafting the appropriate participation language when those two -- those three projects were authorized?

We have had conversations with them going back two, two-and-a-half years, and I have had some conversations with people at the State as recently as a week and a half ago. It is critically important. It can't be done -- it shouldn't be done with public dollars in any way that does not totally reflect the population in the City.

Have they committed to --

We're early, we're early, but they are hearing what 151 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 we had to say.

Is there a local -- I guess a local-elected official who's kind of taken the lead on the participation issue?

Not with that. I think -- I think what will have to happen, because the money is coming from the Commonwealth of Pennsylvania, so the Commonwealth of Pennsylvania is going to have to say that this is conditioned upon which these dollars are being implemented. And then local people will weigh in. But, I mean, if the Commonwealth doesn't want it and if the Commonwealth has its Convention Center Authority, that Convention Center Authority, as you know, is not controlled by the local political infrastructure. If the Commonwealth doesn't want it, then it will probably be a big struggle. It's not -- I'm not saying 152 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that if the Commonwealth doesn't want it, it's not going to happen because there would be a struggle. I think that people are not going to sit back and allow $700 million or more to be spent in Center City without having a full approach to engaging the people who live here. So I think, though, that the logical way for that to happen is to have it flow down from the State administration.

All right.

And those are the conversations that we're having.

All right. You know, I pose that question, and I understand... on a local level in particularly with municipally-sponsored or -authorized projects, you know, because Councilpeople are the ones that people can most get an opportunity to have the interaction with, that there's specific levels of conversation at a 153 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 minimum. Sometimes we do well, sometimes we don't.

Mm-hmm.

But on the State level, there seems to be minimal discussion about real participation.

Yes.

And they just take the position that, Well, this is the Commonwealth, as if somehow, we don't live in the Commonwealth and it's not our tax dollars being a part of that process. It's not clear to me what the level of participation is as it relates to the expansion of the Convention Center or these two gaming facilities.

We got our fingers crossed. They're sending all the right signals so far, and we should know very shortly where they are with that.

Okay, all right. Thank you. 154 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Thank you, Mr. Chairman.

Thank you. Any other questions for this panel? (No further questions.)

Thank you.

Thank you very much.

Darlene Jenkins, is she still here? (No response.)

Jackie Hill? UNIDENTIFIED SPEAKER: She left.

Emmanuel Freeman, I don't see him. Dennis Montague, I don't see him as well. Janelle Williams? (Witness comes forward.)

Good afternoon, Miss Williams. Please state your name for the record and proceed 155 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 with your testimony.

Good afternoon. My name is Janelle Williams and I'm -- can you hear me now? Good afternoon. My name is Janelle Williams, and I'm the President of Janelle Williams, Inc. I have been certified with the City of Philadelphia as a minority women-owned business since 1989, and I have participated in innumerous contracts throughout those almost years. 14 I'm here today -- first of 15 all, I did read over the bill, 060226, 16 and the bill sounds like a great 17 improvement to the current system, but 18 my question is only if in reality, the 19 new provisions are implemented and 20 protected by the laws that establish it. I have a letter. I'm only going to read a part of it. That's why I'm here, because I've just had a recent experience that I thought that 156 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 this was a good forum to bring this information to. I wrote a letter to the Director of Finance on February the 8th, 2007, and it goes like this: Per request of your office, I am submitting this letter as my complaint concerning bid opportunity -- I won't go through all the numbers, but it was a bid opportunity for the recertification process for MBEC. On January 4, 5, and 10, 2007, I proceeded in trying to participate in this RFP. I visited online the philadelphiaprocurement philadelphia. gov website and selected the MBEC consulting bid information announcement. I attempted many times to access the link that should bring up the full RFP. Unfortunately, your website was having technical difficulties, and both the contexts listed on the bid page were inaccurate. I called both 157 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 contacts, and I repeatedly tried to speak to Miss Nichols from MBEC to get some information. I was told that Miss Nichols had no idea about this bid and that she did not have time to speak with me. My pursuit became more and more discouraging, as I contacted the Department of Finance, spoke with Mr. O'Brien. I contacted Miss Wilkerson, Mr. Paceo (sp?), and several people over the next few days. All my efforts throughout that week were unsuccessful. It was a waste of time for my company. My company has had many years of experience, and I felt that this was a good opportunity to expedite our expertise to be a part of this certification or re-cert process as a contractor. My perception is that the business opportunity climate for minority firms has greatly declined in 158 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 the last seven years. And my question is today: Why? At this point, I am very hesitant about pursuing contract opportunities, even though I have been certified for some time with the City. I am not here to bring about a lot of rhetoric to the table, but I speak out of my heart. I would like to see the leveling of the playing field for minority companies and the City of Philadelphia to become more sensitive and proactive to the commitment of minorities, whether it's women-owned businesses or disadvantaged businesses. I feel strongly today that I have not come here just to represent Janelle Williams, Inc., but also, I feel as though that I can be a voice for many other minority firms who share some of the same commonality; that is, rejection and unfairness of the system. I want to thank you for your 159 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 time, and my prayer is that the City of Philadelphia will take this meeting seriously. Thank you.

Thank you, Ms. Williams. Councilman Rizzo.

Thank you, Mr. Chairman. Thanks for being here today. You indicated that you wrote a letter dated January-something --

Mm-hmm.

-- to the Finance Director. Did you ever get a response?

No, no, never got a response from anyone. And at one point, I was so discouraged, I had decided to take it even farther. And I just kind of, at this point when I was, you know, being aware of this forum, I just felt like I could get closure of it, because the Council needs to know 160 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that, you know, all this information is available to say that we're here to support you even technology and et cetera. But in reality, it's not available for all firms. I'm not saying some minority firms didn't get an opportunity, but I would think that when a procurement opportunity goes out, each qualified firm should have an opportunity to respond in an RFP.

And as you indicated, you were already pre-qualified.

As an MBEC? Oh, yes, since 1989.

My question is, you only sent one letter to the Finance Director, and the rest were done, like most people do, through telephone calls and other --

Yes, yes.

Could you provide to the Chair a copy of the 161 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 letter to the Finance Director, please?

Yes. I have copies with me.

And that's the only written communication that you have?

That's right.

Thank you. Thank you, Mr. Chairman.

Can I add one thing too? I had meant to bring it up in my presentation. I think the recertification process needs to be looked at in more detail, that it should be more efficient than what it is. I don't know what has happened, whether this proposal has been awarded to a company or what the case is, but this re-cert process has been a nightmare, which it should not have been. And because of my experience with the City since 1989, I felt though 162 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that my company could have really had a great input in causing this to be more efficient.

Well, maybe as a result of this process, it will get better, and there will be future opportunities. Don't be discouraged.

Councilman Ramos?

Thank you, Mr. Chairman. Have you ever been awarded a contract from the City of Philadelphia?

Yes, I have. Several.

Several?

Mm-hmm.

Okay, thank you.

Any other questions for this witness? (No further questions.)

Thank you.

Thank you. 163 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Is Ari Merretazon here? (No response.)

Is there anyone else to testify on this bill? (Witnesses come forward.)

Ms. Robinson?

Good afternoon.

Please state your name for the record.

Yes. My name is Judith Robinson, owner and broker of Complete Real Estate Services. Thank you for the opportunity today to testify on Bill No. 060226. Not to be redundant, but areas that I think have been discussed earlier today of concern would be the goal-setting; most importantly enforcement, penalties, and the term "clawback." Councilman Goode, I remember in some legislation that you presented 164 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 regarding the banks, I believe it was, that's the first time I saw this clawback terminology, and it's not the same, I'm sure, but something to that extent may be of value in this process. Also, as Councilpeople, you have influence, power and influence. District Councilpeople really have a lot of influence as it relates to boards and commissions -- PHA, Redevelopment Authority boards, various commissions. They also purchase and have a lot of power to give dollars as it relates to a lot of this development going on. For many years now, I've attended Redevelopment Authority Board meetings, and often, we ask questions about equity in delivering of these services, so I just want you all to use your power and influence as best to influence these boards and commissions. In addition, the same developers are used most often in a lot 165 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 of this development in the neighborhoods. And as concept plans are conceived, I would encourage you all to talk to these developers. A lot of them are the same. They have a majority of the work. Certainly, you can go back to them and make sure that if they have not done due diligence in one contract that they do not get others. So thank you very much for the time, and have a great day.

Thank you. Any questions for this witness? (No questions.)

Thank you. Is there anyone else to testify? (Witness comes forward.)

Good afternoon. Please state your name for the record.

Good afternoon, 166 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 distinguished Councilmembers here with us today on the committee. My name is Phillip Harris. I am President of Financial Integrity Resources Management. We're a Philadelphia-based disadvantaged business enterprise. I did submit a copy of my testimony, and I'm going to deviate slightly just to help conserve time today. Thank you, Councilman Clarke and all of the sponsoring Councilmembers for requesting hearings on the Economic Opportunity Plan legislation to help promote increased diversity and inclusion in all City contracts. I'm also a Philadelphia, a lifelong resident, living in City Councilwoman Verna's district in Southwest Philadelphia. After returning from church one Sunday, about to sit down for lunch, I hear a gunshot go off right in front of my house and witnessed the 167 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 smoke of the gun blast rise right in front of my window. I rushed my nine-year-old daughter upstairs into the second-floor bathroom. As you can imagine, she was terrified and asked if we could move to a different neighborhood. One of my neighbors witnessed that it was a young African-American 13- to 15-year-old teenagers. For those of you listening, you may be asking yourself, Does Mr. Harris know this is a hearing on economic opportunity for minority-owned businesses? Thank you for giving me a little latitude. As many of you know, economic opportunity, meaningful participation, and inclusion is directly tied to the quality of life. As a current resident, business-owner, taxpayer, I still do not understand why the City hires and retains and continues to pay millions 168 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 of contract dollars to brokers and consultants that are located outside of the City. How many of those companies located outside of the City and State are going to provide a positive role model to that 13-year-old running down the street, firing a gun, putting his life at risk and the community in danger? How many are going to offer that teenager a job opportunity? If you want to increase the local tax base, give more contract work to Philadelphia-based businesses. You know what? Those guys in the suburbs will get the message soon once they're cut off that they will bring their businesses back into the City to create jobs and economic opportunity for all. This is a very important piece of legislation which includes language to provide timely payments of City contracts. Timely payments and cash flow for a small business is vital. I 169 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 would suggest adding that language that prime contractors are required to disburse and pay subcontractors within five business days to strengthen the benefit to minority disadvantaged businesses. I hope this legislation will receive a hundred percent of City Council vote because it is a vote for a better and safer Philadelphia. Thank you for your time and opportunity to share my thoughts, ideas, and experience with you today. I would like to thank all City Councilmembers that have invited me into your offices, written letters of support, and have supported small Philadelphia-based minority business development.

Thank you, Mr. Harris. Are there any questions for this witness? (No questions.) 170 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226

Thank you again.

Councilmember Goode, if I may address the question about the waiver you asked some of other members today. I think a waiver is a curse word. It gives everyone an excuse, and they will list why they can't find a 11 minority contractor -- no one's 12 qualified. 13 I've personally been 14 interviewed on several of the 15 consulting contracts. They'll call you 16 up. They'll take your name and number 17 or they'll write you on the MBEC list 18 that is person that you talked to. 19 They have no intention of including you 20 in the contract 'cause they know that waiver is their exit plan to exclude minority participation in the contract. What I've seen successful -- and it was stated earlier and is worth repeating, and another piece is if 171 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 there's a DBE as a prime, there should be tangible points awarded to that DBE contract in the evaluation process. A joint venture should be given the second-most amount of points, and a subcontractor the third amount of points. If the prime and/or contracting community doesn't get a serious message from the City that this is really important to them, they're going to conduct business as usual, and then again, exclusion will continue to happen. Also, what I've seen is that if people claim a waiver or a unique circumstance, the company and/or client has a responsibility to call the men to say we're asking for a best and final offer. Either you find the minority contractor or you're going to do business outside of the City; you're not going to do business with the City of Philadelphia. 172 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 I realize the MBEC testified earlier, saying that yes, I know everyone is undermanned, underworked. I think they ought to reach out to each department head and person who purchases contracts and put some accountability on that department 'cause that they can't be everywhere and be seen a lot of places. So even -- and I'm going to speak to raising it to $250,000. There's a lot of money to be lost and a lot of contracts under the $250,000 radar screen. And, again, I would put the onus on the department head or the purchaser. Another point I want to make out in the legislation -- and I don't know if it's addressed well -- I'm in the insurance business, and we receive commissions. We also conduct some voluntary benefit work requiring a payroll slot at the City, which our company was fortunate enough to obtain 173 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 one. I've seen other contracts to the tune of to $7 million a year of 5 revenue, and probably 60 percent of 6 that ends up being commissions and profits paid to companies outside the City. And A lot of times, the purchasers and/or the contractor get together and say, Well, this is not really City money; it's the individual employee paying this, so we don't have any jurisdiction over that. And, again, they're looking for an excuse or a waiver to take millions of dollars of revenue, business revenue, that could create viable business inside of our city, is given too many opportunities and then still today, as I stated earlier, leaves our city. Thank you. That will conclude my comments for today.

Thank you, Mr. Harris. 174 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Is there anyone else to testify on this bill? Please come forward. (Witness comes forward.)

Please state your name for the record and proceed with your testimony.

Hello. , from Isaac Stevens & Associates. Good afternoon, committee, and I just want to thank you for the opportunity that I can leave some thoughts with you. I'm more so that would be an end-user or an end-benefit of this proposal, of this bill that's going to go forth, so I highly support it, Bill 20 060226. My background has been over 26 years in the engineering construction field. I graduated from Dobbins, went to Temple University, and then went over to computer-aid design drafting. 175 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 I work with Penoni Associates, Day & Zimmerman Engineers, Black & Beech, and a lot of engineers in the City. I further moved on over to procurement, selling and buying equipment for state and government agencies because of the Internet. The Internet created a non-face for me so that when I would bid on any project, the primes wouldn't know who I am. That created great success for me because it seems as though that some of the primes, when they find out that you are a minority, especially an African-American male, there's a disconnect. But I'm very grateful to the fact of the technology because, number one, on this bill, there's a gentleman who just was before me saying that the word "waiver" is a curse word. There should be no language, because of the technology of this day, that a prime should say they want to fill out or 176 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 they want apply for a waiver. You can, or maybe some of your children can easily find, a certified minority company or African -- or a minority company on the Internet, just on the Internet. So what that is, is just a lazy statement from these primes that don't want to do the due diligence. You have MBEC, you have the Hispanic Chamber of Commerce, you have all these chambers of councils platforms and MBEC that has these certified minority firms listed. So for someone to say that they can't find a qualified, certified minority firm is just to me personally an outright lie. And that language "waiver" should be just stricken completely. That's just my opinion. The other thing I just want to bring to your attention is that I've done everything possible to respond to and to participate on these bidding 177 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 contracts. And one example was with the School District of Philadelphia. Eleven months ago, I responded to a bid that was out there. I went to a meeting, and one of the members of the School Board said that there was really no large -- there was really no support for minorities in the bidding process. I responded to a couple of bids and found out that I was very successful. 2 million in awarded and scheduled awarded contracts for -- for School District contracts, but I have not been awarded yet because the primes that spoke to me personally and agreed that they would use my services and they would buy my product and that my cost was competitive, as soon as they received their contract from the School Board, communications stopped. That just -- that just totally blows my mind or just upsets me so much 178 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 that for three months, I have had conversation after conversation with prime contractors, and they agree by filling out their letters of intent and all these procedures that you have in place towards minority support, and the very moment that the contract was signed, they stopped communicating with me. Now, the language that the School Board put together was that these primes are awarded the contract and now they should give you your subcontract agreement. It seems as though that the intent of a lot of these primes is really not to work with minority firms. And I also just want to put a good plug in for the School Board because they created a compliance program that goes back to these primes and say that the minority firm that you selected you have to use because at the last minute, you just can't counsel 179 3/12/07 COMMERCE/ECONOMIC DEV.

- BILL 060226 them out. So the issue again is the accountability. 2 million on my books to be scheduled, scheduled awards, and not one of them have been signed off by my primes. Not only that, not one prime has ordered not even a $100 product from me, and I just want the City Council to know the impact and the reality that's out there that some of these primes -- as a matter of fact, a lot of these primes play this game and play paperwork, but I'm an end-user to this, and African-American male, been in business for over 20, years and have never experienced this type of 180 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 disrespect and patronizing that I've had in the last three months. Thank you.

Thank you for your testimony. Are there any questions for this witness? (No questions.)

Is there anyone else to testify on this bill? (No response.)

I thank everyone for your patience. Those that are here to testify on Resolution 070106, we will still be taking testimony on that resolution, but we will move into a public meeting at this time to consider this bill. The primary sponsor has to leave, and I want to make sure we also maintain a quorum. So we will move from our public forum to our public meeting to consider Bill 060226. The Chair recognizes 181 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 Councilman Clarke for a motion on the amendments to Bill 060226.

Thank you, Mr. Chairman. I have circulated the amendments earlier. There is one change in the earlier amendment on Page -- on the amendment actually on Page --

Third page.

-- the third page. The waiver provision number 3 we are deleting from this amendment. I am going to ask all of the parties involved on the formulation of the original language to come up with some language that is acceptable. As was said today, there's clearly some concerns about providing an opportunity or an early-out, so to speak, for particular people who respond to bid solicitations, so I'm going to ask the Administration to work with the pertinent parties to come up 182 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 with some language that's acceptable. The only other major portion of the amendments is with respects to the contracts that will be effected by this. In the earlier version, it's the only bills that were approved by City Council. This language now includes all bills in addition to which there is a $250,000 threshold. So, Mr. Chairman, I move that the -- for the approval of the amendments to Bill No. 060226. (Motion seconded.)

All those in favor? Those opposed? The bill is amended. The Chair recognizes Councilman Clarke for a motion on Bill 21 No. 060226, as amended.

Thank you, Mr. Chair. I move that Bill No. 060226 be reported out of committee as amended 183 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226 and be reported out of committee with a favorable recommendation. (Motion seconded.)

And a request for a suspension of the rules. I'm sorry. (Motion seconded.)

All in favor? Those opposed? Bill No. 060226, as amended, is reported out of committee with a favorable recommendation and a suspension of the rules to allow for first reading at our next Council session. * * * 184 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176

We will now move back into our public hearing on Resolution 070106 I'll read the title again. A resolution authorizing the City Council's Committee on Commerce and Economic Development to hold hearings to examine current invoicing and disbursement procedures and policies in City procurement and contracting so as to determine measures that may be required to implement and ensure best practices and standards for prompt payment. Our first witness for -- actually, Councilwoman Campbell, do you have opening comments?

Yes.

The Chair recognizes Councilwoman Campbell.

Good afternoon. I want to thank you, a lot of you, for bringing your specific 185 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 concerns to my attention, and I look forward to the insight you will provide us today on this very important topic. I note for the record that the issue of prompt payment is of concern to me and the constituents I serve. I have been successful most recently in negotiating a similar type of agreement with the principal parties involved with the low home improvement construction site on 52nd Street. This proposed legislation here would affect a larger group of people across the board and do away with the piecemeal approach when trying to accommodate the needs for prompt pay in the construction industry in Philadelphia. I understand this legislation that would address the issue of prompt pay for prime contractors, subcontractors, and sub subcontractors who are not paid in a timely way in connection with a public construction 186 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 contract. I intend to include the private sector as well. The timeliness of payment to these groups of people have a district impact on the workers and their ability to provide for their families. Many of you here today represent groups of workers as well as contractors, so thank you again for appearing. I would like for your testimony to be as inclusive as possible, but I want you to speak about the following: What is the problem as you see it? Why are you in favor or opposed to this legislation? What procedures and remedies are needed for prime contractors, subcontractors, and sub subcontractors who are not paid in a timely way in connection with a public or private construction contract? How are you, your company, or 187 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 workers affected in a material way by the current practices? Is there a legislation now that speaks to this issue, but what we have is a failure to enforce it. I will have to get the opinion from the Procurement Department advising us of the cost of fiscal impact this type of legislation will have on the City and its future planned construction improvement projects. The ultimate results of these hearings will be to provide for timely payment to prime contractors, subcontractors, and sub subcontractors.

Thank you, Councilwoman. We thank all of the witnesses that have been so patient. Some had to leave, and so this hearing will be recessed to take additional testimony on this resolution, but for those who are here, we will give them an opportunity to testify. 188 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 Is John Phillips here? (No response.)

Joseph Dougherty?

Yes. (Witness comes forward.)

Good afternoon, members of the committee. It's been a interesting afternoon, and just listening to the previous item on the agenda was a learning experience for me, and it has to do a lot with what we're about to talk about at the present time because any legislation that governs procedures for fair and equal opportunities for the acquisition of construction contracts in the City of Philadelphia must also include, I feel, provisions that guarantee prompt payment to those same contractors for whom we strive to guarantee inclusion in the great resurgence we are witnessing here in our city these days. Without prompt payment 189 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 language that prohibits such contract loopholes as if we get paid, you get paid, which is a common thing today, and that prohibits any waiver of rights language that denies a contractor or a subcontract his or her rights to file a lawsuit if not paid in a timely manner or not even paid at all. I believe that such prompt payment legislation should also include language that prohibits retaliation against any person or entity -- a contractor, for example, or a subcontractor -- who is forced to file 16 such a lawsuit against a large prime, a general contractor or developer, because what they do to you in that event is just blackball you. You're off the list. It's invisible -- you guys can't see it, we can't see it. My prime job is, I'm the business manager for the ironworkers here in the City of Philadelphia. I also sit on the labor board, the Board 190 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 of Labor Standards for the City of Philadelphia, so I see a lot of -- I gain a lot of experiences and see a lot of people that are abused in the process and really don't have -- at least they don't know, or in a lot of instances, they don't have a place to go to either complain without being retaliated against. You know, I see a lot of small contractors. Today, we spent most of the afternoon talking about minority and woman business enterprise and disability business enterprise, and when you're talking about contractors like that, that fit in that category, you're more than likely talking about smaller contractors. Probably the most difficult part of going into business is formulating a line of credit so you can pay your bills in between payments from the general contractor or developer, or in some cases if you are already a 191 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 prime, the owner. The people we're talking about -- and I've listened to the conversation today -- are all probably going to be small contractors. They're not going to have a lot of money to begin with, and one of their biggest problems is going to be to get a line of credit to hold them over in between payments. And if those payments aren't in a timely manner, then it just that much more difficult. A perfect example of what I'm talking about and not always for small contractors but the Philadelphia Eagles stadium, the Linc, they call it the Lincoln Financial and then Citizens Bank Park, both very slow payment. We've had contractors, our union contractors, most of which in the ironworker industry are subcontractors that get stiffed at the Eagles stadium and had to barter for monies that were owed to them and filed a lawsuit in 192 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 order to promulgate that payment. And at the Phillies stadium, another situation of slow payment, not as deliberate as the Eagles stadium, but nevertheless, look at the money the City and the State is spending on projects of that size, and we don't realize that there are small contractors involved here in our own town that are being exploited.

And what happens if you don't get paid on time and you're not big enough to -- or you can't forward to hold out long enough to make weekly wage payments and weekly health and pension payments, what happens is, you got to make the paycheck first, but you're always -- you're going to start in a delinquent fashion with your workers' health plan, pension plan, and other types of benefits. You just start digging a hole that most of those small contractors can't get out of. You know, prompt payment 193 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 legislation is a good thing for -- especially for the people we've been talking about today. And there's a heck of a lot more small contractors than there are large. You know, you guys on the City Council here know all the big players in the City of Philadelphia, and they're all guilty, without mentioning any names, right across the board of exploiting smaller subcontractors and intimidating them if they try to file a lawsuit or take any legal process against them just to get paid the money that's owed to them for the work that they've already finished. I want to thank you for your time and for giving me the opportunity to speak on behalf of this legislation, and I'm sure if we come back again, I'll be back here with some more people that are interested in the same type of legislation, because it is an epidemic and not just in our city; this is something that's going on throughout 194 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 the country. But since we're trying toed good things here in the City of Philadelphia, and, you know, we can -- we got to clean up the front of our house first, and that's one of the best things we can do, 'cause it's going to help us with employment. Our hope is the smaller contractors being able to go in business and stay in business, and by doing so, they're going to be hiring the people that we're trying to help. And we just got to force the big guys with the deep pockets to give money in a timely fashion. Thank you.

Thank you.

Mr. Dougherty?

Thank you for your testimony and your patience. Councilman DiCicco and then Councilman Rizzo. 195 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176

Thank you. Thank you, Mr. Chairman. Good afternoon, Mr. Dougherty, and thank you for your testimony. Is it fair to say that this practice of slow payment as it is relates to the small-business entrepreneurs, is it fair to say that in many instances, we have a difficult time even getting these small business to see want to bid on these jobs because of the history?

Certainly, certainly. You know, we just had spoke earlier -- I listened to someone bring up the SEPTA payments. You know, we had a story, a true story where a contractor of ours worked at the Phillies stadium, and he was the steel contractor down there, and because of the slow payment there and his unfortunate chain of events, they put him on the Market Street elevated job right after that, with SEPTA being 196 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 noted for slow payment, he's out of business today from just those two jobs. And he had a lot of potential. And they did a good job, you know. It's the Eagles stadium that's wobbling around, not the Phillies stadium.

I remember some big issues that this council had to deal with in regards to the payment from the owners of the Eagles and the prime contractors and how that filtered down to the subcontractors.

Councilman, if you were one of those contractors and you're reluctant to bid on those jobs, even though the -- if you can get the job, it can put you over the top, it can make you or break you, but you could also -- the odds are that it would break you rather than make you. You know, you're going to have to -- you wouldn't go into business 197 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 until you knew what kind of work you were doing. By the time these smaller contractors go into business, they probably already worked as a tradesperson, and they know what the heck they're doing, and then they're going know people in the industry to hire to build a good workforce, you known. And this is not just for unions. I speak -- most of the time when I speak, I'm speaking as a union representative, but this is a generic. This legislation is needed for merit shop people as well as union people. It's a catastrophe that's been going on for a long time. And I say catastrophe it is if you're the one that's not getting paid and you have your home on the line and so all your employees do as well.

I think there's a misunderstanding. Most people think that if you're a business 198 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 person, you're someone who's automatically making lots of money and is doing very well. They don't understand some of the other issues that go along with the risk of being in business, and this just adds to that risk, which makes it more difficult not only for those companies to survive but to encourage smaller companies minority- and women-owned companies from even being able to have a part to get into that process. So thank you for your testimony. I think this is certainly a no-brainer for you. Thank you.

You're welcome, Councilman.

Councilman Rizzo?

Good afternoon. In just a couple sentences, what do you believe is the reason? And if you said it, I apologize. What do you believe is the reason for the slow 199 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 payment?

It trickles down from the top. From experience, I see slow payment coming from the owner to the developer. I see -- and as the job gets closer to the end, it gets slower because people at that point of a construction site are looking at the profit margin. For example, if you take any Phillies stadium, for example -- let's take the Eagles stadium; it's a better situation. You had -- the owner there got so much money from our state and so much money from our city and whatever he had to put up in order to get the new Eagles stadium built. He hired a management company, not construction management, just a project a management company by the name of KUD (sp?), and they're a subsidiary by the name of Kajima, who's a management company, and what they actually do is, if you're building a 200 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 project, you could -- they'll just take absolute responsibility for the whole project. They help select the site, the architects, the engineering, they get the financing and everything, all the way up till the turning over the key to the building or project itself. They, in order to get that job, have to give you a gross maximum price of what it's going to cost you. And then you can just imagine. You know the number and you're taking bids from general contractors that are under you. In the example of the Philadelphia Eagles stadium, it was Turner Construction Company. Underneath Turner and another company, I forget the name of it, but they're a joint venture. They got stiffed as well. Normally, it's the general contractor waiting for payment from the owner. In this case, KUD was the 201 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 management company, and they're paying all the bills, and as the -- and with all the extra work that was done down there, changes that the owner made that weren't going to be covered from state funds or city funds and that KUD signed off on --

Do you think it's a strategy just to --

That seems to me --

Do you think it's a strategy to be slow-paying? I mean, there's people that wait to pay on line to the last very day to take advantage of every dollar.

In that case, the closer they get -- the closer the job gets to finish, the less money you have left --

But let --

-- the management company, whether it's 202 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 construction management or financial management like KUD was, they have a profit. So when you're getting close to their number, say if they wanted to make $25 million there and there's only 27 million left --

Like you say, it's always better in your account than someone else's.

That's right.

But my question is: What is the experience that you have with getting paid your contractors to do work for the City? I got just a call from a very small vendor to the City six months behind in getting paid. I'm talking about a little guy, I'm talking about a guy that just provides --

Common.

Six months. I mean, I don't know how a person can do business with the City. They've got 203 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 to obviously be fairly advanced, been around a while, because I can't imagine a startup company or a company just a few years old surviving or even wanting to do business. What do you believe -- is it because they're so overwhelmed, they're understaffed? Is it again a strategy? Why would it take six months to write a check for a thousand bucks to someone that performed a service to the City of Philadelphia?

First of all, it's not just the City-funded projects.

Well, now I'm just asking you about --

You're seeing that with City projects, but it's an epidemic that's going on in private industry, the private construction industry as well. The smaller the contractor, certainly he's already agreed to perform the work involved and do the 204 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 work properly. So if he's done the work -- and it all depends on the language of the contract, but usually they'll go percent of the job, you 6 get a payment, 50 percent of payment, 7 75 percent of payment. 8 And each time you submit an 9 invoice, the general contractor or 10 developer above you will have that work 11 that you say you just finished 12 inspected. He has X-amount of days -- 13 or should have X-amount of days to do 14 that. 15 Sometimes if they don't 16 have -- if they didn't get paid from 17 the developer or the owner, then 18 they're not going to release any money 19 to you. You're going to have to wait 20 until they get it. And even after they 21 do get it, they just take their time, 22 and they're not worried about a small 23 contractor. 24 And you were right, 25 Councilman. The small contractor can't 205 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 wait too long for that money. He's going to go out of business, and it's going to discourage him to bid that type of work or with that specific general contractor again, which is contrary to what we're trying to do here.

Right, exactly. Maybe what we can do --

We're trying to put people in business, and if they're afraid to bid the job --

Yeah. Maybe there's something legislatively --

-- they'll never get off the ground.

Maybe there's something legislatively if there's not language, Mr. Chairman, in the procurement that once a company has provided a service, there should be a timeline associated with the payment. For -- again, this one vendor 206 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 that I'm referring to and I won't reveal, six month is the average; he's got some invoices that are almost a-year-old that he hasn't been paid.

It's not unusual.

Maybe what we can do as a council is to put some language into the legislation that requires them, unless there's an extenuating circumstance, a dispute or whatever, most of the time when I find -- when I try to help someone get paid, it's because it's sitting someplace on a desk. It isn't because there's a policy. It's just that somebody says, "Well, we haven't gotten to it yet." Well, guess what? If they have to start paying interest on a delayed payment, maybe that will get their attention.

Certainly.

So maybe we should look at that to see what we can 207 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 do to assure that there's a flow. If the department is running shorthanded, that isn't a good thing because that's putting a burden on someone else. And maybe we need to make sure that they get an interest payment assessed to do that slow payment. That will certainly get their attention. I don't know if there's something we can do about that.

Well, between legislation --

But I assume we can.

I'm pretty sure that's where Councilwoman Campbell is going with this.

Yes.

Are there any other questions for this witness? (Witness comes forward.)

Would you like to testify? MR. McHUGH: Mr. Chairman, I'm 208 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 on the list to speak. My name is Ed McHugh. I'm Vice President of the Ironworkers International and I'm President of the Ironworkers District Council of Philadelphia and Vicinity. And just to expand a little bit on the question from Councilman Rizzo about whether it's an intention to do this or whether there are mitigating circumstances. What you're seeing a lot of today in the construction industry is jobs are going out for bid, they're put on a fast track, and they're going out for bid and they're being released with incomplete drawings. For instance, let's take Local 401's case. They're steel erectors, okay? Well, that steel has to be fabricated by a fabricator, and in a lot of cases, the erector is the same contractor or it's someone who the fabricator uses a lot. He gets drawings that aren't 209 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 complete. He has to fabricate that steel through his knowledge of the fabrication business and the AISC Code to be done right, properly so it will pass inspection. Now, a lot of this becomes negotiable items, and it's done, as was previously mentioned, with intent. Somewhere during the course of the job, somewhere in the chain of command, someone decides, Well, we want to change this, we want to change that. The owner decides he wants something a little fancier -- he wants to put this part over here or that part over there. This all requires change orders. Change orders are executed, they're signed on the job routinely by a representative of the executor and a representative of the subcontractor. No one puts any thought in the change order. Well, I didn't authorize that -- I being the project manager for 210 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 the prime contractor; or I, being the owner's representative, didn't authorize that change order, therefore we don't want to pay for it. And really, it's a game being played out there. And what's basically needed is just firm, uniform language to tighten up all of these loopholes in both the public and the private sector because the truth be told, it actually happens -- although the Councilman says he's seen instances in the public sector here, it's much more prevalent in the private sector. And working together with our contractor partners through our labor-management initiative, we have taken the initiative to do this previously. And across the river, we got it done statewide in the State of New Jersey with a prompt-payment law, which I believe Joe has provided a copy for everybody, if you would care to 211 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 take a look at it, that is fair from the top down, right from the developer-owner right down through the smallest tier of subcontractor. The largest general contractor's association in the State of New Jersey partnered with us in endorsing and lobbying this issue to get it through, so it's not a one-sided bill; it's fair to everybody. Whether it's a union, non-union job is not an issue. It's an issue of someone who went out there on their word, did their job, and now isn't being paid for it, you know. And, again, it puts a small contractor -- they don't have cash flow. They need to be paid for the work they did so they can pay their bills, they can pay their employees, they can pay the benefits that they have to give these people health and welfare coverage, and provide for pensions and retirement for them. 212 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 And it's just kind of a win/win. Someone talked earlier at the table about a win/win situation. The proper bill with the proper language is a win/win situation for the whole construction industry, and there's absolutely nobody in it that suffers except someone who comes in as an owner/developer or a big project manager with some intentions other than doing the right thing. They're the only ones who would suffer from this.

Thank you, Mr. McHugh. Do you have any other testimony you would like to offer? MR. McHUGH: Pardon?

Do you have other testimony that you would like to offer? MR. McHUGH: Well, the only thing I would say is, we were going to bring one of our good steel-erector contractors in with us to testify as to how this has particularly affected him 213 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 today, but he's actually giving a deposition for a lawsuit over a job that he didn't get paid on. It's kind of ironic. (Laughter.) MR. McHUGH: And, you know, along the lines of the previous bill, I would just like to say, you know, there were a lot of good points there, and anybody can look down the street and see one of our woman business enterprises reaching higher into the sky every day to make Comcast the largest job in the skyline of Philadelphia, and we're very proud of that woman's business enterprise.

Thank you. Are there any other questions for this panel? (No further questions.)

Thank you. All right. Guy Pigliacelli? (No response.)

Robert 214 3/12/07 COMMERCE/ECONOMIC DEV. RES. 070176 Duffy? (No response.) MR. McHUGH: Thank you.

Thank you. Robert Keller? (No response.)

Bianca Hart? (No response.)

Lonnie? (Witness comes forward.)

Please state your full name for the record and then proceed with your testimony, and thank you for your patience.