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?
Thank you. Are there any other questions from members of the committee? Councilwoman Reynolds-Brown.
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.
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.
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.
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.
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.
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.
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.
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.
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 --
-- 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.
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.
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.
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.
John Childress, African-American Chamber of Commerce. And I wasn't able to answer you earlier, Councilwoman Brown.
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.
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
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.
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 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.
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.
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 --
-- 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.
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?
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.
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?
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.
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.
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. 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.
But on the State level, there seems to be minimal discussion about real participation.
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.)
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, Mr. Chairman. Thanks for being here today. You indicated that you wrote a letter dated January-something --
-- 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.
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 --
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?
And that's the only written communication that you have?
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.
Thank you, Mr. Chairman. Have you ever been awarded a contract from the City of Philadelphia?
Any other questions for this witness? (No further questions.)
Thank you. 163 3/12/07 COMMERCE/ECONOMIC DEV. - BILL 060226
Is there anyone else to testify on this bill? (Witnesses come forward.)
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, 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
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 --
-- 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?
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.)
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 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.
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 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 --
-- 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.
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 --
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?
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.
We're trying to put people in business, and if they're afraid to bid the job --
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.