COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING COMMITTEE ON COMMERCE & ECONOMIC DEVELOPMENT - - - Room 696, City Hall Philadelphia, Pennsylvania Wednesday April 23, 2003 10:55 a.m. - - - RESOLUTION 020238 - Resolution authorizing City Council Commerce and Economic Development Committee to conduct Public Hearings to investigate the underutilization of Disadvantaged Business Enterprises (DBE) and the underemployment of women, disabled and minority residents of the City of Philadelphia on local construction projects and city procurement contracts... RESOLUTION 030038 - Resolution calling on the Philadelphia Workforce Development Corporation to conduct a needs assessment of training opportunities with the Building and Construction trades... - - - PRESENT: COUNCILMAN MICHAEL A. NUTTER, Chair COUNCILMAN DARRELL CLARKE COUNCILMAN W. WILSON GOODE, JR. COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN ANGEL ORTIZ - - - V A R A L L O, INCORPORATED LITIGATION SUPPORT SERVICES 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 I N D E X RESOLUTION 020238 PAGE TINA KING, Lloyd's Moving Company, Inc. .... JAMES ROUNDTREE, MBEC ...................... 18 RESOLUTION 030038 LYNN PETERSON, ITTI ........................ 24 FRED BAILEY ................................ 29 WILLIAM GAMBLE, Procurement Commissioner ... 32 TINA KING, Lloyd's Moving Company .......... 56 JAMES ROUNDTREE, MBEC ...................... 57 3 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238
Good morning, ladies and gentlemen, this is the Committee on Commerce and Economic Development. I'm Councilman Michael Nutter, Chair of the Committee. There are a total of four members at the table at the moment: Councilman Goode, Councilwoman Reynolds Brown, and Councilman Ortiz. We're going to start today's hearing with Resolution No. 020238. It's a Resolution 11 authorizing City Council Commerce and Economic Development Committee to conduct public hearings to investigate the underutilization of Disadvantaged Business Enterprises (DBE) and the underemployment of women, disabled and minority residents of the City of Philadelphia on local construction projects and City procurement contracts, and further authorizing the Committee to issue subpoenas and such other process as may be appropriate to compel the attendance of witnesses and the production of documents in furtherance of the investigation to the full extent authorized by Section 2-401 of the Home Rule Charter. It is my understanding that there are at least one or more witnesses for Bill 020238. 4 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 Dan Woodall, Jr. (No response.)
Tina King, Lloyd's Moving Company. Please come to the witness table. Identify yourself for the record and proceed with your testimony.
My name is Tina King with Lloyd's Moving Company, Inc. We are certified with MBEC and Woman-Owned Business. I'm here today -- as one minister said, you don't have a testimony until you've been tested. And we have been tested doing business with the City. First I will go to PHA, which we have a contract now with PHA. With PHA, payment, we're not getting paid on time. The contract says within 30 days. Who do we have to be an advocate for us when they don't pay in 30 days? If we don't do the work, they will see that we're put off the contract. I have sent letters to Carl Greene's office. The letters were answered by Mr. Al Novack and then it went down to Contracts Administration. It has been three months. It has been as long as six months. 5 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 They have changed their computer system. They put in new software. Since we've had the contract with PHA, they have changed twice. And I have a problem with when they're not equipped with their workers to know how to work the software. You know, if they're going to put something in place, it seems like to me they would have classes on that before they start using it. Meanwhile, the small business person has to wait until the software is knowledgeable to the workers. During the time, Entrepreneur Magazine picked us up. When I say picked us up, picked our company up. They were astonished that it was a business in Philadelphia that's three generations of minorities. We have been in business since 1929, and it's such a rarity even working in the City. And with the finances, PHA has had us in default of our City wage tax. You have to pay that quarterly. And there's a penalty. Who picks up the penalty? Who picks up when our vendors, like for the gas for our trucks? We're penalized if that's not paid on time. It looks like to me the City wants you to fail. Small businesses, it's -- and I've been 6 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 batting my head and batting my head trying to get -- and I'm just so happy that Councilmembers are looking at this, what's going on, you know, with the small business. There have even been vendors that wanted to speak, wanted to say something, but they know that they're going to be ostracized. But I'm here today on that issue of payment for the small business people. They have to have -- we do the work, the job is done, and all we're asking is for fair pay on a timely manner.
What is the nature of the business? What's the contract with PHA?
And how many employees do you have in terms of that contract?
That's very good. 7 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 And what happens? What's the impact on your business in terms of not getting paid in time? You can't pay them, right?
Finances. We can't pay them. We are penalized. We have a loan at the bank.
Can your accountant -- it may give your accountant a little more work, I guess. But if your accountant can detail to us what has been the cost to you and your workers through penalties, all of this, what has been the cost, and give us that. Because I'd like to see the numbers of what economic impact the City's or PHA's incompetence has on the small business person, the economic impact that it has on your company and your ability then to be able to compete for other jobs. Because that impacts that, doesn't it?
Okay. Well, I would have to go to my accountant and we can come up with some figures for you to let you see it is real.
We would like to see it, because we have a lot of questions for Mr. 8 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 Greene. Councilman Nutter put a lot of questions for him yesterday. I put some questions for him yesterday on another related subject. But obviously, you've been in business here, and when you go into a contract with the City, you expect the City to keep their end of the bargain, because you keep yours.
And if you don't keep yours, you don't get the contract. They take you off the contract.
They take you off the contract and you're not allowed to do business within three years, if they say so.
Okay. The next issue is the School Board. We've had contracts with the School Board. And looking at the different contracts, the different bids that they have coming up, the specs change, so you won't be able to bid. One example. We had a contract with the School District in '92, furniture moving. That was fine. That was for three years. Then they had the contract -- the next time the contract was for one 9 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 year, which I can understand that. It's okay. It seemed like to me they saw where this was very lucrative for the small business. Like, you got in this time, but the next time the specs change. One thing that changed with the specs, your trucks had to be 30,000 gross weight. When you go into that, you have to have CDL licensed drivers. That's more money. Then the specs change whereas they would say, okay, it changed from two trucks: One daily, another truck hours or 48 hours on notice, if 12 they needed it. It changed to five trucks, CDL 13 licensed drivers. The last bid that they had out 14 was 10 trucks. And I wanted to challenge to see, 15 did they have enough work for 10 trucks? But that 16 puts you out, because you don't have 10 trucks 17 within 24 hours with CDL licensed drivers. 18
Commercial drivers license. 21 Tractor-trailer drivers, they can use that. 22 So looking at the specs, that's how they 23 pushed you out because you can't bid on it. 24
Who got a contract? 10 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238
That contract that you're talking about. When they changed the specs, you couldn't get the contract?
So they changed the rules of the game to make the minority contractor not able to compete?
Yes. 11 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 Then in another contract that we had with the School District -- I guess I have a lot to say, but we have been through a lot. We have no 5 advocate to help us in these issues. The School District, again. We had the water contract. That's when there's lead in the water for the schools, and they had to have the little cups of water then delivered to the schools. So it was a pilot program. Again, we slipped in there. Very lucrative. Very lucrative. We got the contract. It was on a six-month trial. And I'm going to say that the School District, they were new at it, we were new at it; but we worked together and we got it done. And to me we got the kinks out of this contract. Again, after they saw it was very lucrative, then they changed the specs when they put the bid back up. What they did with that spec, and the issue that I had -- and Councilman Nutter would know and Blondell. I thank them very much. Because I was trying to get with the School District, Bob Johnson, to hear me, just to hear me. But they had businesses that lived in Bucks County -- the last contract, they got a vendor from Reading, PA, from Reading, that came down to do the contract. So 12 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 we're pushed out. But the whole issue was, they had said that economically, they were looking at that they were less than we were when we bidded. And what it was, it was a mere $80 a week that was less. But meanwhile, if we're working in the City, we have the City taxes to pay. The City is going to benefit by that. Our workers are working in the City. The City will benefit by that. But they didn't look at it that way. And if you put it down on paper and you see it's just as equal, the City is going to benefit by the local businesses doing business in the City.
Yes. What they did on that, they combined it. They combined whereas you would supply the water and deliver the water. Before, it was just the delivery of the water that gave us the opportunity to do that. Now, to supply the water, you would have to have a big company supply of the water. So what they did, they combined the two. So delivery of the water, you couldn't do it unless the big company gave you the job, which didn't happen.
But you had the 13 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 contract for six months?
Yes. In the beginning for six months. While I'm here and I have the mike, I'm going to go on to MBEC. We're certified. And I feel that when you are a subcontractor to a prime, it should be whereas it's a contract with the prime. We had a contract -- and I will say it was the voting contract. We were the subcontractor. Meanwhile, the prime contractor had put an administrative fee of 30 percent on us, which loan sharks are not that high, 30 percent. And we could not operate. We could not operate. You're going to take 30 percent.
The voting machine contract. Again, where were the advocates to sit down and negotiate?
And they added a 30 percent administrative fee for you as a sub?
Subcontractor. So this wouldn't happen again, I feel there should have been a contract written up on this issue. And as I said before to MBEC, who do we have to go to? Who are our advocates when you have issues like this?
Did you notify the Commissioners about the contract and the problems that you with the contract? Did you write a letter to the Election Board Commissioners?
A letter was written to MBEC and then we had a meeting on it, also.
What about the Commissioners? You didn't write the commissioners directly? Because they're generally responsible for giving the contract to the prime.
Well, what we had -- we had a meeting with Roundtree. We had a meeting with Gamble. We had a meeting with Gamble. And I called the meeting. I asked for a meeting because I was 15 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 asking for help. And today from that May election we have not been paid, finished being paid, from that election. And that's an issue also.
Well, there was an issue from this election that they were holding back money from the prime.
Labor Board. The City Labor Board because there was some issues there.
I believe that there are some items in dispute about either cost or repairs or damage to some of the machines. That came up in the City Commissioner's budget testimony this year.
Okay. 16 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238
And again, with one of my colleagues -- and I'm speaking for one of my colleagues, one of my women colleagues in the business. She did not have -- and I'm going to say the name of the company, Ample Moving and Storage -- did not have representation when they had the contract. They were a subcontract before. They didn't have the privilege of having a hearing. The prime quoted that they were late with their machines, but did not have a meeting to hear the side of the one that was being accused. They were taken off the contract. And to me and to her, it was not fair that they could just do that. Where is the advocate for the small business person? Where is it? If you're in criminal court, a judge will appoint a lawyer for you. But with small businesses, they assume that you have money. You have to pay a lawyer to represent you for something that's not fair.
That raises an, actually, very interesting question, Ms. King. And if you wouldn't mind not -- although you might want to -- but not for you to ask any questions of these individuals, but possibly for the Committee on this, 17 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 who's the advocate for the business, and especially if you have a contract for the City. Let me ask Commissioner Gamble and Mr. Roundtree to come up so that I can ask them a question on that particular issue. You don't have to leave. There's enough seats up there. Just the Commissioner and Mr. Roundtree. Thank you very much. I have one piece of housekeeping business here. First, let the record note that Councilman Darrell Clarke has joined the Committee and the Committee has a quorum. Second, we have a group of visitors on a group study exchange from Rotary International with us, from Brazil. They're here with their group leader, Marcelo Macedo. And if we could recognize them. I think they're behind us here in the room. We'd like to welcome them to our little City here of Philadelphia. (Applause.)
I hope our proceedings are interesting. If not, we will do our best to improve and highlight some of the activities 18 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 here. But, seriously, welcome to Philadelphia City Council and the public hearing. Thank you. Commissioner and Mr. Roundtree, you've been here. You've been listening to Ms. King's testimony. What is the answer to the question of, if a business person has a contract with the City, they're having whatever variety of problems that can arise in the course of doing business with City government, state, federal, SEPTA, private business; who internally is responsible for working with the business person through the maze of government, from contract issues to ultimately making sure they get paid in a timely fashion? Who is the business advocate within the government to make sure that people get done what they need to get done?
I'm James Roundtree. I'm the Director of the Minority Business Enterprise Council. If it's pertaining to minority, women or disabled businesses, it's our agency. We will handle advocacy where it pertains to direct City contracts. We don't have a relationship with PHA or SEPTA to that magnitude.
I understand that. 19 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 But within the City, payment issues, contract disputes?
Especially contract disputes. When it's a contract with a City agency, the most difficult aspect of it is when it's a subcontractor. Because right now, unless they're a minority, woman or disabled business, the subcontractor really does not have an advocate -- direct subcontractors -- because the City of Philadelphia does not have a relationship with the subcontractor. They only have a relation with the prime.
But we contract with the prime, and the prime is required to put on their form -- I mean, some of the millions of documents that you guys have -- who the subcontractor is, and we approve that person, right?
See, we have to separate the contracting process. If it's a minority, woman or disabled business, yes. If it is just a subcontract, then Risk Management or some other agency is responsible.
I understand that. But I think, as I know her, Ms. King probably at 20 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 least qualifies for two of the three.
She is certified with the Minority Business Enterprise Council.
So if you're in that situation but if you're a subcontractor, what's your recourse? Who do you talk to?
Well, as she stated earlier, there was a meeting held. She contacted us and told us she had a situation where she was not being paid. And on two fronts, there were several meetings held to determine what could be done. One of them resulted in Tina withdrawing from the contract because she felt that she could not participate on that level. At no point in the initial development of her contract were we contacted and told that was insurmountable activity. We were not involved in the negotiation of her contract, nor can we get involved with the negotiation of her contract with any business activity. But when the issue of payment arose, we tried to set up a meeting and come to some agreement as to why she was not being paid.
To your knowledge, is there any internal policy somewhere, I guess, 21 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 between Procurement and Finance -- and there might be a couple other entities in between. Do we have any particular requirement or policy that seeks to ensure that contractors, at a minimum, the primes, are paid within a certain period of time; is there any policy on that?
Thirty days -- well, I take that back. We don't have a policy where we guarantee payment. For the record, we do not have a policy that we guarantee payment.
Yes. After it's reviewed by a couple of individuals, Budget and the Controller's Office. But, yes, the Finance Department is the ultimate --
But to your knowledge, is there an internal policy that says, we seek to pay -- unless there's a dispute. Regular run-of-the-mill, they got the contract, they did the work, punch list is done, they did everything they 22 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 said they were supposed to; do we have a policy that says, we seek to ensure that people get paid from the day we get the paperwork, 30, 45, 60 days later, and that's how our system is set up?
I think the most appropriate person to answer that would be somebody from Budget.
All right. Thanks. Any other questions for these gentlemen while they're up at the table? (No response.)
Ms. King, is there anything else, or do you want to talk to those guys in the back there?
No. I would like to say also, with MBEC, it seems like to me when jobs come up, contracts come up, minority business should be aware of these contracts that are coming up. Whereas, you have to find out in the newspaper. They're going to -- the Eagles are going to do a stadium. The Phillies are going to do a stadium. But they have no plan whereas, you know, 23 COMMERCE & ECONOMIC DEVELOPMENT - RES. 020238 this person here can do this. This is a minority person that can do this. I would let them know and be aware of this is what's coming up. And I can say for the School District, they will send out bids to you or notify you of what's coming up. There's bids in the City. And we had to find out on our own with the Eagles stadium. We wanted to do transportation for seats. Another company got it. With the Phillies, we tried again with the Phillies. That didn't happen. I would like to know what is the percentage in that department is minority participation?
We'll seek to try to answer that question. I think the two gentlemen in the back heard the question and will try to get an answer to that, okay?
Thank you very much. Any other questions for Ms. King? (No response.)
Barbara Esposito. (No response.) 24 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038
Is there anyone present to testify from the Laborers District Council? (No response.)
Are there any other persons who wish to testify on Resolution 020238? (No response.)
Is there anyone here to testify on any other matter before this Committee? There's Resolution 030038 and two other Resolutions.
On 030038 you wish to testify on? Ma'am, please come up to the table. Ma'am, please identify yourself for the record and proceed with your testimony.
My name is Lynn Peterson and I'm here today to represent ITTI Welding, Training and Certification School.
Ma'am, do me two favors: Pull the microphone a little closer and just slow down a little bit.
Again, my name is Lynn Peterson. I'm here to represent ITTI Welding, 25 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 Training and Certification School. The President and CEO of ITTI, his name is Chester Turner. He is an African-American male who is an MBEC member. His school is certified by the State of Pennsylvania Department of Education. He's an AWS member. He is certified by the federal government. He's an AA company. And really I don't know if I can call this a testimony, other than to say that he has a school where he is looking to train ex-offenders, women, men, who are interested in getting a skill that will provide for them a skill for life in welding. He's been around for years. He is a 15 long-time resident of Philadelphia. He bought the 16 company about 15 years ago, and we have been very 17 fortunate in that we have gotten some contracts 18 from PWDC, and we're looking for more. 19 He's worked with the courts through 20 Domestic Relations to help some of the young men who 21 have come through the court system find work. 22 Mr. Turner does all the training. He 23 is a master welder. He has had contracts with the 24 City of Philadelphia, with the School District. 25 He's trained the maintenance personnel at SEPTA, at COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 the School District, for Conrail. And for many of the unions in Philadelphia, the boilermakers, electrical, he has worked with each of them doing the certification. His plan now is to train young people in a skill that -- even though computers are very, very important -- and I have one and cherish it myself -- but if the axle breaks on the computer, you need a welder. And it's a skill that he has been able to get jobs for people who have come through his program with not less than $11 an hour. Do they care if the person has a record? Companies want to know that. But that's not important. They want to know, can you weld. He will train and work out a program for anyone who is interested. So this is more of an advertisement than a testimony. We know that Mr. Turner is doing a lot of great work. He is very lenient on the high school diploma or GED. He basically wants to help some young folks and even adults who are interested in getting a skill for life and earning a living wage, and not just minimum wage.
Great. Thank you 27 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 very much for the information. We appreciate the advertisement. Could you get us any printed information?
That would be great. We'll distribute it. Any questions of Ms. peterson?
You know, in the paper in the last two days, some stories have come out about learning a skill and having a skill for life. It's a quote from a labor leader. It said, You don't want people with skills unemployed because then that helps weaken the negotiating positions with the employer. It seems that we're trying to keep skilled people from actually giving people skills or training people because it seems to widen the market. And some folks in this City don't want to broaden the market, it seems. It seems that they don't want blacks and Latinos and women to become skilled and join that broad market out there in the construction trades. Because they say, if you have so many of them, it weakens the negotiating 28 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 position. It's a strange way to work in a capitalist society. The Inquirer story today has a very good article in the business page. I suggest that everyone here who is a business person and a minority read it, because it teaches us a lesson, a very good lesson, as to how the system in the City operates and how they have kept us out. And I think it's time for us to end that exclusion.
And we would like to help that inclusion, as I have heard over the last couple of months. Having a skill -- my background afforded me to work for major corporations. Of course, I often-times tell people I've been let go by some of the finest corporations in America due to corporate reorganization and downsizing. In working with Mr. Turner, I found that I can always be a salesperson, as if someone would come -- if those who are interested welding school, they'll always be a welder. They'll never be unemployed. There's no reason to be unemployed if you do have a skill. And certainly I trust that after I leave this information that you'll work very diligently with Mr. Turner to get some people a 29 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 skill. In fact, his motto is, it's not expensive, his training; it's priceless. So we'll work out arrangements for any organization or any group. I thank you so much.
Thank you. Anyone else here to testify on any of the Resolutions before this Committee?
Good morning. My name is Fred Bailey, and I own a private detective agency in Philadelphia that specializes in environmental consulting. I moved here a year and a half ago from my garage. I was working out of my garage in Blue Bell. I moved in an enterprise zone at 51st and Parkside. And I found that the most significant way that I'm being excluded from business is through the performance bonds. The performance bonds are set up so that an individual can go to an insurance company, get a guarantee that they'll perform the duties properly and on time, et cetera, et cetera. Since 9/11, it's almost impossible to get a performance bond through an insurance company unless you have $400,00 to $500,000 in cash available and a track 30 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 record of at least five to six years long.
I'm sorry to interrupt you. You're talking about performance bonds required on City contracts?
Yes. And State. In general. There are times when a performance bond has to be percent of the overall contract. You 10 may have a $2 million contract. What I'm having to do is use up all my ready cash. For example, I have three State contracts. I put up, like, $25,000 each because I can't get an insurance company to cover me for a performance bond, so I have to come up with the money. That's the only way you're going to get a contract. The City is the same. Although I don't have a City contract as of yet, but how do you expect a minority business person who's -- like in Ms. King's instance -- who's not getting paid on time, who's having difficulty paying her employees, and yet have enough money set aside that she can effectively go to an insurance company and say, "I have $200,000 or $300,000, so you don't have to worry about me not performing my job." 31 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 I think the City should consider the sustainability of the business, the character of the business person, their track record, their credit record and make exceptions for minority businesses to get these bonds done. Other than that, I thank you for the opportunity to be here, but I can see -- and I'm looking at this blight initiative. I'm pushing very hard to do the lead abatement and things on some of these properties. But I'm only doing it halfway. Because if I get the 90 percent of it done, and then the proposal comes out and says, you've got to put up $500,000, I've wasted my time. So I'd like Council to look into those issues.
Hold on for one second. The Chair recognizes Councilman Clarke.
Thank you, Mr. Chairman. Mr. Chairman, actually, I'd like to ask Mr. Gamble to speak to this issue. I recall -- I think I'm correct, Mr. Gamble -- we a community meeting that we sponsored and you came to talk about that issue. Can you briefly talk about some of the 32 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 things that we have done or are looking to do to assist business people similar to this?
Good morning. My name is William Gamble, Procurement Commissioner. Mr. Clarke, basically what we have is a Charter issue. The City Charter says that any contracts that we have, we have to pay a performance bond for it. One of the things that we are looking at doing, is looking at a Charter change or an amendment to the Charter that basically will allow the City to decide whether or not to use performance bonds or bid bonds on City contracts. The City has put together a bonding program that tries to look at or tries to assist smaller companies in getting bonded. We know that bonding is one of the problems that small businesses face. One of the problems they face is that they're not creditworthy. They don't have the cash to get bonding. So the Mayor has put together a program that will assist small companies in securing bonding. I'm not sure right now how many companies have been successful in that, but it is a process that is in place, and we're looking at trying to find ways in which to assist small and 33 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 minority companies in the bonding area.
Commissioner, Councilman and I were talking. Two things: One, I seem to have a vague recollection in the course of an NTI hearing where -- aren't we using some of the NTI proceeds to actually cover insurance costs for the demolition contractors? Aren't we paying, actually, the insurance so that they don't have to?
There's a program -- Mr. Nutter, I'm not really sure of the details of it, so I have to get back with you on that. I can't speak to that.
I think there was a wraparound insurance provided so that the demo companies didn't have to go get their own insurance for the demolition. We're actually paying for the insurance ourselves out of the bond proceeds and covering those costs. I seem to almost have a memory of a separate line item in the NTI, the last budget that we did, because I think I asked a question about it just to better understand what was going on. So I would assume that clearly makes it 34 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 easier for the demolition companies do what they need to do because they don't have to go and get their own insurance. We're actually paying the insurance.
I understand that. Right church, wrong pew, but all the same issue.
Did we put together anything in particular for the many companies that are doing work down at the stadiums? Do they all have to get their own performance bond, or is there this kind of wraparound, or one bond covers all situations with those companies?
No. We didn't have anything to do with the stadiums, so that doesn't come through us.
That could be an incorrect memory on my part. What's your sense of the timing of the program that you've made mention of and that the Mayor has initiated?
It's already in place. 35 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 We're currently having companies work with a young lady who has knowledge and who has connections with bonding programs.
Well, apparently at least one person sitting next to you doesn't know anything about it, and I'm not sure if I knew about it. I don't know everything. It's hard to keep track of stuff. Are we promoting this? Is it mentioned in the bid documents?
Well, Ms. Davis mentioned it in her testimony when she came a month ago. She mentioned the bonding program. It has been mentioned in many locations and many meetings. So it is something that is around and we have been advocating it. But one of the problems is that we're having problems in finding people who are qualified to actually get bonded. That seems to be the biggest problem. We can recommend people. We can bring them to a table, but they have to be able to be bonded. One of the problems we face is that a 36 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 lot of companies are not creditworthy. A lot of companies do not have a business plan. A lot of companies don't want to actually become legitimate. When I say legitimate, there are taxes that they have to pay that they don't pay.
Would you qualify or quantify what "a lot" means? You said "a lot of companies."
Then what are you talking about? Were you actually just making disparaging remarks about minority companies?
That's exactly what you're doing if you can't quantify what you mean by "a lot of companies aren't creditworthy, a lot of companies aren't bondable, a lot of companies don't 37 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 have business plans."
The number of companies I referred to, Councilman, are the ones that have come through the program, is what I'm referring to.
Just tell me specifically what you're referring to and use numbers and put it in context. This is not an anecdotal discussion about, "Well, they're not worthy, so we're not..."
Sure. The Chair recognize Councilwoman Reynolds Brown.
Thank you. In instances like that, businesses that come to you that don't meet MBEC or Procurement criteria, is there a mechanism in your office where they are referred to the appropriate City agency that can provide them with that kind of technical assistance and move them to a place where they do meet the requirements of MBEC and/or Procurement, so that we arm them with what they need to move them to a place of being able to compete?
Yes, we do. When a company 38 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 cannot get bonding, we refer them to the bonding program.
Tell me how that works. Is there a designated staff person? Does it happen by way of paperwork? How does that work?
What we do is that we send out actually a flyer that indicated about the bonding program. We do not have a person specifically that deals with that in our office.
So then what's the trigger? A small business comes to your attention that doesn't meet ABC criteria. What's the trigger that then ensures that they are then referred to the appropriate -- PCDC, that does a lot of good stuff to start up businesses; or the Women's Resource Center, which does a lot of good stuff to arm small businesses who want to move to a capacity where they can compete. What's the trigger? What's the procedure in the office that ensures that that happens?
The thing is that if a company -- we send out the information of the bonding program. If a company cannot get bonded, then we refer them to the bonding program, and then 39 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 that triggers them working with that company to assist them in becoming bondable.
You mentioned several though, those who don't meet bonding or can't be bonded, those without good business plans --
That will also trigger them working with the company in assisting them in working with other agencies in order for them to become bondable or to assist them in whatever their business needs are.
So a staff person actually manipulates that process? Help me out.
The person would recommend them to the bonding program. That person then, in turn, will work in them. That triggers them identifying what other resources that are there that are available to them. We don't get involved in that process, other than just referring them to that person.
Where are they? 40 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038
They're on the contract with Risk Management, but it's not with Procurement.
So then another outside contractor is responsible for taking that business and shepherding them to a place where they can be eligible to compete?
Who within your department handles that issue or does referrals to the bonding program?
We don't have any particular person who does it, or has been designated.
So how are you familiar with how ready a business is to be bonded, whether they have a business plan or any of the things you referred to if there's no one within your department that actually handles that?
I have talked with the person who is running the bonding program who 41 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 indicated this.
You've talked to the person in Risk Management, but your department does not handle --
Are you familiar with the Philadelphia Contractors Assistance Program?
Commissioner, if you already responded to this, then don't respond again. I did miss part of the exchange between yourself and Councilmembers Goode and Reynolds Brown. But what I did hear you say in response to Councilman Clarke was that -- I don't want to get into how many, for the moment -- but some companies were not bondable; credit issues, a variety of issues. But in your description, that sounded like the same response that those companies would get if they just went direct to a bonding company. So I am trying to 42 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 understand, if we're doing a program to basically provide in the marketplace what the marketplace itself is not providing or is not flexible to deal with certain businesses -- I mean, I understand that you can't necessarily give every Tom, Dick, and Harry a bond. There may be questions about whether they can actually perform or not. How is our City program different, I guess, than what the person may get out on the street? A no is a no, whether it comes from the private side or from the government side. What's the difference?
Well, first of all, Councilman, what we try to do is, for those companies that are having problems in getting bonds, we try to assist them in getting bonds. We assist them in helping them to -- whatever the shortfalls are.
From the Small Business Administration. These are governmental bonds. That's actually operated by the SBA. What we do is, we try to assist them in meeting the criteria, and also doing whatever it takes for them to become 43 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 bondable, is what we do. We work with them from the time of conception all the way up until they can get to a point where they can be bondable and that they can qualify for City contracts.
One last question on this issue, at least for me. Is this a situation where -- I mean, does the City believe that the company, but for the bond issue, would actually be able to perform the contract, but now you have this other issue that becomes an obstacle? So we think they can do the work, but now they're not bondable?
Right. They're not bondable. I don't believe in bonding to begin with, but as I said, that is a City Charter requirement. And getting bonds, as the gentleman indicated, it is a costly process. It's not necessary in everything that we do. There's some things that we do that we do require it. I would rather use liquidated damages as a means of holding a contractor accountable, rather than performance bonds.
What is the benefit to the City of the bonding? I mean, this is a 44 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 performance bond. I get a contract. I start the work. I don't complete. And then what?
Then what we do is, we go after your bond. I will go to your bonding company and indicate that you have defaulted on the contract.
The bonding company then would be responsible for making sure that it gets taken care of.
If we didn't have bonding -- I'm not, for the moment, saying we should or we should not. You've indicated you don't necessarily believe in it. I don't have bonding; I get the contract; I start the work; I don't finish. You're chasing after me?
No. We have liquidated damages in that. If you don't perform, you don't get paid. So the money has not been given to you. We hold the money.
Under that circumstance, since we don't have a bonding company 45 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 involved, how does the City ensure that the job gets done?
The only thing the bonding company is going to do, is that they're going to get another company to come in and finish the job. They're not going to pay you. They're just going to make sure that the job gets complete. So you can use liquidated damages as the same way of getting the job complete.
You're saying that the reason we do bonding is because our City Charter requires us to do bonding?
But you, as a Procurement Commissioner or as a business person or as a person responsible for this area, you don't necessarily believe that as a part of our governmental policy that, one, every job has to have bonding; maybe some do?
But that the only way to deal with this, ultimately, is by changing the Charter or at least to give you the flexibility 46 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 to require it on some, waive it on others, and then move into this liquidated damages alternative; is that what you're saying?