In your estimation, what is your view on how well our City does with regards to assisting, arming, providing technical assistance to small businesses? Since ultimately we win if we can move them to capacity where they can get contracts, which means they pay taxes and hire Philadelphia residents. How well are we doing? Let me phrase it differently. If you had to ID one, two or three areas where we could do better, what would they be, given where you sit?
Well, one of the things that I guess we don't do -- we have a problem in that we know that the contracts, or people actually applying for contracts are actually getting smaller; the number is dwindling. Why? I don't know, because we haven't been doing things any differently than we've done in the past.
Let me make sure I understand what you just said. The number of 47 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 individuals applying for contracts --
No. Actually winning the contracts. It's been going down. And why it's going down, I really don't know. We're looking at why it's been decreasing.
That started when? When did you begin to see the decline?
We started declining in 2001, and there has been a decline. Why? I don't know. I'm looking into finding out the reasons why it's declining. Do we do enough for minority companies? We're trying. We're not perfect, and we're far from it, but I think we are trying to do so. I feel that MBEC has been an advocate for the small business and minority business. They get blamed for everything that goes wrong. They can't guarantee anybody a contract, but people expect them to. They don't really -- they have a tough job, but don't really have the teeth to do anything about it.
Okay. Now, we heard from the testimony of a small business woman who cited a number of City entities that are not doing a good job when it comes to payment. One of 48 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 those agencies was an agency that you're responsible for, MBEC. What happens internally when it comes to small businesses who are not -- and you said that your relationship is directly with prime sponsors?
That's correct. But let me make a correction on something. MBEC doesn't pay subcontractors or contractors. The person or the department that receives the service is responsible for payment. The City historically has had a problem in paying vendors, whether it's majority or minority. We don't pay in a timely manner. We have known this for years. This is something that is not new. We try to work with companies in getting payment, but it's very difficult.
And so what that suggests is that the system is broken. It's not working at the level you're saying. The department heads are responsible for ensuring that subcontractors or prime contractors are paid by that particular department?
So is there any task force, whatever, to look at fixing the system when it's clear that it's not working? 49 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038
At the moment, no, but there are plans in place to look at that. That's a very serious problem from the standpoint that it does affect the way we do business. It also affects the pricing that we receive. If a company knows that we're going to pay them in 160 days or 365 days, they're going to put that into their bid. So in all actuality, what we're doing is, we're paying for being late, and it's costly. So we are aware that it's a problem. It's a very serious problem that we take very seriously. And we are going to look at it to find out how can we change that. Because this is very hard, especially for a small company. They cannot afford to wait 60 days, 90 days, 180 days, 365 days to be get paid. So it is a very serious problem, and it's something that we take seriously and we are looking at.
I have been talking with the Finance Director regarding this. She is aware of this problem and she is also concerned about this problem. So we'll be working to address that issue.
Okay. That's kind 50 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 of nebulous for me, but I'll leave it there for now. Thank you very much.
Commissioner, one last question for me. You made reference to a contract, I believe, in Risk Management?
Risk management is responsible for the person handling the bonding program.
I'm sorry. Which person, Councilman? The person from Risk Management?
Deborah Lawton (ph), I think, is the person from Risk Management.
They have a contract to actually work with the companies that are referred to them by us. And they're working with the companies to get them bonding. If they aren't 51 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 bondable, then they are directed to other areas of the City government that will help them in becoming bondable.
Let me make sure I'm understanding the flow here. You run into a company that has a bonding problem. You refer them over to Risk Management --
No. We refer them to the person who's responsible for the bonding program, which is a consultant to Risk Management.
Debbie Lawton is the person -- she's the one who is actually responsible for overseeing that contract or that contractor.
So it's a Risk Management person who oversees the contractor, which is this Eileen --
Okay. So that's the 52 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 consultant who actually works with the business to help them through the bonding program?
Back up for one second. Why is Risk Management involved in this?
I guess I'm just trying to figure out why this wouldn't stay over in Procurement. You deal with the companies. You have the bids. You work through the whole thing. Generally, when I think of Risk Management, it's something bad has happened. Go file a claim. I mean, I hate to put it that way, but they're, like, after the fact. Why are they involved in this?
That's a fair answer. Okay. Any other questions? (No response.)
Sir, were you 53 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 finished? You might want to meet Mr. Gamble there and talk about this new program.
It would helpful, but when you've got a proposal where it says, bond requirements, that information would be available. Every proposal that comes from the City has a section on bonding requirements.
Right. Well, that's actually kind of what I was wondering. Are we putting on our documents that this program is available, or who to talk to, or call Risk Management, or Debbie Lawton, or Ellen Nylan?
Every bid document that goes out has this provision in it?
And it tells you who to contact, who to talk to and how to follow-up?
Every performance bond that I've applied for gives you a financial statement. They want a financial statement from you. And every insurance company that I've ever talked to says it's all about your cash flow. You're not bondable because you don't enough cash flow. They want your banking information, and that's the first they go to. It has nothing to do with your business plan. It has nothing to do with your character or credit or any of this. They want to know if you have the money to perform the job. And if you don't have the money, you're not going to get a bond. I've been told, "Well, you're getting close. You know, a couple more contracts. And put some money in another bank account and keep your payroll bank account separate from a business account that you would be joint interest on, and we can look at that separately." You know, I've lost a lot of work simply because I couldn't put up $50,000 or $60,000. And I think it would be helpful what the gentleman is talking about. It certainly would be helpful to me. I don't even know any other business person who 55 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 knows anything about this, because we complain about this on the phone daily.
Mr. Roundtree, you don't need to come up to the table, but you were kind enough, I think, to share some information with us. I believe you have upwards of 1,200 people on the MBEC list?
Eleven, okay. I guess the question is whether it's an MBE or not. We must have lists of all the people who either do business with us or have indicated by getting certified, that they might want to do business with us. Commissioner and Mr. Roundtree, I might suggest that maybe as part of our ongoing outreach efforts, maybe we should just do a special piece of literature or mailing with some explanation about this slightly new program that we have and just get it to all these business people direct. Is that possible?
Sure, it's possible, Councilman. We have done that and we'll do it again. We also advertise in the newspapers about 56 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 the program, as well.
I appreciate it. Maybe a special mailing to the business people might be helpful in getting information out to the various -- especially the smaller Chambers of Commerce and business associations working through the Commerce Department. Councilman Goode.
Could we just have a copy of whatever you send out and a copy of whatever advertisement you might have copies of that actually documents it?
Can we have a copy of whatever you're sending out and copies of whatever advertising documents?
Thank you very much. Please identify yourself for the record.
Before you start, just so I can get a sense, is there anyone else who plans to testify? 57 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 (No response.)
Okay. Ms. King, you'll be the last person for the day.
Tina King from Lloyd's Moving Company, Inc. Through this hearing -- and I don't know if I'm hearing right or what. MBEC is responsible to the prime. The subcontractor, what happens to the subcontractor? Even though they're certified with MBEC, where are our advocates when we have a problem? It's still like they have to deal with the prime.
Well, I see Mr. Roundtree coming back up. Now, in the previous situation -- and I know there was some discussion about some meetings and the like -- were you being dealt with as a subcontractor?
James Roundtree, Director of the Minority Business Enterprise Council. Just to clear up, I did not say that the MBEC was responsible solely to the prime contractors. Our responsibility, for the record, is 58 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 advocacy for the minority, women and disabled business, whether they are sub, prime, whether they are first tier sub, second tier sub, or whatever the case may be. We try to work with each level of the tiers to make sure that minority, women and disabled businesses participate on City contracts. As for a point of clarification --
But I think I also heard earlier that your role in all of this is a function of problems that those entities may be having, primarily directly with regard to the City, but that you will not get involved directly in a contract issue between the prime and sub.
No. We won't negotiate the prime or the subcontracts. We do get involved in issues, but we cannot recommend something other than a business resolution. It has to be a situation where we remain neutral, and the business person must make a business decision. We try to alleviate whatever impediments that we can up to the point where they need legal counsel. Once it becomes apparent that they need legal counsel, we cannot get involved from that point on.
Councilman Nutter, so, again, 59 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 where does that leave a subcontractor? Who is our advocate?
I mean, we have a problem with getting paid and we have a problem with a percentage on this contract; who do we turn to?
Percentage of the contract when I'm saying -- administrative fees. The prime takes administrative fees of 30 percent.
Aren't all those issues -- Councilwoman Reynolds Brown.
Thank you, Mr. Chairman. Councilman Ortiz, point of information. Does your new Bill speak to that particular issue? Please help us remember.
I think it gives MBEC a broad leeway to supervise all of the primes and 60 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 their activities.
Let me try to understand one thing. Ms. King, the issues that you're raising, whether it's a percentage of the contract, 30 percent administrative fees or any of these other issues, were they on the document when you agreed to the contract, or did this come up subsequent? Is that a part of the bid?
No, afterwards. But what it is, is that we have no contract with the prime. And I think it should be the subs should have a contract with the primes spelling out everything that -- but you don't. Later on it comes back and they tell you 30 percent --
Hold on for a second. Don't the primes and the subs have to have a contract between them?
Do we require a contract between our primes and our subs?
No. We require 61 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 contracts -- the City requires a contract directly with the City and the prime. If it's a minority business -- and what Ms. King is referring to, all these businesses, all this activity, is between two minority businesses or three minority businesses.
Whatever. Minority, majority, purple, green, yellow, red. If I have a contract with the City of Philadelphia, and I put on my form that I'm using Joe Blow, Sam Smith, and Sally Sue as my subs, what information is the prime required to give the City, not only to show that they actually have a contract, but what are the terms and conditions of that contract between the prime and the sub?
And if this -- well, that's a little different than what you said earlier. First you said they should have a contract. Now you're saying --
But when you phrase it the way you just did -- the document that you just phrased is a Solicitation and Commitment Form. If they submit to us a Solicitation and Commitment Form 62 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 with a firm's name on it, the next document that we expect from them is a subcontract from the people who are on that Solicitation and Commitment form.
So let me ask this question. Let's say I get a contract with the City and I put -- what's that -- the Solicitation form?
So I put on there XYZ company as my sub. You look at it and say, "that's fine." Then you look for a contract between my firm and XYZ firm and I send you in a contract that, under its terms and conditions, the subcontractor is required to pay back to me 95 percent of what I have planned to pay them. Are we going to approve that? Is that acceptable?
Because there's no 21 benefit to the minority firm. And there's no true benefit to the City.
Who determines that? Maybe the sub is actually willing to just take 5 percent. What are the rules, I guess, is what I'm 63 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 trying to understand? At what point do we step in and say, this was not in the original bid document? There's no basis for this new little arrangement going on between the prime and sub. Where are we in that whole situation? And how does someone add on, if it wasn't allowed in the original bid, that allowed a prime to put on a, quote/unquote, admin. fee? How is a person able to do that?
Councilman, you understand that you're asking me if I reviewed the bid or a contract. The bid comes before the contract.
So the elements within the contract won't come until later. So I can't compare what someone submitted --
I'm asking you, can a prime contractor have a contract with a sub that is at odds, in conflict, or different than any of our bid terms when the person bids on the contract? Or do they have the freedom and flexibility to establish whatever contract they want between themselves and the sub? That's my question. 64 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038
The answer to it would be, yes, they have the freedom to establish whatever contract that is commercially acceptable to that service.
So how would you step in and stop -- you're going to get $100,000 dollars, but our admin. fee is 95,000.
I'm not talking about the bid document. I'm talking about the contract.
When I subcontract with the XYZ firm and put on my -- what's that form again?
When I put on the Solicitation and Commitment form that the sub working with me on this contract is the XYZ company --
Right. To do X service for X amount of dollars. That's where we stop. 65 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 Because our rule then is to --
Let me finish my example. For X amount of dollars. So the subcontract comes in, and the terms and conditions of that subcontract do not match up with how much the firm is actually supposed to get paid based on my Solicitation form.
That's not the issue, though. Councilman, that's not the issue.
No. The contract will say that she's going to -- if it's $100, the contract will say she will be paid $100. Ms. King's issue is, what if I have to pay back $95 of that $100.
Okay. But the documents will say she's going to get paid $100. It won't say how much of that is specific to the actual service 66 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 she's providing versus overhead. It doesn't break out like that.
Well, I hear what you're saying, but I guess what I'm left with is, the prime is establishing their own terms and conditions in a subcontract, for which I'm now raising the question whether they have the authority to do that after the fact. Where is the City's responsibility in that? That's all I'm asking.
And our responsibility is to monitor whatever is paid, whatever is committed to be paid, be paid. If it's $100, if she was supposed to be paid $100, that she's actually paid $100.
But if she had to give $75 of it back, you're saying you're out of that?
Councilman Nutter, with all due respect to MBEC and Mr. Roundtree, I think this issue came up where nobody had a responsibility for it. It's an issue that came up. What can we do? 67 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 Because this is an issue that happened. It's something like the subcontractors fell through the cracks. So maybe now you have to look into this. When you have a prime, a prime and a subcontractor should have a contract between the two. And then have somebody in place to be an advocate for the subcontractor to make sure this is fair. Because they might come up with a contract saying they want 50 percent. This is all I'm saying.
Well, Ms. King, I guess what I would say to you is there is a line at which we have to stop because this is then an agreement between two third-party private entities. The one has an agreement with us. The second has an agreement with the sub. We don't have an agreement with the sub. I think what we have to do is to make sure that the terms and conditions under which the prime takes the contract, there are only certain things that they can do with their subs in order to prevent those kinds of things. But we will not negotiate contracts and get in the middle between two private business entities. That is -- I believe that is not our direct responsibility. Our 68 COMMERCE & ECONOMIC DEVELOPMENT - RES. 030038 responsibility is to the taxpayers of this City and to the ensurance of the performance of the work and the contract that we have with the person who won the bid. The issue that you are raising is a very serious issue, and I think that we should seek to prevent those kinds of things from happening up front. But ultimately, whatever the two independent businesses agree to between themselves, at some point we are not be involved in that.
I hear what you're saying. You've raised a very serious issue and I think that we have some work to do about that. But thank you for the explanation. Mr. Roundtree, thank you.
That will conclude the testimony and our public hearing. - - - 69 COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC MEETING COMMITTEE ON COMMERCE & ECONOMIC DEVELOPMENT - - - Wednesday, April 23, 2003 - - - Public Meeting conducted by the Committee on Commerce & Economic Development, held in Room 696, City Hall, Philadelphia, Pennsylvania, on the above date, to consider action on the following: RESOLUTIONS 000691, 020238, 020522, 030038. - - - PRESENT: COUNCILMAN MICHAEL NUTTER, Chair COUNCILMAN DARRELL CLARKE COUNCILMAN W. WILSON GOODE, JR. COUNCILMAN ANGEL ORTIZ COUNCILWOMAN BLONDELL REYNOLDS BROWN - - - 70 04/23/03 - COMMERCE - PUBLIC MEETING
We are going to move into a public meeting. There are a number of Resolutions that need to be reported out. The Chair recognizes Councilman Goode for a motion on Resolution 000691.
Thank you, Mr. Chairman. I move that Resolution 000691 be reported out of Committee with a favorable recommendation. (Duly seconded.)
The ayes have it, and Resolution No. 000691 has been unanimously reported out of Committee. The Chair recognizes Councilman Goode for a motion on Resolution 020522.
Thank you, Mr. Chairman. 71 04/23/03 - COMMERCE - PUBLIC MEETING I move that Resolution 020522 be reported out of Committee with a favorable recommendation. (Duly seconded.)
The ayes have it. Resolution 020522 has been reported out with a favorable recommendation unanimously. The Chair recognizes Councilman Goode for a motion on Resolution No. 030038.
Thank you, Mr. Chairman. I move that Resolution 030038 be reported out of Committee with a favorable recommendation. (Duly seconded.)
All in favor indicate by saying aye. (Aye.) 72 04/23/03 - COMMERCE - PUBLIC MEETING
The ayes have it. Resolution 030038 has been reported out of Committee with a favorable recommendation unanimously. Resolution 020238 will remain in Committee for further testimony. That ends the business today of this Committee. Thank you very much. (Council adjourned at 11:50 a.m.) - - - 73 C E R T I F I C A T I O N I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of April 23, 2003, were reported fully and accurately by me, and that this is a correct transcript of the same. RE: COMMITTEE ON COMMERCE & ECONOMIC DEVELOPMENT ___________________________ Lisa C. Bradley, RPR and Notary Public