COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, March 4, 2009 9:30 a.m. - - - PRESENT: COUNCILMAN W. WILSON GOODE, JR., CHAIR COUNCILMAN BILL GREEN COUNCILWOMAN MARIA QUINONES-SANCHEZ COUNCILWOMAN BLONDELL REYNOLDS BROWN BILL 090095 - An ordinance amending Title 15 of The Philadelphia Code, entitled "Contracts and Procurement," by creating new requirements 16 relating to the submission of an Economic Opportunity Plan. 17 - - - V A R A L L O Incorporated Litigation Support Services Eleven Penn Center 1835 Market Street, Suite 600 Philadelphia, Pennsylvania 19103 215.561.2220 215.567.2670 2
Good morning. This hearing is called to order. This is a public hearing of the Commerce and Economic Development Committee on Bill No. 090095. My name is W. Wilson Goode, Jr., Chair of the Committee. I note that a quorum is present. To my immediate left is Councilwoman Blondell Reynolds Brown, Vice-Chair of the Committee. To her left is Councilman Bill Green, and to my right is Councilwoman Maria Quinones-Sanchez. The title of Bill No. 090095, amending Title of The Philadelphia 17 Code, entitled "Contracts and Procurement," by creating new requirements relating to the submission of an Economic Opportunity Plan. Our first witness will be Michael Bell of the Office of Economic Opportunity. (Witnesses approached witness table.) 3 3/4/09 - COMMERCE - BILL 090095
Good morning, Councilman Goode. Good morning, Councilman Goode and members of the Committee on Commerce and Economic Development. I am Michael Bell, Executive Director of the Office of Economic Opportunity. I am prepared to give testimony in support of Bill No. 10 090095, which amends Section 17-1600 of The Philadelphia Code, "Economic Opportunity Plans." This bill would require a contractor or developer to include a statement of its diversity track record in its Economic Opportunity Plan. An assessment of the developer's past practices is helpful in several ways. First, by understanding the developer's methods and strategies for achieving diversity within its corporate structure and in its employment, contracting and purchasing decisions, it enables the Office of Economic Opportunity and Council to appropriately tailor the 4 3/4/09 - COMMERCE - BILL 090095 Economic Opportunity Plan for the City's project and determine realistic benchmarks. At the same time, if we believe the developer's past efforts at fostering inclusion are weak, this review provides an opportunity for OEO to recommend practices that will improve the developer's diversity profile. In fact, the Office of Economic Opportunity has already begun eliciting this type of information to support EOP development. Knowledge of how a developer already conducts business within M/W/DSBEs is critical to creating new business opportunities. Knowledge of the developer's employment practices is also imperative for the establishment of workforce goals in connection with the project. The developer's private and public-sector conduct should be examined. By requiring the developer to provide the demographics of its Board and managerial positions, there is public examination and accountability for the developer's 5 3/4/09 - COMMERCE - BILL 090095 corporate and hiring policies. The Office of Economic Opportunity's ability to independently verify the developer's required statement and representations may be limited by staff resources. The prototype Plan does, however, include a provision warning the developer that its representations are subject to the Pennsylvania unsworn falsification law. Further, the Office of Economic Opportunity is prepared to undertake necessary follow-up with the developer as requested by Council. I believe this amendment will foster a beneficial relationship between the developer and City as it creates an additional avenue of communication and exchange of information. There will be one suggestion that I would have for the amendment, is that DBE as it is represented in the amendment be changed to include M/W/DSBE, because the DBE language as it is 6 3/4/09 - COMMERCE - BILL 090095 presently in the amendment connotes federal funding, and with the fact that we're talking about City-sponsored projects, I think we should actually just update the amendment to include that. And then, finally, thank you for inviting me to provide testimony, and I am happy to answer any questions that you may have.
Thank you for your testimony, Mr. Bell. Just a few questions for the record. One, in your testimony, you state that your office is actually moving toward this practice anyway?
How exactly were you planning on implementing that practice?
On the Verizon project, we're actually obtaining information on Verizon's past practices, and then actually we're going to be looking at meeting with them now so we're 7 3/4/09 - COMMERCE - BILL 090095 getting open information about how to proceed on the FiOS project. We have the Motorola Economic Opportunity Plan right now, and this comes at a good time, because we're actually working on referring additional opportunities and additional firms to Motorola. So if this actually becomes law, then we can actually require Motorola to give us information. The biosolids project with Synagro, we've been meeting with them. We have an oversight committee comprised of various City departments, and they've been open. So, like I said, the Economic Opportunity Plans, as they have been set up now, have actually enabled us to sit down with people that are doing business with the City to get this information. And then the Youth Study Center, which is coming up now, we're working on their Economic Opportunity Plan, and we should be able to get information from the 8 3/4/09 - COMMERCE - BILL 090095 contractors. On that project right now we do have a certified firm that is the construction manager. They would be a prime candidate to get this kind of information, but then the other contractors who will win awards there will be required to give us this kind of information.
Thank you. Also, in your former capacity on housing projects, you did require this type of information?
Yes. When I was at the Redevelopment Authority as Director of Minority and Women's Business Development there, the Board of Directors required information on a developer's past three projects or on a contractor's past three projects, and this information really focused the Board, the staff at the RDA and also the contractors and developers to make sure that we were getting pertinent information. And there were at least two or three contractors 9 3/4/09 - COMMERCE - BILL 090095 that didn't win projects because they had no record of diversity or their records were poor. So if everybody is focused and they know coming to the City of Philadelphia that we're going to be looking for this kind of information, then I think it creates the synergy that we need that everybody is on the same page and not just talking about diversity but actually doing it.
Just, lastly, two more questions. One, so it is your understanding that this is basically best practices that are actually implemented in other places and actually have been implemented here, so this amendment is essentially formalizing as part of the Economic Opportunity Plan?
And at what point is the Economic Opportunity Plan made public?
I think when a 10 3/4/09 - COMMERCE - BILL 090095 project comes to Council. Because, like I said, we had started to put together the Motorola Economic Opportunity Plan. The ordinance had already been presented to Council and we noticed that they didn't have an Economic Opportunity Plan. So we're developing that now. And then I think we got an e-mail yesterday from someone from Public Property that we need to actually finish up that Economic Opportunity Plan. So we're tweaking that information now just to go in conjunction with what we have with the Plan.
And when that information is publicly available, where is it publicly available?
I guess I would have to work that out with you, but the depository can actually be at the Office of Economic Opportunity. So if someone makes a request from us, according to the Sunshine Act, we would have the information in our office, but we would share it with appropriate Councilmembers 11 3/4/09 - COMMERCE - BILL 090095 as needed.
Thank you. Any questions from other members of the Committee? Councilwoman Blondell Reynolds Brown.
Much attention has been given to the rollout of the Penn's Landing development project. Is your office already involved with what the Mayor is discussing?
No. I have not received anything about any developments on Penn's Landing. Maybe Commerce has.
We're right at the beginning of that, and I would anticipate that we would involve, as we move forward with some of the development initiatives that are occurring down at the Penn's Landing, that we would involve Michael's world, the Office of Economic 12 3/4/09 - COMMERCE - BILL 090095 Opportunity, in developing EOPs for any of those contractors that are selected for whatever projects. I think we're too early in the stages in this regard to have Michael involved, but would be at some point in time. And, by the way, my name is Kevin Dow, just for the record, Deputy Commerce Director for the Office of Neighborhood and Business Services.
Some might debate the timing on whether or not it's too early, because what I've learned in the nine years here is that if you're not at the door when the seed is planted, then you look up and the tree has grown. So I would suggest and urge you to get your arms around that now, because there have been too many instances, as I said, where the papers are signed, contracts are negotiated in whatever way they are and now this side of the table is asking about the EOP and we've missed the opportunity. 13 3/4/09 - COMMERCE - BILL 090095 So I would urge you to look at that earlier, given what I've experienced since I've been here.
Any questions from other members of the Committee? (No response.)
Our next witness is A. Bruce Crawley, Millennium 3 Management. (Witness approached witness table.)
Good morning, Mr. Crawley. 14 3/4/09 - COMMERCE - BILL 090095
Good morning, Mr. Chairman, members of Council. I have copies of the testimony. Do I need to share them now?
Good morning. I'm here to express my unqualified support for City Council Bill No. 090095, which would amend and expand the types of information required from bidders that submit Economic Opportunity Plans for City of Philadelphia-related contracts. The bill's intent to seek statements from bidders on municipal contracts that summarize the bidder's past diversity-related practices, policies, organizational structures and Board composition is, in my opinion, a logical extension of the original Economic Opportunity Plan concept and 15 3/4/09 - COMMERCE - BILL 090095 will be an extremely useful tool for growing and managing the City's economy. The bill, in my opinion, would assist the City in achieving several desirable objectives. First, it will reaffirm the City's commitment to supplier diversity, which I think is needed. Second, at a time when government "direct-spends" with all firms, regardless of race, ethnicity and gender, will undoubtedly be reduced through new deficit-related expense control measures, it will enable the municipal government to leverage its own minority and female business inclusion initiatives through the purchasing patterns of participating private-sector firms. Such firms, as a result of the passage of the proposed bill, will arguably begin to be much more attentive to their own supplier diversity programs and to document them for their own internal use and for submission as part 16 3/4/09 - COMMERCE - BILL 090095 of future EOPs. If effectively implemented, therefore, the new bill will assist in establishing a more inclusive procurement culture among leading private-sector businesses and organizations that operate throughout the City and the region. Here's a concern, however: While it is not absolutely clear in the bill's language, I do sincerely hope that No. 090095 and its requirement for amended Economic Opportunity Plans will also be specifically extended into contracts the City lets to not-for-profit and human service agencies, which, as you are well aware, constitute the vast majority of municipal contract revenues, but have curiously carried no mandate for supplier diversity in a city 61 percent comprised of African Americans, Hispanics and Asians. In fact, as you are also aware, such contracts historically have not even been included in minority business reports generated by the former 17 3/4/09 - COMMERCE - BILL 090095 MBEC agency, and their minority participation levels, if any, have not been included in recent municipal contract disparity studies. That should certainly be rectified sooner rather than later and perhaps through this very piece of legislation. In addition, while there has been much public discussion about the relatively poor track record for inclusion of minority and female firms in municipal contracts, there has been virtually no public discussion about the fact that the City's private-sector supplier diversity initiatives, with only a few notable exceptions, have been arguably even worse than the municipal government's effort in that regard. The issue is all the more important when we realize that the City government's procurement budget constitutes just a small percentage of local private-sector expenditures. As a case in point, a 2007 18 3/4/09 - COMMERCE - BILL 090095 special Census Bureau tabulation of the most recently available economic census data indicated that the number of minority firms in Philadelphia increased by 31 percent from 1997 to 2002, as compared to percent increase for all 8 firms across the board. 4 percent of the $619 14 billion spent in the region. 15 It also disclosed that while 16 gross receipts for Asian firms increased 17 by 48 percent over the period, the 18 increase for Hispanic firms was eight 19 percent and for African American firms 20 just two percent over a five-year period.
21 Clearly, a great deal of 22 disparity still exists in our local 23 economic infrastructure, and a great deal of focused work still remains to be done in those economically marginalized 19 3/4/09 - COMMERCE - BILL 090095 communities if we expect our local economy to create jobs and to help us to withstand the current national economic crisis. What is also especially important about the proposed bill is that over time it will finally provide a database that will enable Philadelphia's Municipal Procurement Department to measure, in a more effective way, the broad economic impact and multiplier effect of each dollar spent by the City. It has long been our contention that every purchase decision, whether it be made by individuals, private companies or governments, is also an economic decision. Our country's recent over-dependence on outsourced manufactured goods and services and the related disastrous impact on the nation's jobs and economic health has constituted clear evidence of that. In our own small way, as a microcosm of national procurement 20 3/4/09 - COMMERCE - BILL 090095 practices, we have been content to measure local and municipal procurement activities only as a fiscal accountability, without regard for its local economic impact. As long as the purchases have been done within the prescribed budget, we've believed that the procurement function was doing all that was reasonably expected of it. We now know that such an approach has wreaked havoc on our national economy, contributing directly to rapidly growing unemployment levels across the country. While fiscal accountability for procurement will still be very much intact with the proposed EOP amendments, the City of Philadelphia will also be able to measure how its bidding processes and procurement activities have impacted levels of inclusion, local company management profiles, ownership structures and residential employment levels in both the public and private sectors. 21 3/4/09 - COMMERCE - BILL 090095 In summary, this bill is not just the right step for the City because it will help create a more inclusive business culture and encourage public and private-sector local employment, it also represents a quantum leap forward in the creation of data that can help the City manage and grow its own economy as a partner with local business leadership. Thank you.
Thank you for your testimony, Mr. Crawley. Are there questions from members of the Committee? Councilwoman Brown.
Yes. Thank you. Good morning. I want to say thank you for putting on the record again the fact that you are correct, too often the not-for-profit sector has been either inadvertently or not discussed at these tables. Councilwoman Marian Tasco and I observed that during DHS hearings over 22 3/4/09 - COMMERCE - BILL 090095 the last couple of years, with the millions of dollars that they subcontract out to not-for-profit, what is their track record, if you will, when it comes to dealing with women and businesses -- minority businesses and women. So this is important and we do need to do what we need to do on this side of the table to make sure not-for-profits aren't excluded from the discussion. Thank you.
What will you see -- because I was asking Councilman Goode, who has led the effort in here -- the whole issue -- and I'm going to ask Kevin and Michael to respond -- around if we were to incorporate non-profits and others, how do they see their offices playing a role, what their current role is and how they see playing their role. What do you 23 3/4/09 - COMMERCE - BILL 090095 think -- how do you see us implementing this across the board?
I really don't understand what the impediment has been heretofore. I don't know why they simply haven't been included. A lot of it is no-bid work, so -- and the shame of it is that we're here talking about this EOP process and the bid process. Well, that only constitutes about percent of the 12 City's spend. About 75 percent of the 13 City procurement is done away from that, 14 and all the tracking that MBEC has done 15 has historically not even included those 16 data. 17 So I don't know what the reason 18 is that they have been excluded, but -- 19
I think 20 your point is that a lot of it is no-bid 21 work. 22
But as I 24 was discussing with my Council 25 colleague -- and I'd like for Kevin and 24 3/4/09 - COMMERCE - BILL 090095 Michael to come back up to the stand, because there's close to $2 billion, a billion dollars in DHS and the Health Department and a billion dollars at CBH, in contracting that's done. So I do want to ask the question for the record, and if my --
Councilwoman, even if it's not bid work, you can consider who the finalists are that you give a no-bid contract to based on whether or not they're a part of the City's overall economic agenda, and if they don't want to participate or play to help create jobs in a focused way, then that should count for something one way or the other.
Right. Well, thank you for bringing that up. And if my Chairman would indulge me, I'd like to get on the record for my purposes --
Mr. Bell and Mr. Dow. 25 3/4/09 - COMMERCE - BILL 090095
-- Mr. Bell and Mr. Dow to talk about how they would see that being implemented and we could have a further discussion about that. (Witnesses approached witness table.)
Mr. Chairman, I might also say, Mr. Bruce Crawley, that this similar issue has been raised with the Law Department, and I've had -- I'm still actually doing homework around this same issue and what happens with how the Law Department does this type of business with law firms in the City and what their offices look like when it comes to the City being representative. Thank you.
When I was at the Office of Housing, which also distributes a lot of non-profit contracts, we started to coordinate with MBEC, because MBEC for approximately two years had requested 3/4/09 - COMMERCE - BILL 090095 information regarding non-profits. Their first attempts were to try to find out the Board makeup of non-profits, and in many situations, because the Board wasn't made up of minority members, we wouldn't be able to count them. But what happens is, we had large contracts, like the Horticultural Society and others, which were getting $4 to $5 million a year classified as non-profits and we made those organizations start to report. At first, they didn't want to, because they weren't made to report. But, like I said, we are aware of with the non-profits what they have to do, and a lot of times the City contracts are maybe 60 to 70 percent of their whole entire budget. So it's just do we want to take the time to make them report? And now is an excellent time, because as we're coming to the end of this fiscal year, before we start Fiscal Year '10 in July 1, if that's the pleasure of Council, then all we have to 27 3/4/09 - COMMERCE - BILL 090095 do is make the people report. Because we have. Like I said, and they do need those contracts. They have people, they have salaries they have to pay. And if we need to report where their purchases are going and then what their efforts are made in terms of inclusion, it's all what we want to do. But then, once again, like I said, it's about the staffing issue, because it's a large amount of information that has to be required from these organizations, and we've all taken hits budget-wise and staff-wise, but if there was some impetus to do it, we could certainly do it.
What was the change between when they first started reporting and as the years moved forward? Were they required to do any EOP plans and did you see a dramatic change in where they were purchasing?
Well, the non-profits were not required to do EOP 28 3/4/09 - COMMERCE - BILL 090095 plans. Like I said, we were signing economic development contracts when I was at the Office of Housing for -- like the Enterprise Center is doing a culinary institute, or Mount Airy USA, they're doing some housing development, and we required information from those organizations. They had to give it up. But, like I said, there are so many different contracts for the non-profits, it's just how do we want to focus our energy to make sure that we're getting the information that's out there. Because, like I said, MBEC at a certain point in time was requiring the information, and I know the Office of Housing at the time, we were cooperating, but then they just stopped that effort. So the effort just stopped altogether. If we need to reinstitute that, we can work with the Commerce Department to make sure that we can get this information.
Before Mr. Dow comments, I know he wants to 29 3/4/09 - COMMERCE - BILL 090095 comment, but I will also say that as part of the annual disparity study and participation goals that are set, we did make sure, with Mr. Crawley's assistance, back then that we included a goal for non-profit contracting. And so we're actually expecting to look at that annual report to see whether that number is real and whether it's moving and whether we're moving forward on that issue. But we did actually begin that process a couple of years ago of actually requiring a goal and requiring reporting around it to some extent. Mr. Dow.
I'd formally say I would agree with Michael 100 percent. I think that he's right on point with his comments. I would add that with a couple of examples of how we begun to look at non-profits and looking at what we spend through the City Commerce Department, the Cultural and Commercial Corridor Bond 30 3/4/09 - COMMERCE - BILL 090095 programs, we ask all of those organizations now to submit EOPs, and we're working with them. So that's part of that process, as a good many of those are non-profit organizations. In the past, I believe what we have focused on is a focus on the composition of staff and Boards. While important, I believe it is not up to us as the City to qualify or certify Boards' positions. Now, we can find that information. What we want to do as a city, if we give a contract to a non-profit, we want to see where they are spending their dollars. Michael mentioned some of these organizations, 60, 70 percent of their revenue is from the City. Well, then as a result of that, you can make a fair assessment that a good portion of that revenue is being spent on operating activity, so buying the pencils, buying the paper and things of that nature. That is where we want to see if they are indeed engaging some of 31 3/4/09 - COMMERCE - BILL 090095 these minority, women and disabled-owned companies. If we can find that information, which we are beginning to do and we'll look to do in the future, with Michael's leadership, with your urging, of course, with the requirements under the disparity study, we will begin to find that information out and then be able to judge our progress or the lack thereof.
Yes. I have a follow-up. And it's aggravated even more when you discover anecdotes where not only are they not doing business with MBE/WBEs, but they're sending those contracts outside the City of Philadelphia to counties, period. So there's several layers of this not-for-profit world where there's opportunity for us to fix.
I think the 32 3/4/09 - COMMERCE - BILL 090095 philosophy or the -- I'll call it the philosophy, but in the past has been that we would not hold accountable non-profits -- and this is what has changed in this Administration -- is, we would not hold accountable non-profits because they're, quote/unquote, non-profit business or they're non-profits, and we are taking a different perspective from that. We are taking that they are indeed businesses, just non-profits, and that if we look at them in a different way and emphasizing the world that spends most of that money, the health world and that community within the City, we will be able to figure out how we can engage those organizations around tracking their spending habits.
I know Mr. Crawley has another commitment. Are there any more questions for Mr. Crawley specifically? (No response.) 33 3/4/09 - COMMERCE - BILL 090095
Thank you. Is there anyone else to testify on this bill? (No response.)
Seeing none, we will move from a public hearing into a public meeting to consider Bill No. 13 090095. The Administration's testimony has suggested that we amend the bill to change DBE to M/W/DSBE and to change DBEs to M/W/DSBEs, and I'm circulating an amendment to members of the Committee making those changes in the portion of the bill where that is required. So I will now recognize Councilwoman Blondell Brown for a motion on the amendment to Bill No. 090095.
Surely, Mr. Chairman. I move that Bill No. 34 3/4/09 - COMMERCE - BILL 090095 090095 be amended as stipulated by the Chairman.
The Chair now recognizes Councilwoman Reynolds Brown for a motion on Bill No. 090095 as amended.
Mr. Chairman, I move that Bill No. 090095 be amended and moved out of Committee with a favorable recommendation and further move that the rules of Council be suspended so as to permit first reading at the next session of City Council. (Duly seconded.)
All in 35 3/4/09 - COMMERCE - BILL 090095 favor? (Aye.)
Bill No. 8 090095, as amended, is reported out of Committee with a favorable recommendation and a rules suspension. This concludes our public meeting. Thank you very much. (Committee on Commerce and Economic Development concluded at 9:55 a.m.) - - - 36 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on March 4, 2009, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)