COUNCIL OF THE CITY OF PHILADELPHIA COMMITTEE ON COMMERCE AND ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, December 4, 2006 10:15 a.m. - - - PRESENT: COUNCILMAN W. WILSON GOODE, JR., CHAIR COUNCILWOMAN CAROL ANN CAMPBELL COUNCILMAN DARRELL L. CLARKE COUNCILWOMAN DONNA REED MILLER COUNCILMAN JUAN RAMOS COUNCILWOMAN BLONDELL REYNOLDS BROWN COUNCILMAN FRANK RIZZO COUNCILWOMAN MARIAN B. TASCO BILL 060855 - An ordinance amending Title of The Philadelphia Code, entitled "Contracts 17 and Procurement," by adding a new Chapter defining and detailing the categories of Disadvantaged Business Enterprises and of City contracts that must be considered separately by the Finance Director in conducting the Annual Disparity Study... - - - 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 the Commerce and Economic Development Committee hearing. The Bill 6 is No. 060855. My name is W. Wilson Goode, Jr., Chair of the Committee. I note that a quorum is present. To my left is Councilman Frank Rizzo, Councilwoman Marian Tasco. To my right, Councilwoman Donna Reed Miller and Councilman Darrell Clarke. The title of Bill No. 060855, amending Title of The Philadelphia 15 Code, entitled "Contracts and 16 Procurement," by adding a new Chapter 17 defining and detailing the categories of Disadvantaged Business Enterprises and of City contracts that must be considered separately by the Finance Director in conducting the Annual Disparity Study and devising the Annual Participation Goals as required by Section 6-109 of the Philadelphia Home Rule Charter, and specifying additional matters that must 3 12/4/06 - COMMERCE - BILL 060855 be included in the Finance Director's annual report required by that Section, all under certain terms and conditions. Allow me to briefly explain the purpose for the bill. The Charter change recently approved by the voters related to new contract opportunities requires the Finance Director to do an annual report containing an Annual Disparity Study and Annual Participation Goals. The Annual Disparity Study will analyze participation of disadvantaged business enterprises and City contracts compared to the overall availability of qualified disadvantaged business enterprises in the marketplace. The Annual Participation Goals will set out the City's goals of participation by disadvantaged businesses for the upcoming year. Through the Charter amendment, City Council was given the authority to define and detail the categories of disadvantaged business enterprises and the City contracts that must be 4 12/4/06 - COMMERCE - BILL 060855 considered by the Finance Director in conducting the Annual Disparity Study and devising the Annual Participation Goals. That's the purpose for the bill. The bill also includes additional matters that should be included in the report as authorized by the Charter change: No. 1, an up-to-date listing of qualified disadvantaged business enterprises to be approved by City Council; No. 2, contract participation rates for Philadelphia-based disadvantaged businesses; and, 3, City contract participation goals for not-for-profit City contracts related to for-profit subcontracting opportunities. I will be offering an amendment that's drafted by the Law Department, which are technical amendments per a memorandum sent to me. They are essentially just technical amendments. The only other amendment that's included among the proposed amendments I'll just 5 12/4/06 - COMMERCE - BILL 060855 mention, we also would like to devise a category of Philadelphia-based disadvantaged businesses. We want to know how many Philadelphia businesses are getting contracts as well. That's the other thing that's added to the bill. Actually, both of our witnesses are here. I'm going to ask them to come as a panel. So I call A. Bruce Crawley, Millennium 3 Management, Carolyn Nichols of Minority Business Enterprise Council and Vince Jannetti, the Finance Director. You can all come as a panel. Mr. Crawley, could you please state your name for the record and proceed with your testimony.
Okay. Great. Thank you very much. I'm Bruce Crawley, President of Millennium Management. I've lived in Philadelphia all 12/4/06 - COMMERCE - BILL 060855 of my life, and for the last 17 years, I've owned my own business here. As an African-American business owner, I've always been concerned about the lack of meaningful access to contract opportunities in Philadelphia for businesses owned by blacks and other so-called minorities. The evidence is abundantly clear that there's a significant and damaging imbalance in the way that contracts have been awarded by the City of Philadelphia. J. Miller and Associates indicated that businesses owned by blacks, Asians and Hispanics collectively represented just two percent of the City's contract revenues, and businesses owned by white females represented an additional two percent. Over the five-year period of the study, there was virtually no City business awarded to businesses owned by disabled Philadelphians. That left about 7 12/4/06 - COMMERCE - BILL 060855 96 percent of the City government's contract revenue to businesses owned by white males. If we do just a bit of analysis based on most recently available Census Bureau data, we can very quickly realize how damaging such a contract distribution pattern has been for the true majority of the City's population and for the City as a whole. 2 percent. 1 percent of the City's population. Non-Hispanic whites, according to the 2005 Census, constitute 40 percent of the City's population. 5 percent are white females, who have also been systematically excluded from City contract opportunities. 8 12/4/06 - COMMERCE - BILL 060855 By deduction, white males represent about 272,000 persons in Philadelphia, a little less than 5 percent of the City's overall population. 6 That leaves our City with 96 percent of its contract revenue flowing through about 19 percent of the population. It has been that way for as far back as any of us can remember. As egregious as these numbers are, they don't include at all the additional piece of Census Bureau information that informs us that there are 354,409 persons in Philadelphia over the age of five who are described as living with a disability. 2 percent of our City's 19 population, virtually all of which has been excluded from doing business in the City in which they live. These circumstances go far beyond any issue of affirmative action, fairness or equal opportunity. These concepts, when discussed by most 9 12/4/06 - COMMERCE - BILL 060855 governments, mainstream business leaders or when they are covered by mainstream media outlets, are cloaked in outdated, condescending images of charitable assistance and civil rights. But given the new demographics of Philadelphia, this can no longer be reduced to a divisive issue of fairness perceptions. This is, instead, a simple matter of economic competitiveness and survivability for the City as a whole. I'll go out on a limb and say that no economic unit, no city, no state, no country, will be able to feed its people, create jobs for those who need them or provide incentives for people to achieve as long as 96 percent of their gross business receipts are limited to 19 percent of their population. This is what occurs in Philadelphia's public sector contracts, and the situation in the private sector, without government leadership, is just as desperate and deplorable. 10 12/4/06 - COMMERCE - BILL 060855 There's an additional issue created by this contract imbalance. 5 percent of the City's population now lives below the poverty level. I am absolutely convinced that our economic and contract disparities are a leading contributor to that situation. I would not be surprised at all to find in any city where one out of four adults were living in poverty, that there would be social unrest, a lingering sense of desperation, a greater tendency to pursue alternative, illegal sources of income and a higher incidence of crimes of violence. S.
population during the Great Depression, and it's true today of Philadelphia. With all of that as background, I was especially pleased to see on the morning of November 8th that the citizens of Philadelphia seemed to have a greater understanding of all this than most 11 12/4/06 - COMMERCE - BILL 060855 people in the government ever expected. On that morning, I saw that more than 150,000 Philadelphians, about 68 percent of those who cast a ballot on the question, had voted to approve City Council Bill No. 060855, which would mandate a more effective process for ensuring that City contract opportunities are expanded to include blacks and other so-called minorities. With that hurdle having been cleared very emphatically on Election Day, as I understand it, we are now at the step of the procedure wherein we ensure that the infrastructure and processes are appropriate to achieve the results that Philadelphia voters now expect from their government. In that regard, I do have a few lingering concerns. Business award by discrete classification. It is long overdue that the City's contracting process break out from a broad minority classification and 12 12/4/06 - COMMERCE - BILL 060855 individually calculate the percentage of contract revenue and number of contracts awarded to African-Americans, to Hispanics, to Asians, the disabled and white females. Heretofore, for some inexplicable reason, we have been advised that the MBEC didn't have either enough staff or enough computers to make such calculations, obviously. If they were able to provide an aggregate number for so-called MBEs, they did have to have the ethnic components available to do so. They simply chose not to provide that discrete information, making it more difficult for blacks, as an example, to know how much revenue the City ever awarded to their businesses. With this change, we'll know precisely where the imbalances are and will be better prepared to address them. Another concern is the inclusion of not-for-profit contract awards in all future disparity reports. 4 billion in contract awards, that amount that went to not-for-profit business entities, were not required at all to adhere to any mandate to include businesses owned by blacks, Hispanics, Asians, the disabled or even white women. All of the calculations produced by MBEC, therefore, were based on just percent 10 of the City's overall contract revenues. 5 percent as 17 an actual number, very close to the 2004 18 Disparity Study result. 8 billion to the City contract awards 22 available to blacks, other minorities, 23 the disabled and white females. 24 Another concern is local 25 preference. We are absolutely delighted 14 12/4/06 - COMMERCE - BILL 060855 to see that the proposed amendment will now focus on DBEs that are located within the City of Philadelphia as a first preference. These contract awards are a means to improve Philadelphia's economy overall and it is entirely appropriate that the process be amended to reflect that. Annual Disparity Study. Perhaps our greatest concern is to ensure that there is an annual report presented to Council but that there be no question about the accuracy and the objectivity of the reported data. Accordingly, we strongly suggest that a third-party agency or firm with experience in completing such studies be retained to ensure the accuracy and objectivity of the reports that will be submitted. Another concern is prime contractors as an emphasis. 1 percent are owned by 15 12/4/06 - COMMERCE - BILL 060855 females, it is difficult to understand the virtual lack of any prime contracts to minority firms during the 1998 to 2003 Disparity Study period. The language in the MBEC Mission Statement clearly limit minority participation in City contracts to subcontract status. While that seemed to make sense more than years ago, it 11 serves as an artificial ceiling on the 12 growth potential of minority-owned 13 businesses.
That, too, needs to be 14 changed and there should be a new 15 emphasis on identifying so-called 16 minority firms that can serve the City as 17 prime contractors. 18 The Census Bureau also tells us 19 that about 85 percent of people employed 20 at minority-owned firms are themselves minorities. If we have a dangerously high minority unemployment rate in Philadelphia, it appears that the quickest way to address it is to nurture a new generation of prime business 16 12/4/06 - COMMERCE - BILL 060855 relationships between the City and DBE firms. In summary, let me say that even with all that there is still left to consider and improve, I am absolutely delighted that Councilman Goode's bill 8 and the vote of the people of Philadelphia has brought us this far. Back in 1996 when I served as Chairman of the African-American Chamber of Commerce, we did a comprehensive report to City government on all of the steps that were needed to be taken to finally include all Philadelphians in the City's economy. Here, ten years later, I'm encouraged that we have the right people at the helm and a popular mandate to ensure that it will finally happen. I am confident that this will be one of the smartest things that Philadelphia has ever done to improve its own economy and its own neighborhoods. Thank you.
Thank you 17 12/4/06 - COMMERCE - BILL 060855 for your testimony, Mr. Crawley. We note for the record that we've been joined also by Councilwoman Blondell Reynolds Brown. Ms. Nichols, please identify yourself for the record and proceed with your testimony.
Yes. Good morning. My name is Carolyn Nichols. I'm the Director of the Minority Business Enterprise Council for the City of Philadelphia. I'll just briefly just go through my testimony I've submitted.
Right before you proceed, Mr. Crawley, do you have copies of your testimony? I'd just like to have it for the record.
As you know, MBEC is responsible for implementing and administrating the City of Philadelphia's 18 12/4/06 - COMMERCE - BILL 060855 anti-discrimination policies relating to the inclusion of minority, women and disabled-owned businesses in City contracts. Bill No. 060855, the bill, proposes to add a new chapter, Chapter 7 17-1500 to The Philadelphia Code. This new chapter contains some definition changes to existing law, such as adding the term "qualified" to the definition of Disadvantaged Business Enterprises as set forth in Section 2.M of Executive Order 02-05, reauthorized effective September 4, 2006, which is referred to in my testimony as the Reauthorized Executive Order. Section 17-1502 of the bill 18 requires the separate consideration of DBEs, or disadvantaged business enterprises, owned by African-Americans, Hispanic-Americans, Asian-Americans, native-Americans, women and disabled persons for purposes of conducting the Annual Disparity Study and for devising Annual Participation Goals as set forth 19 12/4/06 - COMMERCE - BILL 060855 in Section 6-109 of the Philadelphia Home Rule Charter. Further, the contract categories of Professional Services and Public Works must be separately considered. As a practical matter, I've been advised by the legal department that the proposed change definitions for DBEs may result in the unintended consequence of rendering firms that are certified under the Reauthorized Executive Order as MBEs, or minority business enterprises, which currently contain Asian-American, Hispanic-American and African-American- owned businesses as not being certified under the new proposed definitions set forth in Section 17-1502. Additionally, MBEC would have to work with two sets of DBE definitions, one to complete the Annual Disparity Study and Annual Participation Goals and the other for purposes of setting participation goals in individual contracts, economic opportunity plans and 20 12/4/06 - COMMERCE - BILL 060855 related work. I would propose further discussions to clarify the DBE definitions set forth in the Reauthorized Executive Order and Section 17-1502 to develop a viable, workable solution. Section 17-1503 requires up-to-date listings of qualified disadvantaged enterprises and City contract participation goals for DBEs and not-for-profit City contracts related to for-profit subcontracting opportunities. MBEC currently maintains a directory listing of minority, women and disabled-owned business enterprise firms that is constantly updated and is accessible online and is amenable to the recommendation of enhancements and/or improvements. The setting of contract participation goals in non-profit City contracts is workable and coincides with MBEC's plan to begin reporting non-profit City dollars spent with MBEC-certified vendors in upcoming annual contract 21 12/4/06 - COMMERCE - BILL 060855 participation reports. In conclusion, I look forward to working with City Council to maximize City contracting opportunities for minority, women and disabled-owned businesses, and thank you for allowing me to provide this testimony. I am available for any questions of the Committee.
Thank you for your testimony, Ms. Nichols. Mr. Jannetti, are you offering testimony?
Thank you. Let me start with several areas of your testimony, Ms. Nichols. First, you state that the new chapter contains some definition changes to existing laws, adding the term "qualified" to the definition of Disadvantaged Business Enterprise, as set forth in Chapter 25 17-501(8) of The Philadelphia Code. 22 12/4/06 - COMMERCE - BILL 060855 You are aware that the Charter amendment that was approved by over 150,000 voters at a margin of more than two-to-one used the term "qualified disadvantaged business enterprises"; are you not?
Yes. The legal department corrected me on that. That's why I took it out of the testimony I submitted to you earlier.
So not only does the Charter amendment, which rises above Executive Order and ordinance, take precedent, but this bill specifically also says at the end of it in Section 17 17-1504 that for the purposes of this disparity study and the annual DBE plan, that all matters within this legislation will control over issues within 17-501. You do understand that as well?
I guess my primary question is, what do you consider to be contained within that section of 23 12/4/06 - COMMERCE - BILL 060855 the Code right now in 17-501? Are you considering that to be the amendment that's offered through the Ortiz Bill in 2003 or not?
Well, I've been advised by the legal department that, in effect, with the effect of 6-109 and the Executive Order has been to override or supersede 17-500. That's my understanding now after I conferred with the legal department. The only thing I'm trying to get at is --
My question was, were the amendments that City Council unanimously approved to 17-500 in 2003, do you consider that to be law?
That has not been the position of the Administration. The Administration has said that the Ortiz bill was illegal because Council did not have the authority to legislate on issues of contracting.
I understand. 24 12/4/06 - COMMERCE - BILL 060855 The only point I'm trying to bring home, Councilman Goode, is that I'm hopeful that we can sit down and work all of this out, work out the definitions and come to a common understanding so that we don't have any adverse effect on current MBEs and we can begin -- because I'm not adverse to working with separate categories of DBEs.
Ms. Nichols, does the Charter at all refer to -- prior to this recent Charter amendment, does the Charter at all refer to Minority Business Enterprise Council?
Does this bill refer to the Minority Business Enterprise Council?
You mean referring to MBEC? No, this bill does not refer to MBEC. It refers to the Director of Finance.
So why exactly are you testifying? 25 12/4/06 - COMMERCE - BILL 060855
MBEC is a services unit within the Office of the Director of Finance.
Mr. Jannetti, did you officially assign MBEC to do this Annual Disparity Study and annual DBE plan?
I didn't actually officially assign it, Councilman. It's something we discussed, we talked about internally. It's, by default, assigned.
I think the Administration would understand that if City Council unanimously approved a bill 21 in 2003 and were told that that bill was illegal and the City Council should pretty much mind its own business because it does not have authority under the Charter to legislate any of these 12/4/06 - COMMERCE - BILL 060855 matters, then we pass a Charter change that allows us to define how the report should be done, that we don't have any reason to seriously consider how that conflicts with MBEC's current functions when MBEC was not mentioned in the Charter change nor is MBEC mentioned in this bill. Of course, anything can be worked out, but that's not the approach we're taking, and for Ms. Nichols on behalf of MBEC to come testify and to even raise issues of how it conflicts with MBEC's current functions is ridiculous to me. Obviously you don't get what we're trying to do. City Council is obviously trying to seize as much control and authority over fairness and diversity in contracting that we can, not only because we don't have confidence in this Administration on that issue, but we don't want to leave it to even future administrations of what they may or may 27 12/4/06 - COMMERCE - BILL 060855 not do by Executive Order or who may or may not be elected. So we put something in the Charter. It has nothing to do with whether MBEC exists or who is the Finance Director or who is the Mayor. It has more to do with having an annual process in which we can assure that when taxpayer dollars are being spent, they're being done in a fair way. In setting up a data-driven process, it shows that there's underutilization and there will continue be underutilization unless we undertake a new process, and that the process is not going to conform with what this Administration or any other administration wants to do through Executive Order. It's set by the voters, as everything else is set by the voters, including our being here is as a Charter mandate. There are 17 members of Council because the Charter says so. So this has nothing to do with what anyone does as a matter of practice 28 12/4/06 - COMMERCE - BILL 060855 and routine business.
Thank you. Mr. Crawley, do you have any comments on the testimony of Ms. Nichols?
No real comment, other than a point of confusion as to why the position is one addressing the difficulty in making all of this work. I just think that it has been shown in other procurement functions around the City that it makes ultimate sense to break out discrete ethnic groups who have been previously discriminated against for purposes of making reports. The School District now does it, African-Americans, Hispanics, Asians, native-Americans, white females and the disabled. They did it very simply. I don't think that it disqualified any of their previous vendors. And if it did, then they certainly went right back out and made another list. I mean, it doesn't seem to 29 12/4/06 - COMMERCE - BILL 060855 be a major problem, and I wouldn't think that it would be a problem. The bigger issue for us is that there are virtually no businesses of color getting contract opportunities now, and if you disqualify all of them and have to start over with people who are really going to get an opportunity, then that, too, would be an improvement. Again, the Disparity Study showed two percent for African-American, Hispanics and Asians collectively, and white females another two percent, and that only counted -- when they do their count, it does not include the 1.8 billions of dollars that have been excluded on the not-for-profit side. So I think that anything that's done would be an improvement, and I am sure that's why people in the electorate voted so overwhelmingly for this bill.
And as part of this process even as outlined through this particular bill, it asks for there 30 12/4/06 - COMMERCE - BILL 060855 to be an up-to-date listing of disadvantaged businesses. That is already part of the process. And this particular bill creates a new chapter. It does not impact any other chapter, but those provisions within this chapter for purposes of this chapter control over the other chapter. So it does not interfere with your process at all, and I think you know that. And for the record, I received a legal opinion from the Law Department and actual amendments from the Law Department that were technical changes. At no point whatsoever did the Law Department raise to me those issues of this interfering with certifications. And I have a copy of the legal opinion right here.
If you'd like, I can forward the information that was sent to me and we can work on that.
It was forwarded 31 12/4/06 - COMMERCE - BILL 060855 to me. It was an e-mail, yes.
Yes. Thank you, Mr. Chairman. I, too, circled the word "qualified" here, but I believe that Councilman Goode has adequately addressed that. On of your testimony, you state, "Further, the contract categories of Professional Services and Public Works must be separately considered." Please just share with us why that makes sense to the Department. 32 12/4/06 - COMMERCE - BILL 060855
Well, that's part of the bill. I was just describing part of the bill, 060855. That's part of the bill.
And I should mention in the presence now of Mr. Crawley that just last week the City Solicitor affirmed that MBEC will do what I've come to observe and realize, and, that is, that the Philadelphia Public School District and PHA specifically, those departments, have figured out a way to address the issues you just raised. That's number one. And, number two, I've had concern that those departments don't talk to each other. MBEC has not talked with the School District and its procurement officers and PHA -- long term, over the past -- since I've been here, and the City Solicitor indicated that they are doing what they do in a way that is transparent and better, and so MBEC will be having more discussions and 33 12/4/06 - COMMERCE - BILL 060855 conversations, if there's no other way, to model some of their practices that they've done well.
Thank you, Mr. Chairman. I huddled with my colleague and Chairman, who has done an extraordinary job in this area that's so important to the City and to the members of this Council, and the concern that I have gotten in the last almost three years now here in City Council with minority businesses that have come by to say, I've read Philadelphia is doing well and we want to see what kind of work is out there that we can get information on and bid on and so forth. And this issue of minority businesses that were not, for 34 12/4/06 - COMMERCE - BILL 060855 lack of a better description of it, signed up with MBEC were being left out of the process, and I considered that to be a substantial problem, because there are minority-owned businesses in Philadelphia. There's probably folks also from outside of Philadelphia that want to do business with the City, but the response that they get either directly or maybe even verbatim when they go to MBEC is that if you're not on the list, you have to get on the list, and then at that point, you can qualify. Do you think that in what you read of this, Ms. Nichols and Mr. Jannetti, that this would make sure that in this study that not only people that are qualified and certified under MBEC but people that are not certified under MBEC but are qualified are entitled to bid on work in the City of Philadelphia?
As I understand the Disparity Study, the Disparity Study 35 12/4/06 - COMMERCE - BILL 060855 would look at certified businesses as well as those businesses that are not certified, because that's where the disparity impact is weighed. You have to look at the pool of ready, willing and able vendors that are out in the community in the Philadelphia region and then look at the certified vendors working with the City of Philadelphia. That's how you develop the whole analysis. So that would all be considered as part of the Disparity Study, as I understand it, and you would look at the legal, historical, anecdotal, best practices. You would look at all of that evidence and come up with a report on an annual basis.
And we'll probably get more into this as we get ready for the budget season in about another few weeks, right, Mr. Councilman and Councilmembers, that you would need some restructuring over there at MBEC, because now we want to open this up much 36 12/4/06 - COMMERCE - BILL 060855 more and make sure that our minority community does in fact get equal treatment in the area of business, where if you don't restructure, MBEC might become almost irrelevant, because with this piece of legislation, the minority contractors that want to do work in a particular field don't necessarily have to be signed up with MBEC or, for that matter, wait for what a lot of people have told me for a bunch of years, not just in the years I've been here and in Council, that it is a long, arduous process. Anyway, just, I think, a heads-up from my point of view that MBEC is going to -- if it's going to survive, the changing of the guard in this City might mean that there is going to be significant changes in the way MBEC has done business in the view of whoever becomes the next Mayor of this City in conjunction with the City Council, but definitely I would take a look at 37 12/4/06 - COMMERCE - BILL 060855 restructuring, because if not, I just think that MBEC becomes a thing of the past.
Councilman, in response, I think that a few years ago we had recommended to the Mayor's office that they begin a process of accepting universal certifications. I think Carolyn was there when we made those recommendations, that being a situation wherein people who wanted to bid on a piece of City business who had not previously been certified, because everybody wants to know that this business actually is black-owned, Hispanic-owned, Asian-owned, female-owned, issues with all of that. So you want to be certain that these people are not fronts. So you do want certification. So we don't want to do without certification. The problem is that people who had not previously been concerned about being certified through MBEC because the City's track record for 38 12/4/06 - COMMERCE - BILL 060855 including businesses owned by people of color had been so dismal, they had not wanted to go through the process. But a contract comes up and there's an opportunity for them to do business with the City. They come in and they're told that they need an MBEC certification, and now the contract bid process is about a month, a month and a half and the MBEC certification cycle is six months to a year, so they missed their opportunity. So we had recommended that there be a universal certification so that if the State of Pennsylvania -- for example, the Department of Transportation has a certification process, SEPTA has a certification process, PECO has a certification process. All of these people -- the federal government has ADA. Many businesses owned by people of color are triple and quadruple and quintuple certified and yet they have to stand in line and wait to get in line at the City. And so what we recommended was that these 39 12/4/06 - COMMERCE - BILL 060855 universal certifications, as long as they were all current, would stand in place of having to wait six to months. And so 5 that would make sense and it would be 6 appropriate for having people have 7 opportunity. 8
I just wanted to 12 add that we have implemented that. We do have reciprocal certification right now. So we did move on that.
Good morning. I would like to know what percentage is disabled and what is the percentage for all six categories?
The participation 40 12/4/06 - COMMERCE - BILL 060855 rate has been below one percent, as I can recall, like 0.5 percent or somewhere in that change. It's been very low. That's something that we've been working on to outreach, working with the Mayor's Office of Disabilities and other groups in the community to try to develop a pool of disabled-owned businesses that can become certified and work with the City. But that is something that has been very low, very low participation rate in City contracts.
Do you have a program in place to encourage them to seek certification?
The City has not. We're working on developing that now. Heretofore there has not been anything in place at all to do any outreach to disabled-owned businesses. Since I've been in, we've started to begin to do that, to identify the leaders and the groups in the communities to begin to get our arm's around the universe of 41 12/4/06 - COMMERCE - BILL 060855 disabled-owned businesses in the Philadelphia region to begin to bring the individuals in, and we're just in the beginning of doing that, because it's never been done heretofore.
Another thing I want to know, what is done to guarantee that a minority participant receives the money that they're supposed to receive from a contract?
We have come a long way in that. Several things have been done. Electronically, the City now has electronic payment systems to track payments to minority vendors, which hasn't existed before. Primarily, as Mr. Crawley has pointed out, which we're working on, most of the minority vendors are subcontractors, and the problem in the past has been that these subcontractors do not have privity with the City. The City has privity with the prime. So a lot of times we didn't know what was going on at the subcontracting 42 12/4/06 - COMMERCE - BILL 060855 level. We've addressed that, that now in contract language the prime is legally obligated to pay the subcontractor within five days of receiving their payment, and not only do they have to affirm that as part of the contract, but there's an electronic payment system that affirms that that payment has been made and the prime is required to record that information in that system. And in addition to that, MBEC also has enforcement personnel to follow up, when need be, to make sure that these things happen.
My understanding is that they're only using the pool of approximately 1,200 when there's been 13,000 to 15,000 participants who would like to be certified; is that correct?
My 43 12/4/06 - COMMERCE - BILL 060855 understanding is, they pull participants from a pool of 1,200 when there's approximately 13,000 to 15,000.
Yes. The size of the MBEC directory, City directory, is 1,200, but I do want to say that the DBE -- we also do the federal DBE certification. In that directory we have approximately another 600 vendors. But you're correct, there are about 15,000 disadvantaged businesses in the City of Philadelphia. So we're less than ten percent. So that's something that we're working on.
I would think a city of this size, that they should address this aggressively.
Yes. Yes, ma'am. That is something we're very aggressive in addressing.
Thank you, Councilwoman. Are there any other questions from members of the Committee? (No response.)
Good morning, Mr. Ali. Please state your name for the record.
Good morning, Councilman and other distinguished members of the panel. My name is Jihad Ali. I'm with a group of developers and unionized contractors who wanted to take a minute to thank you. Thank you, thank Councilwoman Tasco and the rest of you that have been on the forefront of this struggle about inclusion. And I also 45 12/4/06 - COMMERCE - BILL 060855 would like to thank the voters of the City of Philadelphia. Everything that we're talking about today has a significant impact on the lives of a lot of young people in the City of Philadelphia. One of the things that some of the other panel testified about this bill, one of the questions that one of our members had was about the $5 million limit for DBEs. Does that match the U.S. Small Business Administration's limit as far as regulations? It's the limit for three consecutive years. Because the reason I have a concern is that if we look at -- one of the things that we want to do is increase the primes, and if we look at developers and general contractors, it would only be a little bit of time before they pass that limit, and I was under the impression that the U.S. Small Business Administration looks at a limit of $17 million a year.
I'm sorry, 46 12/4/06 - COMMERCE - BILL 060855 Mr. Ali. I was looking at three different pieces of legislation before I could address specifically your question. That 5 million can be looked at, but still even within that -- that is just a broad categorization that we can change, but even within that categorization and even through the amendment that we're offering today, the decision can still be made by the Finance Director based upon whether they feel that that business has still been discriminated against and is not participating fully within the process. In fact, I'll read the amendment. The amendment says "unless it can show that, as a result of prejudice or differential treatment based on socially and economically disadvantaged status of its ownership, its ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business who have not been 47 12/4/06 - COMMERCE - BILL 060855 subject to such prejudice or differential treatment." So there is -- I won't say a waiving of it, but it is not a hard category as much as it is a guideline for examination.
Okay. One of the other things that -- Councilwoman Campbell, welcome to the City of Philadelphia's Council. One of the things that you talked about was disabled business. I regularly attend the Redevelopment Authority's meetings monthly. I've been doing that for the past four years. One of the things that has often disturbed me, although it wasn't my focus, was that a lot of times contracts are let at different agencies and they have some goals, and if you follow some of these agencies through the cycle before the contract might be let, they'll have all kinds of promises that they're going to hit so many goals. At the conclusion of that, maybe six months 48 12/4/06 - COMMERCE - BILL 060855 forward, you'll come back and they'll say, well, they didn't hit the DBE goal. And the DBE goal over there was always never met, and that was only two percent, but they were never meeting the two percent goal over there for DBEs. So I think that that concern needs to be looked at, because when we talk about construction, I've had a 20-year history in construction, in the field. I mean, I've worked with my hands. I came up out of the Marine Corps. I became a contractor, and in the course of that, throughout my experience, there's a lot more opportunities for people to work in construction that's not working with their hands. There's office personnel. There's all kinds of support services that can be provided. So we really need to be inclusive when we look at that and just not focus on the people out there with their hands every day out in the field. The other thing about payment, 49 12/4/06 - COMMERCE - BILL 060855 a couple of my contractors that have come to me, when we look at this payment issue, one of the things that we don't really particularly focus on is this change order, payment for change orders. A lot of times that's a secondary issue that contractors will not get paid on, and nobody is fighting for them. There was one of our contractors who was owed close to $25,000 for months on the job 12 that was already closed out. Had it not 13 been for our efforts to go to the Board 14 of one of the agencies to get him paid, 15 he wouldn't have gotten paid. So I think 16 those are vital concerns. 17 And the last one is enforcement. One of the things I think that this panel should consider as you move forward is enforcement. Because we all have these good intentions and we all have people that come out and have a different set of agenda than you, and you're actually the representative of the people, but there's staff underneath you 50 12/4/06 - COMMERCE - BILL 060855 that will go against what you want from different agencies, and I think you should have a strong enforcement and I think you have to be tough, because when we look at the paper every day and we see these young people dying, we have a lot of young people walking around with work clothes not working, and ultimately we're going to have to face that issue of that whole inclusion of youth in these trades. And I'm sure that you will get there, but we can't do that unless we have a collective effort. And I also look at this as a continuation of our struggle that we, African-Americans and other disadvantaged people, have had since the 1960s. This is a continued struggle that Dr. King talked about before he was assassinated. So I'm sure that we'll all do well, but one thing, we all have to be united and we all have to stay focused and we can't let people misdirect our efforts. But thank you for the 51 12/4/06 - COMMERCE - BILL 060855 opportunity, and I commend this panel, once again, for all your efforts.
Thank you. Thank you for your testimony. Questions from any members of the Committee?
I have a question for you about the same issue in terms of the $5 million. In the amendment it said that unless -- I'm just going to go where you have the amendment. "Shall not be considered a DBE, unless it can show that, as a result of prejudice or differential treatment." How does somebody prove all of that?
That's a determination that can be made by the Finance Director, on one hand, as the bill says. On the other hand, we also have the ability on an annual basis to approve a list of qualified disadvantaged businesses.
City Council does? 52 12/4/06 - COMMERCE - BILL 060855
So if a company is doing business with the City and they receive more than $5 million each year or is it in three consecutive years?
It's a classification over a period of time, but in any given year if they're still facing discrimination, there can be a review if they can prove that they are still being discriminated against and they should be involved in the process, and Council, through this legislation as originally crafted and even through the amendment, has the ability to approve the list of disadvantaged businesses.
Well, $5 million is such a low amount of money. It's not a lot of money. I mean, do we 53 12/4/06 - COMMERCE - BILL 060855 have to have that in there at all?
I don't think we ought to limit how much they can get, because we look at the sheet and totally there was, Fiscal Year 2005, $600-and-some million and only about 10 percent went to MBE and seven to DBE and 11 none to disabled, and totaling 21 12 percent. I don't know if the dollar 13 value has any meaning to it. 14
Dollar value has some meaning. Whether we should stick to the dollar value or how we should consider the dollar value I believe is debatable, but what we definitely want to look at long term is diversity. Even as we increase opportunity, we don't want the business to continue to go to the same black business. So there has to be a point in which people graduate and become part of the majority market. That's why that 54 12/4/06 - COMMERCE - BILL 060855 language has consistently been in there. It's actually consistent with the legislation we passed in 2003 and it's been consistently applied, but it's something that is flexible. So in terms of how we make it more flexible, we can decide, but, in general, it's there so that the business does not continually go to the same businesses, even if those businesses are considered to be disadvantaged and fall in those categories. So it's to provide the greatest diversity.
Councilman, I'd like to comment on Councilwoman Tasco's comment. My question that I asked was, you cite in Paragraph 9 that you're adopting these regulations almost in accordance with the U.S. Small Business Administration regulations. Well, my question was, doesn't the Small Business Administration regulations have that threshold of $17 million? Because I agree, like you, that we should have a 55 12/4/06 - COMMERCE - BILL 060855 threshold, but one of the things from our experience of this whole fight, if we go back a couple years ago, you can almost know that there's going to be certain adversaries lining up to fight this issue. And one of the things that happened before in the past was, we didn't have a threshold, and my concern now is, this is too low, because we're talking about general contractors and developers who sometimes have their own construction companies. Most of them will be over this threshold in three years with no problem, because majority of jobs are from $6 to $7 million, but nobody is doing -- very few, maybe one or two African-American firms in terms of development in this City, is doing 17 million a year. So I think that if we went to that, we would still have a great opportunity. And even those firms that are consistently -- there's only a few firms that are consistently getting work, and they are headed by MBEs, but still 56 12/4/06 - COMMERCE - BILL 060855 shouldn't they -- they're still helping the process. They're still helping other MBEs and DBEs participate.
Okay. Is the Committee comfortable with the $17 million threshold?
If you're going with the guidelines of Small Business.
Okay. Any other questions for this witness? (No response.)
Is there anyone else to testify on this bill? (No response.)
We will now move from our public hearing into a public meeting to consider Bill No. 21 060855. There are amendments to this bill that have been circulated. The amendments are those that were drafted by the Law Department. The only amendment 57 12/4/06 - COMMERCE - BILL 060855 that was contained within this bill that was not drafted by the Law Department as a technical amendment is on the third page. We're adding a separate category G, DBEs operating within the City of Philadelphia. In addition to that, on , I would like to go to the first paragraph, the third sentence and scratch the word "five" and put in the word "seventeen."
Point of information, Mr. Chairman, if I may. Can you again briefly repeat why the 16 million number. Why is that a threshold? 17
It's consistent with the new threshold by the Small Business Administration.
And I'd like to strike the numeric amount of "$5,000,000" that's in parentheses and change it to "$17,000,000." 58 12/4/06 - COMMERCE - BILL 060855 The Chair recognizes Councilwoman Tasco for approval of the amendment.
Mr. Chair, I move that we adopt the proposed amendment to Bill 060855. (Duly seconded.)
The bill is amended. The Chair recognizes Councilwoman Tasco again for a motion on the bill as amended.
Mr. Chair, I move that Bill 060855 as amended be reported out of Committee with a favorable recommendation and a request for the suspension of the rules so that this bill can be heard at Council's next 59 12/4/06 - COMMERCE - BILL 060855 session. (Duly seconded.)
Bill No. 11 060855 as amended is reported out of the Committee with a favorable recommendation and with a suspension of rules to allow a first reading at the next Council session. Thank you all for your testimony. Thank you, Committee members, for attending. Thank you very much. (Committee on Law and Government adjourned at 11:10 a.m.) - - - 60 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 December 4, 2006, 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.)