COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING BEFORE THE COUNCIL COMMITTEE ON COMMERCE & ECONOMIC DEVELOPMENT - - - Room 400, City Hall Philadelphia, Pennsylvania Monday, November 16, 1998 1:53 p.m. - - - Resolution No. 980734 - Authorizing Council Committee on Commerce and Economic Development to hold investigative hearings on the performance and compliance of Kvaerner Shipbuilders and the Philadelphia Shipyard Development Corporation with the participation goals of minority and female businesses and contractors on the rehabilitation of the Philadelphia Naval Yard. PRESENT: COUNCILMAN MICHAEL A. NUTTER, Chairman COUNCILWOMAN AUGUSTA A. CLARK COUNCILWOMAN DONNA REED MILLER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN ANGEL L. ORTIZ - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 I N D E X Harold Rafdal, President and CEO. . . . . . . 9 Kvaerner Philadelphia Shipyard Robert Benko. . . . . . . . . . . . . . . . . 11 Executive Director PSDC William Hankowsky, President. . . . . . . . . 105 Philadelphia Industrial Development Corporation James A. Roundtree, Jr. . . . . . . . . . . . 126 Deputy Finance Director, Executive Director MBEC John Kromer, Director, OHCD . . . . . . . . . 129 Charles Solomon . . . . . . . . . . . . . . . 135 Director of Economic Development, GUAC Kevin Brooks, Assistant Director. . . . . . . 170 Employment and Training, OHCD Handford Jones. . . . . . . . . . . . . . . . 175 Economic Opportunity Coordinator, OHCD Richard Ryan, Project Manager . . . . . . . . 185 Kvaerner Jihad Ali, Committee Chairman . . . . . . . . 245 United Minority Enterprise Associates Bill Wellock. . . . . . . . . . . . . . . . . 258 Keystone Boiler Works - Manayunk John Thomas, Private Citizen. . . . . . . . . 262 3 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 P R O C E E D I N G S
Good afternoon, ladies and gentlemen continuation of the public hearing that took place on October 27th. That hearing had been recessed until today Monday, November 16th, at 1 o'clock p.m. We were slightly delayed by an earlier hearing but are prepared to continue resumption of testimony on Resolution 10 980374. My name is Michael Nutter, Chair of the committee. And with me is Councilwoman, Tasco who had been appointed to the committee on the prior occasion of the hearing. One bit of housekeeping. Apparently between the time of the first and today, there was testimony received by Norman K. Spencer, President and CEO of the Berean Institute. That testimony will be entered into the record as if it was read, by being given to the stenographer. Councilwoman Tasco, who sponsored Resolution 980374, has prepared an agenda for today's session. That agenda includes testimony by Mr. Harold Rafdal, President and CEO of the Kvaerner Philadelphia Shipyard, Incorporated, 4 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Mr. Robert Benko, Mr. James Roundtree, Mr. John Kromer, and Mr. Charles Solomon. Those are the individuals who will be testifying today. To the best of my knowledge, that is the lineup, as worked out by Councilwoman Tasco, who was the prime sponsor of this resolution. I believe Councilwoman Tasco has an opening statement, and then we will begin with testimony. Councilwoman.
Thank you very much. As you know, these hearings began in a response to the queries made to my office and to the Controller's Office by minority and female contractors, who sought to participate in the construction aspect the in the renovation of the Philadelphia Shipyard. It was brought to our attention that many of these companies did not have access to the information or an opportunity to compete in the bidding for contracts. We had testimony at our prior hearing of contractor after contractor, who came forth and shared with us their frustration in trying to just 5 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 get information about the projects and the bids that were going out from the shipyard, which was very painful to sit here and listen to, when we know that there are many, many qualified minority companies, minority and female companies, that are available in the Delaware Valley area, who can compete and perform this work in a satisfactory manner. And we wish to correct that as soon as possible since so much activity has been designated for a fast track. And one of the gentleman who testified said all construction is fast truck. I don't really believe I know of anybody who wants to "slow-track" any project. However, where there are public funds involved, I must stress that everyone must be given an opportunity to become a part of the process. This is a multi-cultural society, and we expect to reflect that in our creation of economic and social projects. We want to assist the Kvaerner corporation in meeting the goals of the contract in this phase, as well as this the upcoming phases of the contract. So, today, what we'd like to hear is 6 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 what is planned for this first phase of construction and how those contracts that have been let will be brought into conformity with the agreement. We need to know what is the composition of the staff and educational units for the shipyard university, who are the participants that will certify minority workforce participation in the training. We need to know what are the provisions in the union agreement for training and hiring and how minority women and disabled workers will be integrated into the workforce. We must see that the minority participation involvement begins at the beginning. We had a chart here at the last hearing that presented a flow chart of the shipyard activity and the levels of participation, and we spoke to representatives of Kvaerner that this level of including minors and females, that level was too low. And we want to see that that level is included in the very beginning of the process. And we need to know if you can create an on-site office which will give Kvaerner daily feedback and consistent monitoring of the work site to see that the goals are being met. 7 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 These are some of the concerns that I have. And as we continue this the testimony, certainly, we will raise others pleased. But we are to have Mr. Rafdal come, who was not able to attend the last time, I think, if he would have heard the testimony from the various contractors about what happened to them in relationship to his was company, but we are pleased that he's here today. And Mr. Chairman, I will refer back to you to continue with the agenda. Thank you very much.
Thank you, Councilwoman Tasco. Let me also mention that committee member Council Frank DiCicco is here. And also sitting in for the testimony today is Councilman Ortiz. Let me have the individuals who are here to testify come up to the table. That would be: Mr. Harold Rafdal, President and CEO of Kvaerner Philadelphia Shipyard, Incorporated; 8 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Mr. Robert Benko, Executive Director, Philadelphia Shipyard Development Corporation; Mr. James Roundtree, Executive Director of the Minority Business Enterprise Council; Mr. John Kromer, Executive Director, Office of Housing and Community Development; And Mr. Charles Solomon, Director of Economic Development Greater Urban Affairs Coalition. If I could have all of those individuals approach the witness table, take whatever seats might be available, but Mr. Rafdal and Mr. Benko are the first two to testify.) (Panel members come forward.)
My understanding is that Mr. Hankowsky is in the room, and so I request that he join the various presenters in the witness area. (Mr. Hankowsky joins panel at table.)
Mr. Rafdal, welcome. Please proceed with your testimony and please identify yourself for the record.
My name is Harold Rafdal. I'm the President and CEO of Kvaerner Philadelphia 9 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Shipyard.
Good afternoon and welcome. Do you have testimony that you wish to give, or would like to make an overview or an opening statement?
(After briefly concurring with Kvaerner counsel, Ron White.) My proposal is that maybe Mr. Benko can take an overview of the whole project as it's set from the very beginning and explain briefly the role of PSDC and Kvaerner and how we are doing this task of renovating the shipyard together as partners.
Okay. So it's your it's your desire to have Mr. Benko start, you'll respond to any questions that may be asked directly of you, but you want Mr. Benko to provide an overview of the nature of the relationship between Philadelphia Kvaerner, Inc. and PSDC. Is that what you want to do?
Thank you. Mr. Benko, identify yourself for the 10 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 record and proceed with your testimony.
If you'll bring that microphone a little closer to you closer.
-- Executive Director of Philadelphia Shipyard Development Corporation. Thank you for inviting us here today to testify. When the Kvaerner Shipyard renovation project was initially structured, the governmental parties in the deal -- that is the Commonwealth of Pennsylvania, the City of Philadelphia, and the Delaware River Port Authority, as well as Kvaerner -- agreed that it would be best to have one entity represent the governmental parties so that Kvaerner could have a single point of contact with the principals in the deal. Thus, the governmental parties created the Philadelphia Shipyard Development Corporation, a nonprofit entity that was established to assist in all aspects of the Kvaerner project, not only the construction of the yard itself, but also in the training of the shipyard workers and the creation of a broad-based regional network of 11 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 suppliers to provide the more than 30,000 separate components that will be used by Kvaerner in the construction of each ship. Currently, PSDC operates in temporary quarters at the Philadelphia Naval Business Center. As the Executive Director, I am the only full-time employee -- staffer member per se -- of PSDC. Although PSDC has retained consultants in connection with all phases of the shipyard project, those consultants are located PSDC's offices. Now, as the agent for and representative of the governmental parties, PSDC has a multitude of roles, all important for both the immediate and long-term success of this crucial economic development project. The participation of minority- and women-owned businesses is a priority, as evidenced by the applicable provisions of the master agreement. And I would like to first describe the importance of one component that very often gets overlooked in this process, but that is of the supplier network and the importance of that network to businesses primarily because of the 12 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 long-term impact it can be on the regional economy in general and the opportunities that will exist for these firms. The most significant long-term economic impact of the new Kvaerner Philadelphia Shipyard project will result from the development of a competitive supplier network that is organized within this region to fit Kvaerner's supply chain strategy. Approximately 70 percent of the material costs of each ship that will be built by Kvaerner will be out-sourced to firms that both provide the components that go into the construction of these vessels. Because of the significant business opportunities offered though out-sourcing to companies that are part of Kvaerner's supplier network, this component of the project has seen extensive planning among a variety of public and private entities. For example, PSDC and Kvaerner, working with the Philadelphia Industrial Development Corporation, has launched a series of supplier network briefings since September here in Philadelphia. Working also with Philadelphia's Economic Development Coordinator, Handford Jones, 13 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 over 200 invitations were sent to minority companies to attend the two initial briefings that were held at the Seaport Museum in Philadelphia on September the 25th. Those attending the briefing sessions are provided with information about the type of materials needed by Kvaerner for the construction of the ships as well as the information on how to become part of Kvaerner's supplier network. Overall, supplier network briefings will be 12 held throughout Pennsylvania and New Jersey, including 4 additional sessions in the southeastern Pennsylvania/New Jersey region. com. For those companies who do not have ready access to Internet assistance, arrangements have been have been made with LibertyNet in Philadelphia, and assistance will be provided.
And I have also brought for this committee's review a copy of the Internet Supplier Network briefing presentations, which are included 14 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 on the Internet itself, and I'll be happy to make a copy of that available to you. In an effort to involve minority-owned and women-owned in the supplier network, PSDC is arranging with the Pennsylvania Department of Community and Economic Development to bring companies from Germany that are part of Kvaerner's (unintelligible) supplier chain to meet with minority- and women-owned firms about becoming a part of Kvaerner's supplier chain here in Philadelphia. And I would like to thank Handford Jones for suggesting this idea to PSDC, and I would also like to thank the Pennsylvania Department of Community and Economic Development for supporting this rather unique approach for increasing minority participation for the supplier network. I think it's important not to underestimate the economic potential of the supplier network for minority companies. Clearly, building a strong, competitive network of suppliers is not going to happen overnight. It requires an investment of time and effort on 15 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 everyone's part, and it's not without some risk. But the overall objective is much broader than simply supplying Kvaerner Philadelphia. If it's done right, the supplier network that is developed in this region can supply the other shipyards throughout the United States, throughout the country, such as those at Newport News at Bath, Engles Avondale, as well as the other shipyards that are owned by 11 Kvaerner. Any company that becomes a supply chain 12 here in Philadelphia automatically becomes part of the supply chain for Kvaerner's 12 other shipyards located throughout the world. The bottom line is that the larger, long-term value of Kvaerner Philadelphia is as a catalyst for significant economic rewards for minority companies and others that participate in building a comprehensive global supply network to the commercial shipbuilding industry that is centered in this region. PSDC will continue its efforts to help minority firms become established as prime suppliers and subsuppliers to the commercial shipbuilding industry. PSDC will also continue 16 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 efforts it has underway to involve minority contractors in building the shipyard. It must be made clear however that Kvaerner, not PSDC, is responsible for building the yard. The master agreement provides that among its various responsibilities, PSDC is charged with monitoring the obligations of Kvaerner pertaining to the shipyard project, including those related to the participation of minority-owned and women-owned business enterprises in the construction of the yard. PSDC, however, is going beyond fulfilling its monitoring responsibilities in this regard. It has also taken steps to assist Kvaerner in its efforts to include minority- and women-owned businesses in the construction project. For example, PSDC engaged, through a competitive bidding process, the regional firm of Keating Building Corporation to serve as its project management consultant. Keating has extensive experience in building or acting as construction manager for a number of significant projects in the region, including the Philadelphia 17 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Convention Center. Keating's responsibilities include monitoring MBE/WBE goals established in the master agreement for the project and ensuring that all efforts are being made by Kvaerner to meet or exceed these goals. Keating has played a valuable role in assisting PSDC in its efforts to advise Kvaerner of the importance of awarding the single largest construction contract, the $48 million structural steel contract, to a joint venture that included as a subcontractor a minority-owned -- a woman-owned business enterprise, excuse me.
And it continues to work with Kvaerner and its consultants in assuring ways to include minority- and women-owned businesses on bid lists and as subcontractors of businesses. It should be noted that in connection with its training responsibilities, PSDC has also engaged in a nationwide competitive process the firm of Price Waterhouse Coopers (PWC) to serve as its workforce development consultant. PWC was selected, in part, on the basis of its proposal to include as part of its team that is advising PSDC 18 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 on the direction, management, and oversight of the workforce component of the project, the accounting firm of John Milligan CPA, a local minority-owned business. We believe that John Milligan CPA brings extensive experience in accounts management and operation, and we are looking forward to the company joining PSDC's operations on November 30, 1998. PSDC reviewed and supported Kvaerner's plan to engage the Greater Philadelphia Urban Affairs Coalition to monitor its efforts to include minorities and women in the construction of the shipyard as well as the arrangement made with Minority Business Enterprise Council, the Office of Housing and Community Development, and the African-American Chamber of Commerce to ensure that best efforts are being made to achieve and surpass the MBE/WBE goals established in the master agreement. PSDC is also working with the Governor's Advisory Commission on African-American Affairs, which is also interested in opportunities that are available for African-American through the Kvaerner Philadelphia project. 19 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 PSDC has ranged for Kvaerner representatives to make a presentation on November the 18th, 1998 before the Advisory Commission on direct minority employment opportunities with Kvaerner. This completes my prepared remarks. And I'd be pleased to answer any questions that you may have.
Thank you, Mr. Benko. The first thing I'd like to ask is, the statement that you are reading, is that a typed or a prepared statement?
What I'd like to do is have one of the sergeants-at-arms get that from you. We'll make copies and get it to the members who are here. You also made reference, I thought, in your testimony to a chart or something that you may have a copy of --
-- for our review? 20 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Why don't you give all of that. . . We'll get copies of those made. If you could very briefly explain for the record the nature of the relationship between PSDC and Kvaerner Philadelphia Shipyard, Inc. Who is contractually doing what for whom and who created PSDC?
Between the principals and the Kvaerner Philadelphia project. And that included the Commonwealth of Pennsylvania, the City of Philadelphia, and the Delaware River Port Authority, and Kvaerner. And on the basis of the agreements that were reached and that were set forth in the master agreement, PSDC was developed and designed to represent the governmental entities in interactions with Kvaerner; governmental entities, again, being the Commonwealth, the City, and the DRPA.
And do you have 21 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 copies of that master agreement? Or can you make copies available to us?
I have one copy of it. I would certainly be pleased to provide you with a copy.
And does that master agreement make any reference to goals with regard to goals to minority, female, or disadvantaged businesses?
It does, okay. And somewhere during the course of this afternoon's hearing, if you could pull that out and mark the page, we'd like to take a look at that as well. So those governmental agencies decided to create PSDC. And then PSDC was, I guess, incorporated, or articles of incorporation were filed. And how does one become a member of the board of PSDC?
Each of the principals in the project, governmental entities, has an appointment or one or more appointments to the PSDC board. There are five members of the board 22 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 of directors. Three of the member are appointed by the governor, one member is appointed by the mayor, and one member is appointed by the chairman of DRPA.
The five members appointed by the governor include Paul Tufano, the governor's chief counsel, who was chairman of PSCS; Sam McCollough, the Secretary of Pennsylvania's Department of Community and Economic Development, who was appointed by the governor; Gary Crowell, the Secretary of General Services, appointed by the governor; Bill 16 Hankowsky the president of the Philadelphia Industrial Development Corporation, who was appointed by the mayor; and Manny Stamitakis, the chairman of Delaware River Port Authority, who appointed himself.
So you work for the 23 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 board?
I am not. I am paid through the Commonwealth as an in-kind contribution to PSDC.
Before you became on loan, what part of the Commonwealth of Pennsylvania were you attached to?
I was the Executive Deputy Secretary of the Department of Community and Economic Development.
I was the Executive Director before Secretary McCullough came, after 24 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 he came during the period in which I was the acting secretary of the department. I was then working for Secretary McCollough, that's correct.
I'm going to make an assumption that you've had some discussion with, I guess, either Mr. Tufano, who's the general counsel to the governor or someone with an "esq." behind their name. Is there any concern, given the nature of your status, which is that you are, for all intents and purposes, an employee of the secretaries at the Commonwealth level, you're on loan to PSDC and you work for the board of directors of PSDC, three of whom are appointed by the governor.
I report to the board of directors of PSDC; I do not report to the secretary or to anyone else in the Commonwealth.
Okay, all right. So you report to the board, okay, and you are the 25 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 only employee.
Okay. Now, in your previous job capacity, did you have any responsibility for coordination or implementation of minority, female, or disadvantaged business plans or programs?
As the executive deputy secretary, I was responsible for the day-to-day operations of the department, which included --
I appreciate the response, but can you tell me whether you had any direct involvement in the monitoring or the implementation or the day-to-day activities of dealing with minority, female, or disadvantaged business programs or policies? It's pretty much a yes or no question.
In setting the basic policy frame work under which the department would operate in terms of programs that were available COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 for minorities and women.
Okay. Did the person who had the direct responsibility for that in your department report to you?
No. They reported to a deputy secretary; the deputy secretary reported to me.
Okay. Now, who's responsible for those programs and policies for PSDC?
PSDC, per se, basically enforces the master agreement, which contains the policies regarding minorities and women.
But PSDC is also responsible for making sure that the policy is implemented; is that correct?
PSDC ensures that all of Kvaerner's contracts, if you were talking about construction contracts, contain the specific provisions of the master agreement related to the hiring of minorities and women and ensures that before those contracts are executed that that information is in each of those contracts and that the contractors are aware of their obligations 27 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 under these provisions.
I understand that the provisions are required to be in the contract. What I'm trying to understand is, who's responsible for making sure that people do what they're supposed to do according to the contract?
Kvaerner has the responsibility under the terms of the contract.
How do you ensure it? So you're saying your responsibility to PSDC is just to make sure that the proper language is in the contract and that the contract theoretically doesn't go forward unless someone's in compliance? Is that what you're saying is your responsibility?
We will continue working 28 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 with Kvaerner in looking for different options and opportunities to involve increasing numbers of minority women-owned companies so that the goals in the project can be met. We have supported Kvaerner's efforts to enter into relationships with the minority governmental entities, both public and private, and continue to look for different opportunities to engage minority companies in the process.
My last question is in this area, and I'm sure Councilwoman Tasco and other colleagues will have questions as well. I guess, based on the earlier response, I'm still trying to figure out what PSDC's responsibility is in all of this. Obviously, Kvaerner is responsible for building ships at the yard. But your earlier response was that they're also now responsible for MBE/WBE/DBE activity to make sure that it takes place properly. Your responsibility is to make sure that there's certain language in the contracts. What does PSDC do?
Well, it does a great deal. And if you have an opportunity to look at 29 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 the master agreement, which I don't think I could summarize here for you this afternoon, but you would see that there's a significant involvement in both the construction of the yard, the training of the workforce, and the development of the supplier network, all of which -- components of which are the responsibility for PSDC. There are specific provisions in the master agreement regarding Kvaerner's contracts with companies that are building the shipyard, and PSDC reviews those contracts and ensures that those contracts contain the provisions that are stipulated in the master agreement pertaining to minorities and women. PSDC also --
Let me -- I don't mean to interrupt you, but let me make sure that I'm understanding one last thing. When you make reference to PSDC, I mean, aren't you, for all intents and purposes, really talking about yourself?
No, I'm not, no. As I mentioned in my testimony, PSDC has employed the firm of Keating Building Corporation as the project consultant. It's a staff of Keating 30 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Building Corporation, approximately five people, who are working with us in our headquarters at the Philadelphia Naval Business Center that are engaged in this process on the construction side on the part. On the workforce development side, PSDC has hired the firm of Price Waterhouse Coopers. On the workforce training side, PSDC is responsible for assisting Kvaerner in the development of training plans for each of the 950 workers that will be working there in order that the funding that has been packaged from the federal government, the DRPA, and other sources can be applied to those job-training activities.
Do you have an organizational chart that lays out from top to bottom this particular structure that you're making reference to? Because, I mean, I seem to remember, many months ago, when this deal was being proposed, that PSDC was really going to be a fairly live and healthy entity, with its own workforce doing certain things. I am now left with the impression -- at least by this record -- 31 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 that you're a central person in the office and that the day-to-day responsibilities for various things are really being handed off to other people who are in no way, shape or form a part of the government, they did not testify at the public hearing to have this deal go forward, they have, to my knowledge, never been in these chambers about this deal. And we have no ability, under these circumstances, to really talk to them and understand what they do. I mean, you essentially manage other people who are doing the work, managing the process, who are off-site somewhere, or maybe they're on-site, but they don't work for you?
No, they work for me directly. They are there daily, on a daily basis.
They're paid by 32 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 someone else, though?
They are consultants to PSDC handling two specific functions: as construction project manager and as workforce training development manager. Price Waterhouse Coopers on the workforce side, Keating Building Corporation on the construction side. There are individuals reporting on a daily basis to our headquarters, working for both entities. These individuals report to me.
And -- I'm sorry, I missed your response earlier to the organizational chart question. Do you have an organizational 33 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 chart with you?
Okay. Have you had an opportunity to review the record from the hearing on October 27th? You were not here at that public hearing.
Okay, all right. I'm sorry about that, but we're pleased to have you today. Did you have an opportunity to read the notes of testimony from that hearing?
-- from the individuals who were here? So you just came in cold today? You haven't --
So you have no 24 sense of the history of background or --
Well, other than what I 34 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 read in the newspaper article, that's about it.
Well, what were you -- I mean, when you woke up this morning, what did you think you were coming to? (Laughter.)
Okay. What was your sense of the purpose of today's hearing? Have you read the resolution that was introduced here?
Okay, all right. And you've had no opportunity to talk to either Rich Ryan, who's the project manager for construction, or Gary Thompson, the project director of construction, or Tore Sjursen, the vice president of Kvaerner? Have you taken advantage of any opportunity to talk to any of those individuals?
I did not speak with any of 35 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 those individuals that you mentioned. Harold Rafdal and I have had some conversation about the hearings.
Have you talked to any of the contractors or business people who were here with us on the 27th? My notes indicate that I asked Mr. Ryan, Mr. Thompson and I asked Mr. Sjursen to be responsible that someone directly from either Kvaerner or PSDC speak to every individual who testified at the public hearing on October 27th. Do you know whether that happened?
I understand that he used to do that in school all the time, get guys in trouble like that. The question was, have you had an opportunity to talk to the three individuals that I mentioned to you about any of their contacts? 36 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 There was a direct request from myself to Mr. Sjursen that he talk to or direct his staff or some appropriate person to talk to each of the contractors who testified at the public hearing on October 27th? Do you know whether that took place?
Okay. Councilwoman Tasco has a number of questions. I just -- I mean, I have to say to you, Mr. Benko, that it was our impression at the October 27th hearing that the central entity, other than Kvaerner, who's ultimately -- their workforce is going to build the ships, that for the management of this operation, that PSDC was a central and critical player in this process. And now I am left with a very different impression based on the testimony and the responses I've heard today and I'm hoping that we'll be able to rehabilitate this record and that all of us have a better understanding of just what the role is or is not of PSDC and the nature of your relationship with Kvaerner and the various contractors, but 37 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 it's slightly troubling.
Councilman, I certainly hope you'll take the time to look at my prepared remarks because I think I have --
Well, I'll be glad to read your prepared remarks, which I'm getting today. I'll be glad to read them.
Councilman, I would also add that since April, I have been in Philadelphia working on this project. And I've never heard from any member of City Council, I have never received a phone call from City Council, I've, never been asked any questions by City Council other than today. And I would be very happy to meet with any member of Council or any member of the Council staff to discuss any aspect of the Philadelphia Shipyard Development Corporation and our relationship with Kvaerner.
Well, let me ask you this question. Since you arrived here in April, have you ever called a member of City Council to inquire as to what their interest might be of the Philadelphia Naval Shipyard or with the 38 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Kvaerner project?
Again, I appreciate the response. But you either called them or you didn't. Have you called any member of City Council? Notwithstanding what you believe is or is not your responsibility, have you ever called a member of the Philadelphia City Council?
Who, I believe, approved this project overwhelmingly and who have an interest greatly in what goes on in our local market? Did you ever call a member of Philadelphia City Council about this project?
Okay. Have you ever received a phone call from any of the contractors who might have an interest directly in working on this project?
Any aspect, any aspect. 39 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
And has anyone, as a result of a conversation with you, received either a contract or any information that they thought would be helpful in this process that they might be able to do work with either PSDC or Kvaerner?
The only contract that can be issued for the construction of the yard would come from Kvaerner directly.
There are numerous other projects involved in this program, right, Mr. Benko?
As I mentioned to you, we have two contracts with consultants for PSDC. We have some very small contracts on the supplier network to hold these briefings throughout the Philadelphia region and the Commonwealth.
But other than that, there are no other contracts. 40 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Okay. And you said you have talked to some contractors.
Minorities, females. To the degree they were disadvantaged, I assume that some of them were.
Do you have any recollection of who they were or what they were calling about?
Well, I would receive, you know, dozens of calls concerning opportunities to be particularly a part of Kvaerner's supplier network, companies that were interested in talking with Kvaerner. And it was overwhelming, actually. And one of the reasons that we developed the concept of the supplier network briefings and the website was to help answer questions that companies may have that would become part of that network.
Right, I understand that. I just simply ask, do you recall -- I mean, 41 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 do any stick out in your mind? Did anyone have a compelling story? Was anyone, you know, so overwhelmingly interesting that they just, you know, kind of touched your memory?
Well, I've had conversations with companies in this region who are interested in bidding on key components of Kvaerner's equipment packages. Yes, I can remember specific conversations I've had with some of them, yes.
Philadelphia Tram Rail, for example, was interested in bidding on the cranes that are going to be used at the yard.
When you read the account in the newspaper regarding the concerns raised by the contractors about their inability to receive information about the project, what did 42 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 you think about that?
Well, I felt that the process was moving so quickly, was moving so aggressively, and that Kvaerner was engaged in a process of letting some very large contracts and that we needed to find some ways in which we could facilitate getting minority companies into the process. And to that extent, I've had conversations with Harold, plus I've had conversations with the minority business representatives at the Commonwealth to look for different opportunities to bring minority firms into the process. One of the things that we're working on with them is to try to identify particularly minority companies who could be prime suppliers to Kvaerner on the supply side, that would be in a position to be able to organize all of the subsuppliers, the network of subsuppliers that would be involved in supplying Kvaerner as well. So, yes, we've done quite a number of things in that area. That's one of them.
Your testimony tended to focus on the supply side. 43 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
And we're very concerned with that too, but the questions that brought us here today was the inability of these individuals to get information from the Kvaerner company regarding construction.
And since we were told during our briefing in the Caucus Room prior to the hearing and at the hearing that PSDC would be the monitoring agent for this project for us and that certainly all of us had expressed some interest and concern about the minority participation, we were assured that it would be your role to monitor minority participation. It was troublesome to hear that these contractors, and -- I mean, they came forth at the last hearing, one after another, just to say that they weren't even given the information so that they could participate. And if that is the role of PSDC, I want to know, why weren't you aware of this going on? And did anyone contact you about the lack of information going out to the community? 44 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Well, let me say this: Kvaerner has the responsibility of going through the process of the bidding, the bid awards, conducting the bid proposal meetings and the like. PSDC, through its representatives on the construction side, Keating Building Corporation, participates in that process. I was not aware, nor do I think even the leadership of Kvaerner was aware at the time, that there may have been minority contractors who were not able to get information. And part of this may be the result of the fact that these were very large contracts in which Kvaerner had an idea that there were a number of firms in this region that were capable of doing those projects. And in many instances, we know minority firms are not the largest firms in the region. When this was brought to our attention, I've had conversations with Harold Rafdal and others about ways in which steps could be taken to include involving more minority companies in the process. One of the proposals that we discussed was to continue to put pressure on the prime 45 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 contractors to meet the minority goals that were established in the master agreement. And it has been my position that the issuing of the prime contract to a large construction company within the region is not the end of this process, that the process must go on through the identification of the subcontractors and ensuring that those subcontractors are, as best we can, minority companies. And so we have had a good deal of discussion about this. And I think it was important after the first several contracts or the first few contracts -- I'm sorry -- were let to sensitize Kvaerner to the concerns that were being raised within the region concerns minority contractors. And that's something that we did as well. I think Kvaerner, on its own, recognized the importance of this, and as a result, took steps to ameliorate the situation that existed initially. I don't think that situation exists now, I am comfortable with the fact that Kvaerner engaged the consortium that it has to look specifically at the contracts and to 46 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 ensure that the subcontracting includes minority contractors. And I know that's the position that we're in right now.
Is it Keating's responsibilities in seeing that the minority participation is part of the overall program?
But if Keating does, how do we get so many complaints that information was not given to the contractors so that they could bid?
If I understand this condition that existed initially, and I was not personally involved in the letting of those initial bids, but as I understand the situation, the bid process started to roll out. And the fact that minority contractors may have been excluded initially or didn't have the opportunity to learn about these bid packages I think is something Kvaerner recognized after it stepped into this process.
No, I think it was before 47 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 that.
Well, at what point did you start all of this? I mean, we were contacted, I guess, in August about the problems from the minority coalition. And at what point did you begin your investigation about the lack of information going out?
Well, we haven't actually begun an investigation, but it's been an understanding from information that has come to us from various sources that there needed to be more emphasis placed on this aspect. I think from the beginning, even with the initial contract that was awarded to the coalition, that the architectural and design contract, the Pennsylvania Shipyard engineers, a sizeable portion of that contract went to a minority firm, if I'm not mistaken I felt that. And I felt that, you know, we were off to a good start. Subsequent contracts that were let, including the demolition, one and two, I believe, they're minority contractors involved in that as well. My point to Kvaerner is that on the 48 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 subcontracts that are let by those prime contractors, there needs to be more emphasis placed on ensuring that minority companies have an opportunity to bid on those projects.
You contracted out, you have consultants, Keating Consulting, to do the contracting construction management?
We have a very small contract with a company that does the logistics for setting up the supplier meetings that are held throughout the state.
Workforce development side. 49 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 And did you think that Keating would monitor the MBE/WBE portion of the contract?
Well, they do. That's in their response to our request for proposal. There's a component in that response that addresses the MBE/WBE process.
Is there a report that recently was produced regarding minority participation? Is there such a report?
There hasn't been a report done about the minority participation on the Kvaerner project?
Well, I can only tell you what we; we have not have produced a report on minority participation, no. 20
I'm sorry. Thank you, Councilwoman. Councilwoman Clark, I believe, has what we generally call kind of a follow-up or a piggyback question on one of the questions 50 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 raised by Councilwoman Tasco. And I also recognize Councilwoman Miller, who has joined us. Councilwoman Clark has a yield question, and then it comes back to Councilwoman Tasco.
I thank Councilwoman Tasco for yielding. I would just like to ask a follow-up question on the Keating responsibility. Would you mind stating for this record and for our clarity what you see Keating's responsibility is with respect to minority participation?
There is -- the responsibility of Keating is to monitor the MBE/WBE component of the project and to help ensure that the goals that are set in the project are reached.
And what particular expertise does he have that causes you to pick him to do that? Has he ever done it?
Yes. Keating Building Corporation managed the construction of the Philadelphia Convention Center, and I think was -- 51 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
But they were not the sole monitors of the minority and female and disabled participation. I'm having difficulty wondering why you picked a person whose expertise is not minority and female to monitor the minority/female participation. That's a little bit like fishing in the forest.
Well, with all due respect, Keating was one of seven or nine contractors who bid on this proposal. We went through a very rigorous process of rating each of the RFPs that came --
If you were looking for a person to monitor in your principal product line, wouldn't you require that the monitor have expertise in that particular product line?