Committee Hearing, November 16, 1998

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?

Yes.

Thank you. Mr. Benko, identify yourself for the 10 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 record and proceed with your testimony.

My name is Robert Benko. I am --

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?

It is. I'd be happy to give you a copy.

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 --

Yes.

-- 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?

PSDC was created as part of the master agreement that --

The master agreement between who?

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.

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.

And who are the five members?

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.

That's not bad. And how did you get to be at PSDC?

I was hired by the board of directors.

So you work for the 23 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 board?

I'm employed by the board, that's correct.

Okay. And you are paid by PSDC.

I am not. I am paid through the Commonwealth as an in-kind contribution to PSDC.

Whose name is on your paycheck every two weeks?

Employee on of the Commonwealth on loan to PSDC?

Yes.

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.

So you worked for Secretary McCullough.

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.

Are you on the secretary's payroll?

I'm on the Commonwealth's payroll.

Okay, all right. So you report to the board, okay, and you are the 25 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 only employee.

That's correct.

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.

As far as -- yes, I did. Yes, I did.

And what was that involvement?

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.

PSDC has no role in that?

PSDC ensures that those provisions are --

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?

That would be the first step.

Okay. What's the second step?

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?

That's correct, that's correct.

They work for someone else.

They work --

They're under contract to 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?

No, they are paid by PSDC.

Okay.

They are paid by PSDC.

Are they employees of PSDC?

Pardon me?

Are they employees of PSDC?

No, no. 12

Or are they agents of PSDC?

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?

No, I do not.

Okay. Have you had an opportunity to review the record from the hearing on October 27th? You were not here at that public hearing.

I was not invited to the hearing, that's correct.

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?

I did not, no. 16

You did not. Did you get a debriefing --

I did not.

-- from the individuals who were here? So you just came in cold today? You haven't --

Basically, yes.

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.)

I knew very well what I was coming to.

Okay. What was your sense of the purpose of today's hearing? Have you read the resolution that was introduced here?

Yes, I did.

Okay.

I did see a copy of it last week.

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'm sorry, I didn't hear the entire question.

Is that because Bill Hankowsky was distracting you?

He mentioned something, yes.

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?

I do not know whether that took place, I do not.

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?

Councilman, I really don't think that's my responsibility.

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?

Councilman, I --

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?

I had no reason to.

Okay. Have you ever received a phone call from any of the contractors who might have an interest directly in working on this project?

On which aspect of it? You have to be more specific.

Any aspect, any aspect. 39 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Yes, of course.

Did you talk to them directly or personally?

Yes, I did.

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.

Right.

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.

I have.

Minority, female, disadvantaged businesses?

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.

What company was that?

Philadelphia Tram Rail, for example, was interested in bidding on the cranes that are going to be used at the yard.

All right. Councilwoman Tasco.

Thank you very much. Good afternoon, Mr. Benko.

Good afternoon.

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

Yes.

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.

Right.

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?

And Keating does.

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.

After we called your attention to the fact.

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?

Yes.

You have Price Waterhouse to deal with --

The workforce development side.

And you have someone to do --.

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.

What about this training?

That's the workforce development side.

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?

No, no. 12

There hasn't been a report done about the minority participation on the Kvaerner project?

By whom?

By anybody.

Well, I can only tell you what we; we have not have produced a report on minority participation, no. 20

Let me yield to Councilman Nutter.

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 --

Did any minorities bid to being monitors?

No. 17

Why do you think that is so?

I don't know.

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?

We re -- 52 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Just answer that question, sir.

I would like to say this.

No, I do want to hear what else you have to say but I do want you to answer that.

The RFP was publicly advertised, including in the Philadelphia papers and all the regional newspapers in this area. And the contractors that responded were the contractors that we reviewed.

Now, would you be good enough to tell me --

Councilwoman, Councilwoman, if I may. It's just that I -- I'm -- just on this very specific thing because Keating was hired to be project management consultant for the Kvaerner project. Define that. They were not hired to be monitoring of the MBE, the WBE, the minority hiring process, they were hired to be project management consultants.

That's correct. 53 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Define that. This is being very obfuscating terminology here.

Right, right.

Define the fact -- they were hired to oversee the building of the Kvaerner Shipyard, period.

Keating?

Keating.

No. 11

That's what a management consultant is, project --

No, that's the construction manager that oversees --

What?

The construction manager oversees the building of the shipyard.

Well, define it then, define what it is, define what a project management consultant is.

The project management consultant is intended to provide PSDC, including me and the board of directors, with information regarding all of the contracting that Kvaerner will do on the shipyard. 54 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 They attend contractor meetings, they attend bid meetings, they receive daily reports from Kvaerner as to the status of the shipyard, they review and report to me on each of the contracts that Kvaerner is letting, and they also advise me specifically on the release of funds to Kvaerner, which, as you know, all funding for this project comes through PSDC. So unless I receive a report from Keating which supports the request for disbursement for Kvaerner on construction, Kvaerner doesn't get its money. So that's the consulting work that Keating does for PSDC. So they take an intimate view of everything's that is going on, but they make no 17 decisions on the contract. They provide advice to me exclusively.

Councilwoman Clark is going to finish up her yield question, and then we'll go back to Councilwoman Tasco.

Okay. Now we're qualifying Keating to have an informed opinion on what is a sufficient level of minority, female, and disabled participation. 55 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Please tell me, who is Keating's minority business partner or women business partner or disabled business partner? Do they have any? And if so, what are their names?

I think I need to go back to the first part of your question. The specific minority goals and goals for women aren't defined in the master agreement. So Keating is not in the business of freelancing on this or any other aspect of the project. The specific objectives that Kvaerner is to meet are specifically defined in the master agreement, so they don't come up or make up their own objectives or --

In other words, you're answering a question that I didn't ask you, as interesting as your answer is. Now let me see if I can get you to answer my question. What is Keating's own record with respect to minority, women, and disabled business partners?

I believe Keating has a very good record. I don't happen to have with me a -- 56 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

You can't name any of them, you can't name one?

One what, Councilwoman?

Did you forget the question?

Well, I'm not sure that -- I'm not sure that the question is -- is --

Okay, let me try it this time.

-- is on the mark.

'Cause I'm reading it off a piece of paper, so I can repeat this at many times.

Excuse me. May I -- may I make some clarification?

Would you identify yourself for the record, please.

Yes. My name a Harold Rafdal, and I'm the President and CEO of Kvaerner Philadelphia Shipyard. And please bear in mind that I might have some problem in answering your questions because I'm not a native American, so I may have some problem with the language. But anyhow, PSDC's role is to follow up 57 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Kvaerner on behalf of this agreement. In this agreement, it is stated that we have a good-faith effort to use minorities, and there are certain goals on it, yeah? And we have hired as our own consultants Urban Coalition to follow up and monitor on behalf of what we are dealing, so that we have consultants both on board, working on behalf of me, that know this environment, that have a long experience.

Fine. Can I stop you right there, sir? Can I stop you right there? Because I think that is an admirable way of doing business. You have picked someone who has background, experience, and interest in doing what you hired them to do, correct? That's why you got the Urban Coalition, Urban Affairs. Tell me why you got Keating.

Keating Building Corporation went through a very rigorous assessment process by a team of the -- comprised of the board of directors of PSDC.

Mr. Benko, before you go way down that path -- 58 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Well, I don't know how else to answer.

'Cause I know Councilwoman Clark a little bit better than you do. I don't think -- you're answering a couple questions down the road. The Councilwoman did not ask you, How did you get to Keating? The Councilwoman asked you, What did you get them for?

I'm sorry?

Why?

What are they there for? She didn't ask you how you got them. She's asking you what they're there for in the first place.

Well --

We don't need to know about the rigorous tests that you went through to get them.

I'll try to --

She wants to know, what is their role, what is their responsibility, what are they there for? That's the question. 59 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

I'll try to describe it one more time.

Okay.

Keating Building Corporation serves as the project management consultant on the construction side for PSDC.

Construction of what?

The construction of the shipyard.

It's the physical buildings on the shipyard, not building ships.

No, construction of the shipyard.

Right.

Now, in that capacity, Keating is, on a day-to-day basis, engaged in reviewing all of the contracts that Kvaerner lets or is proposing to let for the shipyard.

Okay. And so then the question is -- not to beat up on Keating. I mean, you hired them, you know, for whatever reasons. But why do you have Keating doing that versus PSDC doing that or someone else who is a 60 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 direct party to this piece of business?

But I think the point you're missing --

I think that's the concept we're trying to understand.

Councilman, the point you're missing is that Keating works for PSDC. We have them under contract to perform this responsibility for us.

Please come back to me on this one.

So that we do not have to build a bureaucracy to carry on this function. PSDC is a temporary organization; it's not going to be here after the yard is constructed, at least the staffing.

Right, I understand. That's what gives us concern. Councilwoman Clark.

On the point of PSDC, who do you consider you work for?

I work for the board of directors.

Of. . . ? 61 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Of the Philadelphia Shipyard Development Corporation.

Now, if I read your first paragraph of your testimony, you say, in main part, that it would be best to have one entity represent government parties. Did you reckon those government parties to be the City of Philadelphia, including City Council?

The City of Philadelphia, an entity, as a party to the contract.

Sir, including City Council?

The City of Philadelphia as represented by the mayor, who signed the contract.

Are you having difficulty with my question?

No, ma'am.

Did you understand my question?

No, ma'am, I'm not.

Did you recognize it as including City Council. The mayor and City Council represents the City of Philadelphia. Or 62 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 did you think that when you had spoken with the mayor, that was all you needed to speak to?

Well, our understanding, when the mayor signed the contract, was that it was with the advice and approval of City Council, so he was -- I think that's a question to be taken up internally by the City.

No, no, just answer my questions; don't give me advice I don't ask you for, just answer my question. So you did not feel that when you said nobody from City Council had ever called you that we had been derelict in our duties in any way, did you?

Did I feel that you were derelict? Not necessarily.

You must have had some reason for bringing up the fact that no 20 member of Council had called you. What did you mean by that comment?

Well, I meant that I was surprised that some of the Council had indicated concerning PSDC, I would have been more than willing to come to your office to describe our 63 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 roles and functions or whatever we were doing at any time, if you would have asked.

Say it again, sir? You would have answered us at any time if we had asked?

Had I been asked, I would have been more than happy to sit down with you at any time, at any place, and describe what PSDC is doing.

But you're here now and you don't look that happy about it, to tell you the truth.

Well, you know, I'm --

There's a certain feistiness that I see coming back at you, which is not helping us get to the root of this problem.

Well, it's --

We have talked to our representative on your board, Bill Hankowsky, more than once, haven't we Bill?

Yes.

And so our thoughts have not been in a bushel under a building. We have been saying, wherever we could, 64 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 as clearly as we could, that we wanted in on this process. Did you know that?

Well, I --

Answer "yes" or "no," sir. Did you know it?

I don't know how to answer your question because you're --

Well, you know whether you knew it or not.

Knew what?

That we, who represent some minority contractors, wanted to be in on the process.

Well, first of all, I was not --

Did you know that?

I was not aware that you represented minority contractors, per se.

Well, you know that I represent the entire City, so that must mean that some of those contractors must be minority. Now, if you want to play this game, I don't have anything but time. 65 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Councilwoman --

I'm going to send out for something cold to drink and we'll be here till tomorrow.

Councilwoman, if I can ask, I'm running the risk of the longest yield on record.

Say that again?

I'm running the risk of having the longest yield on record. What I'd like to do now is finish up with Councilwoman Tasco and then give you a regular turn in the rotation.

Okay, that's fair.

May I --

Speak into the microphone, please.

We -- excuse me. We have worked out the answers to some of the questions that you all asked in the last hearing. I was -- I was not here at that hearing, but I'm fully informed about the situation and the questions that was going on. We have prepared some answers to those 66 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 questions. And maybe we could clarify a little bit by going through those questions first to get a status of where we are.

Okay. Hold on for one second.

And we appreciate that.

We appreciate that because we do want to come to some resolution, but you can see the frustration of this committee and of Council over what has happened in the past and the reason why we've called these hearings. I just wanted to ask Mr. Benko, do you remember receiving a call from my office, from Brenda Frazier?

I think that was last week, yes.

It's my recollection that it was prior to the first hearing.

No. No, I did not receive a first call.

We called your office to talk to you about those hearings, and 67 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 you weren't available and you never called us back.

Well, I did not know you called, I did not receive the call.

Is it the same -- do you have the same receptionist that Kvaerner has, that Miss Briggs couldn't get through to?

No, no, no. 10 (Laughter.)

It seems you all need to train your staff to give you telephone messages. One of the questions that I want to ask before we go to Mr. Rafdal is, are you -- is Keating only going to be concerned with -- no, let me ask it this way. What aspects of the contract will Keating oversee? Is it construction? And will they also have some monitoring responsibility for professional services? Just how broad is their contract, and who will monitor the contracts for professional services on the project?

Could you just clarify for 68 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 me what you mean by "professional services monitoring."

If you need a PR firm, if you need a secretarial firm, or other operational aspects of the company that's not necessarily going to go into bricks and mortar.

No. Keating is only involved on the bricks and mortar side, which also includes the equipment that is being purchased for the yard itself.

Now, are you going to monitor Kvaerner on the professional services side? Who's going to do that?

I'm not again clear of what you --

Do you see that as a responsibility of the PSDC board?

Let me say this. If Kvaerner's going to use any of the funding that came through the funding package that was assembled by the governmental parties, then PSDC will have to monitor any contractor, would have to approve any disbursement of funds. So to that degree, yes. 69 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Do they submit to you what they plan to buy before they buy it? And "buy" is broad in terms of buying professional service or any service that is paid for by the public funds that have been committed to this project.

To the extent that on the preliminary -- you have to understand that the construction includes a component that is called "preliminary development." Preliminary development is basically all of the work that leads up to the construction itself. It includes anything from renting of office space and equipment to hiring personnel. All of that -- funding for all of that must from PSDC. Now, on the preliminary development side, we work primarily on the basis of purchase orders and invoices. The master agreement basically does not permit PSDC to second-guess Kvaerner in terms of their business decisions. If Kvaerner submits to us a purchase order, an invoice for professional services, and everything is in accordance with the standard provisions, then we will pay it on the 70 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 construction side. It's a different matter on the construction side. On the construction side, Kvaerner must give us signed contracts before PSDC will release funds. In many instances, we need to see backup on components of those contracts before we will releases funding. So they are really two different animals here.

But they are all public dollars, right?

Yes, they are.

So there will be no monitoring of the professional service side by PSDC to see if there's adequate minority participation for those services. They can just spend the money with whomever, without considering any local vendor, minority or women vendors, for whatever services they might want to purchase with the public dollars.

Well, you know, if you're talking to what I would interpret as the preliminary development side, the master agreement provides that Kvaerner will make those decisions. 71 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 If that's we're talking about --

You don't see that the minority participation is a part of that?

Oh, yeah, I think so. But I believe that Kvaerner now is aware of the importance of minority participation in the project.

How do you know that they're meeting the goals of the master agreement?

Well, the master agreement, let's be very clear about it. The master agreement, you know, in terms of those specific goals that you're referring to, those goals are in relation to the construction side of the project itself.

I'm not sure that that was the intent of this Council.

Well, that's --

But there are other guidelines, federal and state and local guidelines, that govern participation based on the fact that they are public dollars.

And Kvaerner is an equal 72 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 opportunity employer so, you know, it is --

Who's going to monitor that they are, that they live up to that title?

I think that when you have an opportunity to listen to Harold Rafdal concerning the employment goals that are being achieved within Kvaerner itself, you'll understand that they are not only meeting them but, in many instances, they are exceeding them.

But you don't see your role as monitoring them, PSDC? See, we were told that you all were going to take care of all of this stuff.

And we are taking care of it, Councilwoman Tasco. And I tried to explain to you that this is an exceedingly complex project when it comes to the funding side and how the master agreement treats each of the funding components. And there are specific provisions regarding the construction side that are not the same as on the workforce development side or the preliminary development side. 73 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 So, you know, I think part of the problem in communicating back and forth here is that for me to answer many of your questions, you need to be much more specific. And, again, I would offer, you know, to sit down with you at any time, at anyplace and discuss any aspect of the master agreement with you and discuss with you the role of PSDC as it pertains to that specific component.

I think we have been very specific in the fact that we want the spirit of this Council to be reflected in the operation of the Kvaerner Shipyard development, and that it doesn't take a rocket scientist to know that when you let contracts, whether they are for construction or whether they are for professional services or for employment, that that should reflect the diversity of the City and the public dollars that you are spending. It doesn't take a whole lot of specifics for that.

Quick comment to Mr. Benko, and then I think a couple members have questions. Again, my recollection is that you were 74 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 not here at the Council hearing that finalized this particular deal. You had mentioned on a couple of occasions that certain things are very complex and are handled differently, depending on whether it's on the construction side or the employment side or possibly even the shipbuilding side. You may have missed the great controversy around the release, or lack of release, for Councilmembers' review of this particular contract that you're talking about. There was a great amount of discussion about whether that contract was going to be made available prior to the deal. The basic answer was no. And, quite frankly, had we been able to look at some of those things at the time, many of us around here would have pointed out many of the same things that we're now having a decision about. You weren't here at that time because I don't think PSDC had been created here. If it was, I still don't recall you being in the house. But that is one of the reasons why we take a look at things before they get finished. 75 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Councilwoman Clark. Councilman Ortiz, then Councilwoman Clark, then Councilwoman Miller.

Who's the main contractor in building the naval shipyard?

The main contractor?

Yes.

Well, the largest contractor --

I mean, who is building the yard? What construction company is building the Kvaerner Shipyard?

Well, there are a variety of construction companies.

Well, which one is it? Is there a main one?

There's no general contractor.

There's no general contractor.

There's no general contractor.

Is there a project manager? 76 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Kvaerner has a project manager, yes.

And who is the project manager?

Gary Thompson.

Excuse me?

Gary Thompson is the project manager.

And Keating is the project manager consultant for the PSDC.

That's correct. Project management consultant.

Project manager consultant?

Not manager, management.

Management.

Management.

So Keating is not advising you about the building of the shipyard. I think that's their expertise, isn't it? I didn't know that Keating was a management firm. I thought they were a construction firm.

They are.

So they're advising 77 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 you about the construction of the shipyard.

They are advising us about the construction, the various components of the construction, the various bid packages that go into construction.

They're sort of duplicating the job that the project manager is doing for Kvaerner.

Well, they have an oversight responsibility. They're verifying that Kvaerner provides us with the most advanced shipyard in the world. That's their role.

I -- I -- I think we'd rather hear from Mr. Rafdal from now on and see where we're going to go from there because you don't have many of the answers.

Mr. Rafdal, please proceed.

Yeah. First of all, I am prepared to answer any questions that City Council has. Nevertheless, we have prepared a list of answers to the specific questions you asked last time.

I'm glad somebody 78 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 at least read the notes of testimony. Thank you.

I would like to go through them first and then try to explain as much as possible, and then we can questions after that, if it's okay for you.

Do you possibly have any material that you may be able to share with us prior to your going into that? You, obviously, have a binder or something there. Is there any material that you can get to the members or that we can get copied while you're going through your. . .

I do think that we have done some minor changes on the setup of the whole contract flow, including the Hispanic Chamber of Commerce, as we discussed last time.

Right. Why don't we do it this way. If you can, just for this record, if you can tell us what the question is that you think that you are answering from last time, and then give us the answer --

Yes.

-- since we don't have the materials right in front of us. 79 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734

Yes.

Proceed.

Thank you. The first question: Is there a chart that details the bid process at Kvaerner? Answer: Yes, there is a chart, and we have it here to present to the Council.. And as I said, please note that the Hispanic Chamber of Commerce has been added to the chart to receive information from Kvaerner. The second question: Has Kvaerner added the Hispanic Chamber of Commerce to the flow chart? Answer: Yes, we have. We have a copy of the amended flow chart to present to the Council, and we can hand over that after we. . .

Okay.

And the third question: Please define "fast-track." (Unintelligible) saying that no one wants to slow-track, everyone wants to fast-track. But our definition of a "fast track," is that when we state that Kvaerner is on a fast track, we mean that we have a certain and limited 80 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 time frame in which to achieve certain goals, 'cause the overall goals here is to bring people back to work and to start up the operation of the shipyard by end next summer. The question 4: What is the current breakdown of minority participation at Kvaerner Philadelphia? And do you have it on paper? The answer: We just received on Friday the report and we have brought to the members of the panel a statistic breakdown of that information for those of you who that wish to review it. I can say at the top of my head that roughly, compared to the goals of 30 percent minorities on the employees side, the figures show us today that accumulated we have achieved 45 percent minorities of the employees working at the site.

This is -- Mr. Rafdal, this is on the construction?

Yes, we are talking about the construction. And there has accumulated -- there have been 20,000 man hours worked since we started out throughout the summer, and 45 percent 81 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 of that work is done by minorities. The goals was 30.

Okay. And I need to stress to the members of the audience that it is very difficult for to us conduct a hearing with the comments going on back and forth. There will be a full opportunity for discussion if someone else has an interest in testifying. Mr. Rafdal, you talked about the employment side; what about the construction side?

Yes, I will come back to the construction side later on.

Okay.

And we have coordinated with the Private Industry Council, the so-called PIC, to provide us with potential candidates for training once the operation phase of our program takes place. Additionally, a representative on behalf of Kvaerner has had initial discussions with the director of the Philadelphia Housing Authority and some of its tenants' organizations to explore the possibility of training 82 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Philadelphia residents who are a part of the welfare-to-work program. In an effort to not to mislead the Council, I do want to add that this will be more than likely be coordinated throughout the Philadelphia Industrial Council.

Councilwoman Clark.

Could we request that your comments be provided to us in writing? I do appreciate that you are struggling with it and so are we, but we need to be able to analyze the data that you're offering us.

Yes, yes, definitely, you will receive the answers, yes, in written, yes.

I'm asking for the text from which you are reading.

You will receive written copy of all of my answers because this is just my hand notes.

Thank you, thank you.

Just so the record is clear, Mr. Rafdal, it appears to me, as I look at where you are, that you have a binder probably 83 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 with some kind of a tab system, and you're going back and forth between the various issues; is that correct? There's no one document where you're just reading down the page on.

No, no, no, I'm going back and forth.

Right.

Yes.

That's what I thought I saw.

It makes it difficult to copy it.

Just so I don't forget this question, you mentioned 20,000 person hours of work being done so far. What are these people doing?

Most of the work so far has been to demolish the old part of the Navy Yard that we will use in the future, to take down buildings. That's the very most of the 20,000 hours.

So this is the demolition prior to the construction, which part of the earlier discussion was with regard to 84 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Keating and the buildup the Navy Yard. You have to demolish first and then you're going to build up; is that correct?

You are right, Chairman Nutter, yes.

I might be able to get a job down there myself.

I'd like to ask a follow-up.

A follow-up question by Councilwoman Clark.

Of the 45 percent hours by minorities and disabled, can you say where they are? Are they all in labor, or do you have any in technician and professional and managerial classes, what we used to in the old days an EEO-1 spreadsheet? Are they all down at the bottom, or is there vertical integration throughout the company in the skills being hired? If, for instance, I asked you what percent of the officers and managers were minority and women, are you prepared to answer that question, what percent of the professional, what percent of the technicians, what percent of 85 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 laborers? Do you see that gradation that I'm asking?

Mm-hmm. I think that all of the questions you are asking for is going from -- is going in -- are presented in detail in our reports, and you can get the report. But it goes with the nature of the demolition. Most of the hours that are spent are related to workers. So that's the reason why it's mostly workers in this 45 percent as well. But we have it specified in detail in the report with the names and everything of the people that have been working there.

Thank you. I yield back, Mr. Chairman.

Please continue, Mr. Rafdal.

Thank you. Question 5: Has Kvaerner been able to determine its minority participation at its New Jersey facility? Answer: On November the 9th, we sent a letter to our sister company and we requested this 86 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 information from our New Jersey office, and a copy of this correspondence is available if you desire. However, we have not received the response yet from the New Jersey office, but we will do that. Another question: Does Kvaerner have a detailed plan outlining what it plans to do with respect to minority participation? And, A, when will the plan be implemented? And, B, who has the responsibility of implementing the plan? Our answer to this is the following: From the beginning, Kvaerner has attempted to supplement a plan of action with regard to minority and female participation. In the beginning, the plan did not work as well as I thought, as I would have liked. However, since our meeting with Council on October 27, 1998, we have made additional strides to reach out to minority participation goals. In our letter of October 26th, we outlined for the Council members the process of the communication we had established to ensure that minority contractors receive the information and in sufficient time to compete. 87 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 We further contacted each and every contractor who appeared at the hearing by letter to specifically direct his or her company on who to contact at Kvaerner to guarantee access to information that would allow them to compete. Both of these pieces, the letter to the Council and the letter to those contractors present at the hearing, are in my possession if any member of the panel wishes to see them. And when it comes to professional services, there was a question: What has Kvaerner done with respect to women and minorities in the area of professional services? And our answer to that is: Currently, Kvaerner has engaged the service of one of the minority law firms in the City of Philadelphia. And it also, through its PSDC component, engaged the services of a minority accounting firm. We have minorities providing services in architecture and design. We have invited minorities to bid for work in the areas of insurance and printing, and we are exploring the possibility of minority involvement in car leasing, pest control, travel 88 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 services, and maintenance.