Since your name has been one that's come up so often about being asked to be at the shipyard, I was wondering, and you have been around down there for a long time, have you seen a difference, say, from August up until now?
Absolutely. I am in concurrence with Mr. Kromer's statements, that there has been improvement but, yet, there's still a way to go. Most recently, the report that you're reviewing now from the Greater Philadelphia Urban Affairs Coalition, for example, OHCD, as a HUD reporter, if you will, of their monies and activities, we're supposed to get information directly from the sub grant recipient, which would be Kvaerner or PSDC. And then we will massage it the way it needs to be. Right now, we're in a position of getting secondhand information. And, generally, we like to get it primarily from the source because, you know, we are responsible for reporting to HUD, and if HUD were to ask us -- 176 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Right. What information and who are you supposed to get it from? I mean, if you're getting secondhand who's -- who --
Well, the contractors who respond in their bid packages, that's the information we really like to review because that's the official record. Everything thereafter becomes second and third (unintelligible) record keeping. And as an agent of City of Philadelphia OHCD, I personally would like to see, in responding to this job, information coming from the contractors to Kvaerner, from Kvaerner to OHCD.
In particular, relative to Section 3, MBE/WBE/DBE participation, other employment requirements on the job.
Is that a separate part of the contract -- I mean, the bid submission?
There is a form. 177 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
There is a form that Kvaerner has in the bid documents, and the last two or three bids had those forms in there, and the contractors should have, you know, submitted those bids -- submitted those forms with their bids, listing who they were going to use and not being in a review process advantage to assist Kvaerner in analyzing who's responsive and responsible and whether their good-faith effort are really indeed good faith or not, we're three, four weeks down the line, somebody's on the job, they're starting to work, and as mentioned by Mr. Nutter, bid shopping, you know, then they have the power of the hammer to subcontractors, and subcontractors are going to get a chance to get the maximum profit margin, especially those contractors who bid with the primes going in, which is the standard operating procedure in construction anyway. So we're not asking for anything different at OHCD. It's just the way the industry is anyway -- subs quote the primes, and you go in 178 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 with the prime directly is supposed to be the subcontractor if they win.
I can't say for the last three, four bids right now because we don't get the advantage of the bid form that shows who the primes on listing at bid opening. It's after they're scoped and after it's given to the Urban Coalition, then we get it.
So you should get it at the same time as the Urban Coalition gets it?
You should get it at the same time the Urban Coalition gets it?
Well, we are a City government agency working for the mayor and the Council concerning the HUD monies. And Mr. Brooks has made that recommendation to Kvaerner that we get it directly because we are a City department. What the Urban Coalition and Kvaerner do is a private agreement that the two parties have.
So the plan 179 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 should be given to you directly from Kvaerner?
In the most recent recommendation that my superior has given to Kvaerner, yes.
All right. So how can we help you get the information you need?
You got to ask Mr. Kromer, you got to sit down and make it happen. But, you know, I do have access to the yard now. And I must admit that it was like a marriage. And, indeed, I tried to engage or be engaged to Kvaerner and their staff. We had some rough problems, and this entire session here has been like a marriage counseling session, and there's a lot more improvement, a lot more respect among the parties. And I'm happy to work with them now because I think they understand what this whole thing is about and that is the agreement that has the 20 and 10 involved and the ability of the local firms here who are certified by MBEC, who have done work on other major union projects and their ability and their readiness to do work on their project. 180 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Okay, thank you, Hanford. Mr. Kromer, will you tell us how we can help? Or maybe you already started to streamline that process.
I really agree. And just the knowledge that Council has raised a question or expressed, whether there's another hearing or not, that it is taken seriously, and I think these two hearings have been very helpful in that regard. And we'll certainly report to you on the follow-up to each of the questions you've raised.
It seems to me that it would be good if the three of you, the three entities -- the Urban Coalition, the MBEC and -- at least the Coalition and the OHCD -- develop a process that they think would be a good flow for gathering information at the early point of the process so that you're not coming in the back door, and submit that to us so that we will be able to have our input into recommending that 181 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 this happen with the Kvaerner Shipyard.
I just have one question that I'd like to get on the record. Mr. Solomon, the report that you shared with us, and I believe it was actually first shared in terms of percentages by Mr. Rafdal in his testimony, you're showing employment as of October of 1998, you have a couple different categories -- minority and female skilled workers, and then you have total minority and female skilled crafts you're showing at 41.31 percent; is that correct?
And then you're showing for minority and female laborers, which I'm going to assume is technically considered an unskilled position?
That's correct. 182 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
And the total minority female laborers, although you're using that term, I assume on this report it's slightly different than -- is that maybe total minority female workforce, would that be a better term in that section there so as to not be confused with the general term laborers? 'Cause you're talking about skilled and non-skilled minority and female.
Well, we could substitute unskilled for laborers. That would be exactly what it --
Well, I'm just trying to understand because the bottom line of all of that is, when you add up the skilled and the unskilled, you're saying the total is the 45.5.
Right, I understand, I understand, okay. Now, I believe that there are probably 183 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 some final. . . I'm asking the first panel of individuals to come back up. This testimony has elicited some possibly final questions. And so I thank you, members. Please don't go anywhere, though. And during the switch, we'll take a five-minute recess. (Brief recess taken.) (Proceedings resume.)
We are back. Mr. Rafdal, I think you want to add some information to the record, either based on what you heard from some of our constituent governmental agencies or some of the contractors that are doing work with you, and you might have some additional information you want to share. And then I have maybe some final questions for you and other Councilmembers may have some as well. We appreciate your endurance through this process.
Thank you, Mr. Chairman. We have just one clarification or some comments to add.
Pull the microphone 184 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 a little closer.
Yeah, and I would like Richard Ryan to do that on behalf of me. (Richard Ryan comes forward.)
Good afternoon. My name is Richard Ryan, R-Y-A-N. I'm the Project Manager for Construction for Kvaerner. Just a couple things really quickly. The first thing is the report you received, which addresses the utilization of minority and women business enterprises. That is, at this point, a confidential report inasmuch as some of the contracts have not been finalized, and we request that you copy that to only the individuals that it needs to be copied. The second point was, Councilwoman Clark had mentioned the word "leverage." Forgive me, my back is to her. That was an excellent point, but I want to clarify something. I believe I'm representing what she said correctly, but I believe she said that if Kvaerner waited until after the prime bidder's 185 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 been awarded the contract to reconcile the minority percentages in his contract, then what leverage do we have? And she's absolutely right. If we did wait to do that, we would have no 6 leverage. That is a practical matter. What we actually do is, as part of the bid proposal form, the prime contractor is required to respond to the bid and to fill out the form which details his minority percentages. If he does not fill out the form, he's considered a non-responsive bid.
Mr. Ryan, I'm sorry. Do you want to expound on that? You said that if they don't fill out the form with what information?
Okay, let me go back a few steps. The request for proposal goes on the street to the prime bidders. The prime bidders respond to the proposal, their bid proposal, which is essentially the price in addition to other elements. As part of that proposal, there is a document in the proposal where the prime bidder 186 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 has got to fill out the percentages that he is planning to utilize for both minority persons, for women business enterprises, and for minority business enterprises. If he does not fill out that form, it's considered non-responsive as the first thing. The second thing, as a follow-up to that, that becomes a criteria of selection for Kvaerner. Obviously, the higher the percentage, the greater points he will get in the selection procedure, consistent with price and schedule and quality and various other factors.
So is it your testimony, on behalf of Mr. Rafdal and in his presence, that Kvaerner's policy is that if a contractor bidding on work does not identify the percentage that they plan to utilize of that contract for a minority or female or disadvantaged businesses, that contractor is deemed to be non-responsive and, at that point, is essentially ineligible to get a contract?
Okay, he's deemed to be non-responsive, with the result of a follow-up whereby, you can imagine, if you're bidding a 187 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 $20 million project, in some instances, you may not have a copy of insurance or bonding requirements, which are also selection criteria.
Exactly. There's a lot of resources going into preparing a bid, and we have to give an opportunity.
Let's you go back and forth a few times, and the person just doesn't fill that part out, what would you do at that point?
Mr. Chairman, I'm not trying to be evasive. We haven't had that happen to date, but what would I do in those instances? We would bring in the contractor and basically explain what we have done on at least one occasion, that we have certain obligations to the City and various other parties under the master agreement, and that this is one of the criteria that we simply cannot ignore and will not ignore, 188 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 and that in order for him to be considered as competitive, he needs to complete the form. It's as fundamental as price or bonding or insurance, as far as we're concerned.
So from your standpoint, it ranks with those other criteria in terms of importance to you and to the company?
Councilwoman Clark, I know you've been trying to get my attention.
Thank you. I'm particularly interested in seeing the things that Mr. Ryan compares to failure to comply with minority, female, and disadvantaged requirement. You said it's equal to -- it ranks with bonding, insurance and financing. Now, that's at the core of business. It's not "a nice to do," like giving to the United Way; it is an essential to do, or we can't go forward. Is that correct?
Yes, ma'am. It's as important to us, the ability of the contractor to 189 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 submit a plan and to follow that plan as -- it's equal in standing to the other criteria such as the bonding and insurances, which are also, incidently, master agreement requirements.
Okay. Now, if a person does not provide insurance or bonding or financing, failure to do so would mean that there could be no contract?
Then am I correct if I assume that a contractor or a prospective contractor, a bidder who fails and refuses to fill in qualified minority, female, and disabled contractors is a non-responsive bidder and, therefore, cannot go forward after you have given the kind of technical assistance of going over with them and requiring that they beat the bushes and turn every stone?
Yes, that's correct. We've formalized procedures internally. Before Mr. Rafdal annualizes the bids, these requirements in-house are that the selection criteria will include, as a matter of priority, minority and women business enterprises, and each contractor's 190 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 proposal in that regard, along with prices, it's on a singular spreadsheet, and it's considered very important on the spreadsheet.
Where in the document would I find this language? And if it is not spelled out, would you be willing to spell it out?
You'll find it in Contract Exhibit 5, Item 1.12. Incidently, OHCD and MBEC receive a copy of each trade package, and that clause is in there. It's called "Kvaerner's Minority Business Policy. "
Okay. I have no 16 further questions. I thank you for the clarity of your answers.
I would like to add two comments. First of all, there is some part of the project that cannot be supported by minority companies because they're not at all supplied from the United States. There is some equipment coming 191 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 from Europe and Asia, due to the nature of the supply industry here in the United States, it has not done commercial business for the last 5 years. 6
Mr. Rafdal, I'm 7 sorry, I don't mean to interrupt while you're in 8 the process of making that statement, just for 9 those of who are not in the business -- I haven't 10 built anything recently -- could you give us some 11 examples of the kinds of things you're talking 12 about? 13
Yes, crane. It's a 19 600-ton capacity gantry crane. And there are no 20 one in this country that is supplying those kind 21 of cranes. 22
That particular 23 purchase or procurement, actually, I believe, was 24 the subject of a newspaper story some months back 25 about this particular crane, and I think you 192 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 bought it possibly in Europe, and there was a concern about the purchase of steel and other components from outside the United States. I think actually some members of the House of Representatives, not even from Philadelphia, had apparently made some comments in the newspaper questioning whether steel components, if not this kind of crane, could not have been purchased in Pennsylvania or somewhere else in the United States. Could you shed any additional light on that?
The reality is that there are none in the United States that can supply it. And the steel issue in the gantry crane is a misconception 'cause I think that based upon reports that PSDC has worked out, that the steel contained in that contract is not more than two hours production in the steel plant in Pennsylvania. So the question is not steel; the question is knowledge about setting up a gantry crane like this. But what I can say is that on the erection side of this gantry crane, when it comes 193 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 to Philadelphia, that erection will be handled by a minority company, so we are trying to push that those suppliers as well. The second one I would like to add is that if we, for any reason, can't find minority companies on part of the contracts, we are trying to work that out by increasing the number on the other contracts. So, hopefully, down the road, we will measure this in the total picture when we are finalized with the construction.
So if I can slightly rephrase that, what you're saying is that there may be an occasion where, on some particular contract, for some various set of reasons, there might be low or possibly no minority participation on a particular bid package for whatever reasons there may be. But your system is set up such that and your commitment is such that if that were to occur, you would look for other opportunities in places where there clearly are minorities who could do work to increase the percentage over and above maybe what you had been thinking about initially. 194 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 And I guess your goal, it seems to me, is that at the end of the day, when all the contracts are added up, you would like to be measured by the overall percentages and not necessarily on each and every contract that goes out the door because there are some in which you will have virtually no participation at all.
And that's where good-faith effort comes in because if you end up with zero participation, then you've got to have a substantial rationale that tells you what you did and came up with zero. If you don't -- and I've seen this happen before -- your participation with low-level, low-dollar labor pieces and the plum jobs where minorities and women need the experience for the resume points as well as for the dollars, they get closed out.
So we want to have vertical integration as well as horizontal.
I don't normally do this, but he has a out booming enough voice. 195 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Mr. Roundtree, is it true that from time to time, on certain contracts with the City of Philadelphia, there are occasions that there may be virtually very little to no minority participation on certain types of contracts, not because of ill will but because there are no 8 people who do that work who may fit into those categories? Does that happen sometimes?
Mr. Rafdal, why don't I let you finish, and then I have final questions from myself.
Mr. Chairman, we have given you the (unintelligible) we asked for.
Based on the testimony that you've heard and the questions back and forth, do you anticipate any additional changes with regard to reporting requirements or any change in structure between Kvaerner Philadelphia Shipyard, Inc. and PSDC so that Kvaerner can ensure that it gets immediate access to information about what's going on with the various contracts and we can avoid, both for our purposes and your purposes, having to revisit 196 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 these kinds of situations under the circumstance that brought us here today? Do you feel that you have a network in place and a system in place that will ensure that you're getting good information and that you can respond as quickly as possible? This is for Kvaerner, not for PSDC.
Yes. The situation is today, two months after this happening in August, I'm convinced that we have the system and we have the right attitude to do this.
Okay. Mr. Benko, let me ask you a couple of questions. What kind of reports does PSDC produce with any regularity either to its board, to Kvaerner, or to any of the City agencies that were here earlier between your first appearance and your second appearance?
Well, you know, one of the major functions of PSDC is to disburse funding to Kvaerner based on these various contracts that we've talking about and other financial matters. So one of the principal efforts that is undertaken in the form of reporting is to keep the 197 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 board apprised of the balances in the variety of the funding accounts that make up this $400 million plus initiative.
So you report to the board on MBE, WBE, DBE issues as well?
I report to the chairman, who, in turn, confers with other board members. The board --
There's no formal reporting process to the entire board on these issues?
We have -- it's a very small, close-knit board of directors, as you know.
And I'm, of course, in communication with various members of the board on this issue and other issues on a regular basis.
Well, the last meeting of the board was -- the formal meeting of the board was -- I would have to double-check, but it was probably in July perhaps. I think July might have been the date. 198 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Are there are a certain number of required meetings for this board?
Don't nonprofit boards, by statute, have some certain number of meetings they have to have during the course of a year?
I'm not sure if there is a specified number, but it can't be monthly, it could not be less than annually. I would suggest that we would meet that.
No, there's not. Again, it's a very small board, a board that I am in communications with on a regular basis.
Yeah, but this is a 199 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 board that's responsible for $400 million.
If people have a responsibility for $400 million, they might want to meet every now and then, right?
I understand that. How often do you anticipate in the course of the year the board is going to meet?
And where was the 200 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 last board meeting?
The last board meeting was in the office of the general counsel, at 200 Broad Street, here in Philadelphia.
I'm sorry, the governor's general counsel has offices --
The Office of General Office. The Inspector's General's Office is in there as well.
So that -- is this a regular staffed office? I mean, the governor's chief counsel has an office in Philadelphia?
The Governor's Chief 201 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Counsel Office of Inspector General, the Office of Inspector General, as I understand it, falls under the general counsel's direction. And they are located here, yes.
Okay. And all the board members were at this meeting in July?
And when you make your reports, are these written reports or verbal reports?
Both, depending. Financial reports, of course, are written reports. Most often, they are verbal reports to the board members.
Is there any prohibition on your giving these reports to anyone else?
I don't know. I would have 202 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 to check with our attorney.
Okay, if you could check with your attorney and see whether there is any restriction as a nonprofit corporation with a representative from the City on the corporation, if you could check and see whether there's any prohibition on your providing copies of any of those reports to City Council, I would appreciate it.
Tufano, T-U-F-A-N-O, Chairman. 203 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
But you said it's a small board and very intimate, do you know where he's from?
Okay, the 204 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 chairman's Mr. Tufano. Who's the next member?
The Secretary, Department of Community and Economic Development.
He lives in Reading, so you know where Sam McCullough lives, right?
Okay. And the fourth? 205 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
He lives in Philadelphia, he lives in Mt. Airy. (Laughter.)
Maybe he spends some time down the shore but I believe that he lives in Philadelphia.
The final member is Gary Crowell, C-R-O-W-E-L-L. Larry Crowell is the Secretary, Department of General Services. And he's a member of the board.