Gentlemen, I'd ask to you introduce yourselves to the record and proceed with your testimony. I would only mention to you that only in the interest of time, you can get right into your issue. I think a fairly decent foundation of some of the problems, in fact, have been laid out. If you have some different situations that you'd like to share with us, we'd certainly be pleased to hear them. Please proceed.
Well, we will attempt to 78 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 be brief.
Would you admonish all the witnesses to speak directly into the microphone, holding it as close to their mouths as possible, because the acoustics otherwise is very bad in this chamber.
I'm sorry, Councilman, I couldn't hear you -- no. 16 Go ahead.
I'm sure you'll hear me. To the Honorable Chairman and other Councilmembers, I'm J. Pierce Barnes, Jr., Executive Director of United Minority Enterprise Associates Minority Contractors Association. And on proceeding, I'd like to read into the record a brief statement and then get right into our details as our concerns.
Do we have your 79 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 statement, Mr. Barnes?
It has always been the goals of United Minorities Enterprises Associates to represent minorities and females and disadvantaged and disabled business to provide access to the community resources and facilities that address the needs of the families and the community at large and those who ask for our help in representation. UMBA was the initiator of the amendment to the 17-500 for the City of Philadelphia, establishing minority and female participation. To that end, we come here today with a multitude of concerns that will affect our participation in the expenditures of public and private funds in the projects around the City of Philadelphia going into the 21st century. UMBA initiated a letter written to the City Controller, Jonathon Saidel, addressing our concerns with Kvaerner and its practices. Number one, Kvaerner Ship Building of 80 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Philadelphia has been contracted to establish facilities here in the City of Philadelphia to the former naval yard, with an initial contract that will exceed more than $450 million in the next decade. Under the master agreement with the City of Philadelphia, United States Navy, HUD, OHCD, the Delaware River Port Authority, and others, a somewhat comprehensive but inadequate plan has been drawn that do not meet the inclusion of all the members of the City of Philadelphia. I, therefore, request an organizational breakdown chart of all the entities concerned in the participating master agreement, their dollar budget, names, addresses and telephone numbers of the department directors and the decision-making executives. I also call for an up-to-date copy of all Section 3 reports tendered to date. We found out after our initial meeting with Harald Rafdal several weeks ago -- he's the president of Kvaerner Shipbuilding -- that our concerns and proposals to include MBEs, WBEs, and DBEs has yet to be taken in what we feel to be a serious and representative light. 81 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 We call for the same opportunities to negotiate with Kvaerner as was expended with the unions, the majority contractors, and others to establish a working relationship on contracts and agendas in light of the invoices and direct documentations of expenditures of monies to date to set up the contracts and the cross-training of personnel to accommodate acceptance of their agreement. We would further request a copy of those documents which would allow for waivers of the Buy America Act and Buy Pennsylvania Act that subsequently allowed Kvaerner Shipbuilding to purchase its crane outside of the United States and all of the amendments that would allow for its payments using public funds. I further question the following awarded contracts of records that lack minority and female and disadvantaged business participation. , has been awarded $2,932,565 in contracts. No minority, W 82 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 or DBE participation. We have adequate certified contractors capable of dealing with this portion of the contract, and you previously heard from some of the representatives. I won't recall them in consideration of the time. P. 6 million. To date, Hannah & Son has received a 5 percent contract, totaling $80,000. Demolition and site, including site paving and caps, which was discussed previously by KKAJ, you are aware of. And without minority participation, these contracts continue to proceed. , $2,292,836 to date. No minority participation. And in this particular contract, we will not settle for just the supply end; we want work on that job. We have adequate certified contractors who are able to deal with the demolition and the reinstallation of the 83 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 electrical work on the job. So just to award us a supplier consideration is not going to be acceptable by UMBA. Continuing on, you previously heard a reference to the structural steel. To date, Havens Steel has been awarded $48,253,000.
This is a joint venture, and they have no WBE or MBE participation. On the steel pylons, a $20 million contract was awarded to Agate, a construction company. No minority participation to date. And they have 7500 pylons that have to be driven. And I'm sure that we have minority contractors capable of providing services on the preparation, digging, and evacuation concerning these 7500 pylons that they're going to be installing. On the concrete bid, Madison Construction has won. I'm not sure of the dollar-amount. But, again, they have no minority participation to date. It is a local firm. They've done work over in New Jersey, which required them to have minority participation. They're well-aware of the requirements in the area, yet they still choose to 84 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 ignore minorities and the law. And we are calling for a reconciliation and identification in this aspect. Continuing. Former representation of a small minority business should be -- I'm sorry. Former representation of small minority business concerns should be addressed through a representative, advisory or oversight board of which United Minority Enterprise should be a voting member with direct communications with Kvaerner Shipbuilding, majority contractors and such, concerning the percentage participation of M, W, DBE participation. In closing, I call for an investigation of the Eighth and Market Street contract, which will be coming before you shortly for funding. Again, there is no minority A and E firms that have been included in this project, and we have our concerns. I will, as well as UMBA, make myself available for any follow-up successful negotiations concerning these matters of interest. In proceeding, Mr. Simon has forgone 85 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 his participation so that we could present Mr. Jihad Ali, who is a committee chairman from United Minority Enterprise Associates, also dealing with directly with the questions concerning Kvaerner. Mr. Ali? )
Thank you. The sergeant-at-arms will distribute them. Please identify yourself for the record and proceed.
I'm Jihad Ali. I'm a member of the United Minority Enterprises Associates.
I'm Jihad Ali, a member of the United Minority Enterprise Associates. And it's an honor to be here today, Mr. Chairman and other members of the committee.
Pull that mike down a little bit, a little closer. 86 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
It's an honor to be here today, Mr. Chairman and members of the committee, because we're still struggling. And I take that as an honor because in the history -- when I focus on the history of Black American people in this country, we've struggled to get everywhere we are today. That legacy is still passing on. It's been 10 generations before us in our community that have 11 been here, and we're still fighting that 12 struggle. 13 And when I look back at my lifetime, in 14 the 41 years that I've been here, I look back and 15 I see the great struggles such as Cecil B. , and others that have 17 existed in this city. So it's really an honor to 18 be here today to continue that struggle because 30 19 years ago, at 33rd and Dauphin, they were talking 20 about jobs; 30 years later, we're sitting right 21 here still talking about jobs. 22 Because this whole thing, this whole master lease, this whole set of exhibits that's attached to the master lease, it all talks about jobs. That's the number-one payout for the city. 87 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 And, in fact, that's the thing that we need to focus on. So it's not so much as Kvaerner building those ships, but the payoff for us is in jobs. Chairman Nutter and members of the committee, I appreciate the opportunity to appear before you today to discuss the rehabilitation of the Philadelphia Naval Shipyard and Kvaerner Shipbuilders and their equal-opportunity responsibilities. Some of the matters discussed today are similar to matters happening on all of the major construction projects occurring in Philadelphia being financed by the City of Philadelphia. Mr. Chairman, to begin with, I would like to discuss the financing that was extended to Kvaerner Philadelphia Shipyard, Inc. I believe that it is important to see where the money came from and what laws apply. There is little doubt about the importance of Kvaerner Shipbuilders to the City of Philadelphia. Nearly 1,585,577 people call Philadelphia their home. Over the past year, $429,500,000 of taxpayer dollars has been 88 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 channeled to Kvaerner Philadelphia Shipyard, Inc. primarily in the form of housing and urban development 108 loans an special-purposes grants. Two of the HUD 108 loans are identified below. It is a $30 million Tax Increment Financing Grant financed by PIDC through a loan of HUD 108 loan funds. A $10 million PIDC loan, which is also a HUD 108 loan. Other loans and special-purposes loans are as follows: A $182 million investment authorized by the Commonwealth Capital Budget Project Itemization Act for 1996 and 1997. A $25 million loan from the Commonwealth Discretionary Dislocated Workers Fund. A $20 million PIDA loan. A $19 million Economic Conversion Fund interest-free loan to PSDC for the benefit of Kvaerner. A $65 million grant from the Delaware River Port Authority. A $50 million grant from the United States Department of Defense. 89 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 A $25 million grant or grants from the National Reserve Account Job Partnership Act. And $3 million in savings to Kvaerner through utility discounts from public utility companies. Above are other sources of funds as indicated in the master agreement. "The problem that we have is that in all the loans or grant documentation is a clause that reads: The borrower shall comply with all state and federal laws prohibiting discrimination in hiring or employment opportunities. " 90 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 There are other clauses that should be incorporated in all these long documents that are missing; most notably, from the 108 loan funds, are the Section 3 clause. These loans are a direct advance of the future community development block grant entitlement receipts. These are some of the obligations that Kvaerner is ignoring. While Kvaerner Philadelphia Shipyard, Inc.
has only been there a short time, they have awarded several major contracts for construction of the yard. This blatant disregard for existing laws and regulations of state and federal requirements is being passed through to the contractors that Kvaerner is contracting with because these rules and regulations are not a part of the bidding documentation. These problems have been exacerbated by the failure of our local city government to correctly give responsibility for compliance to the Office of Housing and Community Development. Because of the federal dollars that gives jurisdiction to them, in addition, others chosen by Kvaerner Philadelphia Shipyard, Inc. has recently been contracted to obtain minorities 91 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 involvement have taken an adversarial role. We hope to have a meeting with our attorney and also parties involved to solve these problems at this stage of the development. Mr. Chairman, I hope you can see that Kvaerner Philadelphia Shipyard, Inc. has not been fair in the construction process. The hiring of prominent African-Americans will not put a happy face on what has been occurring. We will need direct oversight of this committee to put this construction-letting process back on the right track. Because, as of now, Kvaerner Philadelphia Shipyard, Inc. has done all the wrong things. , Kvaerner has been like an animal caught in a net. The more it struggles to get out of its predicament, the more it gets entangled. The time has come for all of us to work together to help Kvaerner Philadelphia Shipyard, Inc. get untangled. That is why we're here today. I suggest that our organization and our attorney, Mr. Michael Davis, be invited to any follow-up meeting to address this issue. 92 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 What we would like compliance with Section 3 and other federal laws. We'd also like an open bidding process. We'd like documentation of all minority outreach efforts until the project is completed. And we'd like access to the those records. Perhaps the United Minority Enterprise Association can assist in these monitoring efforts. The controller earlier, David -- I didn't get his last name -- he asked one of the Councilwomen -- the Councilwoman asked him what could be done when we find out that they're not in compliance. As I've indicated through the documents that I saw that were a part of the master agreement, but they weren't signed, so I can't say legally that that's what they signed. Because when you look at that issue of documentation, when you go to the mayor, when he submitted the bill before the Council, at the time he sent the master agreement, and he said contemporaneously, the agreement was going to be placed in the chief clerk's office. It's still not there today. I went there today before this hearing and it still is 93 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 not there. I looked at the file. That document has been in existence for over a year. It consists of over 500 pages. I would ask the Council, in your capacity, under your rules and regulations, you have the ability to get outside counsel. Because, obviously, there's going to be a conflict. You're represented by the City Solicitor, then they represent PIDC. If we're going to look at legally what can be done, I want you to have the right information. Perhaps you can obtain outside counsel.
And the other thing before I close is, there's a concern by one of your other Councilman about -- his focus was on union work. Well, there's a lot of people that I know that aren't in the union. I would want everybody to be in the union. However, there's going to be sometimes when people have the skills but they really don't have the ability for the union. As things exist now, we need to know if there was a project agreement signed, waiving the requirements of disadvantaged people to work on 94 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 this job. Because if that's the case, then that's going to mean that this is going to be a 100 percent union job, which is quite in contrary to Section 3 regulations. And we need those types of answers answered.
Just one item for the record. The City Solicitor's Office does represent a number of -- represents all of the City departments and some of the agencies. I do not believe, though, that the City Solicitor's Office represents PIDC. I believe that PIDC has their own legal counsel, as they are a quasi governmental agency.
Yeah, I go along with what you're saying because, going down the listing of organizations, we've had -- we've had a few meetings with PIDC and the Hispanic Chamber of Commerce. And within that, there have been several contractors and representatives of the Hispanic Contractors Association. And as of this time, I do not know of anything that has gone in terms of a pre-bid or a bid proposal or RFP to the Hispanic Chamber of Commerce or to the Hispanic Contractors 95 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Association. And we actually said that the Hispanic Chamber should be the instrument that they use to be able to get involvement. And after this time and so it's -- and I agree with you in terms of contractors and construction workers and electricians. They would be very hard to find within the building contractors union and so on. So in terms of participation, in terms of jobs, it becomes a problem in terms of diversity and minority representation, both African-American and Latino and women.
Just in answer to you, it's not a problem for the other guys, but that is a problem for us. And as long as we're on point and this committee takes a stand, this stuff can't go on. Today in the paper, they quote that there's going to be $2.7 billion worth of construction in this city. And if you don't stand up now, then you might as well just kiss all of that money good-bye. And everything that we to today affects all these young brothers that we bury every night 96 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 out there. Because they're not selling drugs because they inherited that, that's nonsense. It's the easiest opportunity that they have. They have no idea about the kind of money that's involved in construction. And, I tell you, it is my responsibility to come down here today, to stand up, to tell you that we, as UMBEA, is going to do everything within our power to stop this project within the law, because we owe it to ourselves, we owe it to our children, and we owe it to you our ancestors. (Applause.) (Charles Ang comes forward.)
Chairman and people of the Council, I appreciate the opportunity today to come here and air the concerns from the minority and the women's business sector.
My name is Charles Ang. I'm president of Ang Associates, which is a consulting engineering office, and also a small construction 97 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 company named Innovative Construction Systems. My concern is pretty straightforward. This Kvaerner job, I believe we are not getting enough information for the minority and WBE sector. Attest to that, I have a letter here that shows a follow-up to an ad in The Inquirer regarding -- well, this came out from the Philadelphia Shipyard Development Corporation. And the people, the contact person there, is Bob Benko. And the letter here I had is when this ad came out looking for project management consulting services, and I addressed to them to Mr. Benko, and this is following a very -- it's just a very regular, normal procedure. And I quickly mentioned about my company, and I'm a certified minority business enterprise and I'm interested in offering my services. In fact, I did mention, because our company, a minority company. Not too many have grown to be strong enough to be a prime. And I have stated right here I'm only interested to go in as a sub to the primes. In the letter here, I ask them to keep our company informed of your short-listed firms so that we can 98 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 network with them independently. And I gave him my number, telephone number, my e-mail number, but I got no response. In fact, I followed up with several telephone calls and I never got a return call.
Did you get past the administrative assistant? (Laughter.)
You heard Mrs. Bridges. Did you get past the administrative assistant?
This wasn't the Kvaerner piece, okay. This was with the Ship Development Corporation, and you wrote to Mr. Benko 'cause he is -- this corporation, we were told, was going to be the oversight board to make sure that everything went all right. And you got no response from him?
No response from him. 99 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Let us say that we have given Kvaerner and its entities untold opportunities to communicate and establish a working conduit with us, and they have directly, callously and with aforethought avoided any opportunities to deal with any minorities. As included within the package that I gave you, there had been also the concerning testimony by Mr. Leonard. And every sense of the operation that we have tried to make this thing work prior to coming here and voicing our concerns has been received with total disregards to the community in which they are located. And when you're paying out of your pocket, you expect to at least hear the music if you don't even get to a dance to it. They're not evening hearing us.
Let me ask you a question. Have you made any contact with PIDC or PSDC? Has your organization contacted both of those agencies? And what was the response?
Again, inquiries have been directed to Mr. Hankowsky ad his office.
Did you get a 100 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 response?
It's status quo. The status quo is to avoid. If you avoid us long enough, maybe we'll go away. Well, we're here today and we're here to tell you that we're here for the long run.
There has been phone calls and I do believe those letters. At least two letters that I'm aware of have been written. I have no response to those letters. Unfortunately in my rush to get down here today, some items were overlooked for inclusion in this package. However, I shall make it my duty to get that to you before the end of the week, Mr. Chairman and other members.
We had proceeded in giving them a variety of proposals and packages concerning our cross-training and participation 101 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 with the minority community, of which I believe Dr. Spencer and others will discuss in their follow-up after we leave the podium.
However, we thank you for allowing us an opportunity to bring forth our concerns. And as Mr. Ali has just proposed, that we're here for the duration.
Thank you, Mr. Chairman. This question can be for any one of the three. You know, we all went down to meet with the president of Kvaerner.
And since that time, I've received correspondence, and I think at the meeting, Jim Roundtree was there, so I think things started to be worked out where OHCD and MBEC were now going to participate actively. 102 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Has there been any change in information flow? Have communications opened better? Or what?
To date, no, it hasn't changed. And I say this with a jaundiced eye because there are other entities that have been further included into it that does not communicate or represent the minority community. However, I notice by a letter that I received dated October the 13th, which is included in the last four pages of the package, which kind of offhandedly just dismisses us and says that these entities have been awarded contracts to establish a communication and contact with the minority community. And I don't feel that all of it is representative of the needs that we have espoused here.
Yesterday, Handford Jones 103 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 from OHCD, HE called my office, and I did have to say this, that we were able to see some principal people down at Kvaerner yesterday. And I was able to present my credentials and brochures and seems to be receptive. And I hope that kind of spirit should be kept up and someone else can follow up. And we were only two parties, went down to together with Handford Jones. So I hope that that kind of activity can continue on and bring up more interested people in there to be involved.
I just wanted to add that Handford Jones is doing his job. And sometimes when you do your job -- (Applause.)
-- people don't like it. Regardless of what it says paper, they don't like it. And he's one that's going to need protection from the chairman and rest of the members of the board. And the only way things are going to change is through the efforts of this board sitting right here because you have the power to 104 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 change it. You can always get everybody's attention when you stop the money.
Right, okay. Thank you, thank you very much. (Applause.)
Ladies and gentlemen, after consultation with Councilwoman Tasco, the prime sponsor of the resolution, given the substance and the weight of the testimony that we've heard from two panels, we will make a slight deviation. We believe at this point in time, it is appropriate to have representatives from PIDC Kvaerner Philadelphia Shipbuilders, Inc., and Mr. Hankowsky and Miss Van Nostrum come to the witness table. (Above group comes forward.)
Thank you for your presence here. If we could have initially each individual at the table identify themselves, your agency, your connection to the project. And then I will assume that you have worked out amongst yourselves, if you have a presentation, please 105 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 make the presentation. But we would certainly ask, and I know you've been here from the start. You have heard the testimony of many individuals who have, apparently with good faith, attempted to be involved with this project. We would like direct and forthright answers or explanations to the statements that have been made. And so if we could start with Mr. Hankowsky and go around. If everyone could just identify themselves and their agency or employer.
I'm William Hankowsky, the President of the Philadelphia Industrial Development Corporation.
I'm Richard Ryan, the Project Manager for Kvaerner for the Construction.
My name is Gary 106 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Thompson. I'm the Project Director of Construction for Kvaerner.
My name is Tore Sjursen. I am Vice President for Yard Development for Kvaerner. And I would like to convey Harald Rafdal's apologies for not being able to be present personally.
I understand. Unfortunately -- could -- I'm sorry and I apologize. Can you say your name again and spell it.
I'm Ron White, Mr. Chairman and, I'm here as counsel to Kvaerner. IDENTIFIED AUDIENCE MEMBER: I didn't 107 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 hear you.
My name is Ron White, and I'm counsel to Kvaerner. Is that okay?
Okay. Let's try to have decorum and respect for all of the witnesses. I appreciate it if anyone didn't hear it; they now heard. Is someone making an opening statement or presentation on behalf of Kvaerner? Don't everybody jump up at the mike too quickly. We can just go around then.
Mr. Chairman, I do have written testimony. I'm a little more used to this format.
I could quickly go through it if it's the pleasure of the Chair. Good afternoon, Mr. Chairman and members of the Committee on Commerce and Economic Development. I'm here today to testify on the resolution before the committee. I would like to begin with some background information. As you know, we have been 108 COMMERCE & ECONOMIC DEVELOPMENT - RES. S. Navy announced its plans to close the facility. This search been extremely difficult and, at times, seemed hopeless. Last year, we completed a two-year effort to put together a transaction to induce Kvaerner to reestablish shipbuilding. This is perhaps the most complicated project we have ever done, involving numerous branches of the federal, state, and local government. The agreement with Kvaerner was signed December 16, 1997. Without going through the entire agreement I would just outline the structure of the transaction. The Philadelphia Authority for Industrial Development, (PAID), has leased a 114-acre site from the United States Navy. PAID, in turn, has leased site to the Philadelphia Shipyard Development Corporation, or PSDC. PSDC has entered into a master agreement and lease with Kvaerner Philadelphia Shipyard, Inc. (Kvaerner). Kvaerner is designing and building the shipyard and will operate the 109 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 shipyard. Included in the master agreement is an MBE/WBE program, which is Section 118 of the agreement, which Kvaerner proposed and agreed to. The first contract awarded for construction was the design contract. This contract was awarded to a joint venture, The Pennsylvania Shipyard Engineering Group, in April of this year. This $5 million contract includes percent MBE and 5 percent WBE participation. 11 Actual construction contracts, beginning with 12 demolition, began to be bid and awarded in July 13 and August of this year. 14 I first became aware of the concerns 15 about the implementation of the MBE/WBE program in 16 September via correspondence from the Controller's 17 Office and members of Council; in fact, members 18 who are with us today. I contacted Kvaerner to 19 share these concerns and asked that the issues 20 raised be addressed. 21 I met with Kvaerner and PSDC on 22 September 28th to specifically seek a plan of 23 action. And, obviously with Kvaerner here, I 24 think they can enumerate on it themselves. But my 25 understanding is that Kvaerner has taken a series 110 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 of actions to ensure the implementation of the plan. These actions include the hiring of the Greater Philadelphia Urban Affairs Coalition and Ron White, Esquire, to provide assistance to Kvaerner; meetings with OHCD and MBEC to enlist their assistance in participating in the plans implementation; in the inclusion of the MBE/WBE goals and the bid packages and contracts with contractors; and meetings with prime contractors to stress the need to work towards fulfilling these goals. In addition, I have clarified on behalf of various parties that the agency which will monitor the plan on behalf of the City would be the city's Office of Housing and Community Development. Obviously, PIDC is not a direct party to the Kvaerner master agreement. However, I share with City Council the serious concerns that all provisions of the Kvaerner agreement be adhered to. I've decided to use my influence to make sure that all the appropriate parties work 111 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 towards an effective MBE/WBE program and I will continue to do so. The proof, obviously, will be in the results. And, therefore, I plan to stay involved. This project is a critical one for the city's future economic well-being. Its benefit should be felt throughout our entire community. I would be pleased to answer any questions. I'd like to take Councilman Nutter up and the chairman up on his request that perhaps if I address a couple of the items that have come up in the comments.
So if I might just for a minute try to answer a few of the questions that were raised. One, there was a question raised with regard to the auditing rights vis-a-vis Kvaerner. The right to audit the project in a financial sense -- I think I've clarified that the MBE/WBE monitoring would be done by OHCD. But in a financial sense, the auditing rights are embodied in the master agreement, and those rights are therefore PSDC, who has the right to review the bills and the finances and the expenditure of the funds that are in the transaction, and then to 112 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 provide those reports to the various governmental entities -- federal, state, local -- that are signatories to the agreement. There was also -- I just want to point out that a couple of the firms that have been made comments this afternoon -- for example, there was a -- one of the firms discussed Building 101 at the shipyard. That, in fact, is a PIDC project that they participated in. The PSFS building, the Mellon project, so that there have been projects where we've sought to make sure that there were MBE/WBE plans that they were working. OHCD has been the monitor of those plans. And so I -- the spirit of the hearing is something that we share, not just specific to this transaction but generally. I have to be honest with you. I will simply apologize to one firm, S&W Asbestos, because I'm sure if they called me, I believe I sent all of those calls, firms looking for information, through a process that should have gotten a response back to them, that we were advising them, we were passing the information on, etc. Because, obviously, we're not directly in 113 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 the bid cycle. If that did not happen, that should happened and I think has happened with other firms as we have received this information. And we'd be happy to provide a chart. Someone requested a chart to show sort of how this deal is organized. I briefly mentioned it in my testimony, but we can show sort of which players are handling which portions of the transaction. I think probably, as Tore mentioned, Harald Rafdal, the president of Kvaerner, ha conveyed to me directly and in person his commitment and his concern -- I'm sure Tore will amplify -- that to whatever degree there have been mistakes or omissions in getting this program off the ground, that there is a focussed effort at this point to get it back on track. That doesn't satisfy the fact that, in some instances, there may have been misinformation or miscommunication in the past, but I think there is an effort currently to try to get this operating the way we are used to having MBE/WBE plans operate and projects that we finance and work on. Perhaps with that, I'll end my 114 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 testimony.
Well, let me ask this question, Mr. Hankowsky. I mean, who at this point, within either PIDC, PSDC, or Kvaerner Philadelphia Shipyard, Inc., is directly in charge and responsible by their job duty description or title for the implementation and adherence to goals for MBE/WBE participation?
I think the answer to that question is that the implementation and adherence is a responsibility of Kvaerner's. I think that falls under Tore and his group as the construction development group.
And that the monitoring of their performance is a responsibility of OHCD.
Well, I mean, it is Kvaerner. I think it is Tore's group, I think he can confirm that.
So Kvaerner is ultimately responsible for implementation and 115 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 adherence to these goals.
To monitor that performance, like they do in other projects.
And if, for some reason, they might be deemed out of compliance, who would they be deemed out of compliance by?
OHCD does. And what is OHCD's power, once they've been deemed out of compliance, to do anything either about getting them in compliance, or what other penalties come with being out of compliance?
OHDC would do what they have done in other transactions, which is, they would notify -- in this particular transaction, they would notify the city administration, PIDC, PSDC; in other words, the parties to the 116 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 transaction. And we would then raise that with Kvaerner and seek that it be addressed.
Well, we would continue to -- I mean, again -- then parties would have to decide what is the appropriate next step.
What is the final and ultimate penalty for noncompliance?
Well, it is not -- the plan is a plan, as it is in many development agreements, that is there, it's an obligation of the party to the agreement. Noncompliance is -- does not terminate the agreement, so it's not -- I mean, if you go through sort of the legal parts of the agreement, it's not an event of default under the master agreement.
It is a default that needs to be corrected. Then the other place that it comes up is in the loan documents that are between PIDC and Kvaerner. We have not closed that loan. So at 117 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 the moment, we sort of -- we haven't disbursed any of those funds, none of the TIF funds have been disbursed I think all of the funds disbursed. I think, in fact, all of the funding that has been disbursed to has been state in origin. I'm pretty sure that's accurate. PSDC will know that for sure.
Well, let me ask this, then. If, for some reason, Kvaerner never complied -- and maybe some parties had no 12 intention of complying or they just acted inappropriately or by delay or by other strategies and tactics -- but there was never, ever compliance, does it mean that the project would still, in fact, take place?
I'm -- I'm not trying to be evasive or obtuse. I'm not sure it's a simple yes or no because I think the various parties to the transaction would independently make a decision about what their actions should be vis-a-vis that circumstance. So --
The parties to the transaction being PIDC, PSDC and --
The Commonwealth of 118 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Pennsylvania, the Delaware River Port Authority, the federal government. And, as I said, there's always --
Why is OHCD the monitoring agency, and who made that decision?
When we have put HUD 108 funds and development projects, because their origin is HUD in its ultimate origin, OHCD has done that for the hotel projects that we've undertaken. And so we have a protocol in place where they've done that on behalf of those loans. Because there's a 108 loan in this transaction, I felt it was appropriate that we have a direct party such as OHCD's office involved in that. That's Kevin Brooks and Handford Jones that were mentioned earlier by certain individuals. And so I basically said that's who I want it to do it on behalf of us.
Okay. 119 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Mr. Hankowsky, just to follow up because you say it doesn't require -- it doesn't have a simple yes or no answer. I just signed a contract with a contractor to rehab my house. If they don't comply, there are some penalties; just as if I don't comply with the payments to them. There are some penalties. I think the Councilman asked you very specifically, where in the contract, where in that huge contract is there any clause that goes to if Kvaerner does not comply with the MBEC, WC, all the way down the line? These are the penalties that will accrue along those lines. Obviously, the answer is no, there is nothing in there to really force Kvaerner to comply with these clauses. And there is nothing within the contract. And so the answer is no 24 again because I don't think there's anything in the contract that will stop the money to flow to 120 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Kvaerner if the answer is no to these questions. Isn't that so?
Well, I obviously -- I mean, you are an attorney by practice so I want to careful I'm not giving an illegal response to an attorney by practice. But the distinction I'm making is to your first point, which is, is there a specific penalty clause for noncompliance; you know, pay a fine or, you know, or in a monetary effect or whatever that you might see in a transaction. There is not, that's accurate. There is a provision in the loan documents, for example, that a borrower cannot discriminate. If the determination was that there was discrimination, then we could say we're not loaning the money. I mean, that is a proviso in the HUD 108 loan documents.
First you have to have a legal term and then you have to prove intent and all of those other things.
I don't disagree with that, Councilman. I just want to be responsive to the question. 121 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Mr. Hankowsky, The documents that we're talking about -- and I know Councilwoman Clark wants to jump in. The document that we're talking about, is this the same document that on the day of the final deal -- which I believe took place in the chambers here -- is this the same document that there was a significant amount of discussion about members wanting to see this document prior to voting on the bill to approve the Kvaerner deal? And was this the same document that we were told at the time we could not have a copy of that document because of the sensitive nature of the negotiations that were taking place simultaneous to the Council hearings; but we were encouraged to trust in the good-faith efforts of the people who were negotiating the deal and the documents and that everything in the end would be to our liking. Is that the same document that we're talking about?
Okay. 122 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
And I think earlier again this afternoon -- I mean, we did file t with the city clerk, and I believe we provided full sets to every City Councilperson. If it's not there, we can clearly provide one. There's no 7 attempt not to have it available. It is a matter of public record.
Thank you, Mr. Chairman. I want to follow up on the sanctions question. Mr. Hankowsky, what happens if Kvaerner -- and I don't want to go to intent. If for whatever reason Kvaerner never took one tiny baby step to implementing any of the minority business and disabled business, what happens? What sanctions are there? Where in the document, what language do you rely on to implement what sanctions? That's why we contracts now. This is not who's a good guy and who's a bad guy. These are the provisions of a written contract. Where are they? Show me the language 123 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 on which you rely that would give me some assurance that I don't have an illusory promise. Where's the language in the document?
Again, I think, Councilwoman, as Councilman Ortiz asked in his question, there is not a specific penalty provision that is specific to nonperformance of this section of the contract. The contract -- and, again, I speak to an attorney by practice so I want to be careful I'm not making a legal analysis. But if the contract is an entirety and the parties sign it and both are to perform accordingly. So if there is a total default of the agreement, clearly the parties might make a decision to simply say, We believe you're in default, egregious default, and we're not proceeding, we're not disbursing, we're not --
Let me interrupt you. Because sometimes a remedy like that is illusory. What is the likelihood, if we can't find language on which to rely, where will we sue on? Where is the good-faith effort. Now, you and I had this discussion. 124 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 This is about what, the third or fourth time? At some point, somebody is going to have to recognize that there is a population in and about Philadelphia that cannot rely on good-faith effort and "trust me" and any of those other "cutesy-tootsies." We're going to have to have some language on which you can sue out, Ron, on which to say, Here's the standard, and you've fail to meet the standard by more than an insignificant degree and, therefore, we believe that you're in violation. We have nothing now. Mr. Chairman, we absolutely have nothing on which to base our assertion that this company is not in compliance because there is no 17 standard that requires them to do it. And you say on the four corners of a contract that's got as many dollars, as many jobs and as much emotion wrapped in reactivating the naval shipyard, if we can't get your commitment now when you've got the new buildings up and the cranes and the hardware and the people in hard hats going to work, that just turns us into the bad guys when we say, "Let us come to the party 125 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 too." So I need you to insist. I'll even be willing to sit with you and help word the provision we cannot rely on your willingness to do it. There is not one example in all of recorded history that permits me to rely on the haves willing giving to the have-nots. There's just no 9 (unintelligible). And I've told you this, I've told you this. You said it plainly, you said it clearly, you said it with insistence. I do not accuse you of bad fait. I think you're a well-intentioned man, but I do not have any language on which to rely.
I understand your point totally, Councilwoman. And I can't -- I obviously can respond to the facts are that we have today. I can also say that it is -- which may provide no 19 comfort to you, I appreciate this, that it may provide no comfort, but it is analogous to what we have done in prior transactions where MBE/WBE plans were components of those transactions, where parties were responsible to execute them but where there weren't specific -- and I'll again use the term "penalty clauses" related to that. 126 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Use "sanctions"; don't use "penalties." Sanctions are a much better contract term. What are the sanctions for failing to comply? There is no standard for compliance. There's a kind of good faith, "Well, we're going to do what we can when it's convenient." But that's not what we're talking about, okay? And I remind you that in your capacity, that you represent all of us so that you can't (unintelligible). You have to represent all of us, including those of us who represent all of these people. And sometimes I'm not persuaded that you understand the severity of this situation to us. Maybe we're being too polite about this. I don't know what has happened in here. (Applause.)
Well, I hope civility is not a sin. I do understand my responsibility to represent the role I have as it may be all of the city, and I take that seriously.
We have 127 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 Councilwoman Tasco and then Councilwoman Miller and then I'd like to get back to the Kvaerner people.
Mr. Hankowsky, when we met in the caucus room in a briefing prior to bringing the legislation to City Council, you heard the sentiments around the table by many Councilmembers about this whole issue of minority, women, and disabled participation in this project. And you assured us that you understood our concerns, and just like the Councilwoman so passionately has spoken, we talk to you about this all the time. And we don't seem to get your ear. I'm not sure that PIDC understands what they should be about in terms of representing us in the economic development field. What is your minority participation on your board? And do you have a minority, women, disadvantaged business component as a part of your board? Or is there any discussion about it in terms of what PIDC does?
Yes, there is in fact, Councilwoman. I will apologize for not quickly 128 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 being able to tell you what it is on my board. I have a 30-member board, and I'd be happy to provide it to you, I just -- would almost need to do it quickly on a piece of paper. But there is both minority and female participation and female and business participation. We also, as I mentioned a moment ago, have sought to make sure that there are MBE/WBE plans on projects like the various hotel projects we've been seeking to do the same in our -- in all our activity, understanding again that that is -- at the moment, I just kind of -- well, not kind of, but that's independent of the Kvaerner activity that we do at the shipyard. So to the degree we are designing a building, we are looking into the professional-service sector for that.
If I could, Councilwoman, I really would appreciate just another minute. And I've taken that to the point of, for example, on projects, looked at -- because professional services, in fact, are a very 129 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 discretionary area versus when you bid, when public law may have certain requirements. And we have done scenarios where we have only solicited professional services proposals from minority or female firms to ensure that there's representation. Just earlier this calendar year, in fact, I've started an effort to revisit own MBE/WBE program. And I hope to have that wrapped up by the end of the calendar year because there's been just a lot that has happened in terms of different funding and different activity and making sure that there is a plan that is responsive to sorts of where we are today in terms of what we do and how it works. And I'd be happy to share that with Council as a draft before and clearly after. So, again, it may not satisfy you today, but I am not, from my own perspective ignoring or not trying to pay attention to the issue. I believe it is an important issue.
I will just say for the record that I've been here and I was chair of the Economic Development Committee my first 130 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 term. I've heard that answer for the last eight years, and we haven't gotten anything from you regarding your agency about minority participation since we've been here. You're always looking at it, you're always working on it, but we don't get anything, okay? We don't get anything. (Applause.)
Councilwoman, if I could, just for the record 'cause I at least want to get the record --
We submit one annually, and I'll be happy to share it with you and prior copies of it. I don't -- I'm not sure where it all goes but I'm happy to do it.
Well, I think you ought to give it to each of us. In Mr. Jihad's testimony, he states that in the master agreement -- and you can agree or disagree with this, I don't have the master agreement here -- that it reads that the borrower 131 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 shall comply with all state and federal laws prohibiting discrimination in hiring and in employment opportunities. And in the event a borrower is not in compliance with nondiscrimination clauses in his contract or with any such laws, this contract may be terminated or suspended in whole or in part, and borrower may be declared temporarily ineligible for further City contracts, and other sanctions may be imposed and remedies invoked. And he further states in other clauses that he has, he refers to the master agreement in each of the footnotes here that the contractor shall actively recruit minority subcontractors and women subcontractors or subcontractors with substantial minority representation among their employees. You talked about PSDC auditing the Kvaerner project. In auditing other than for the expenditure of dollars, do you and do you plan to do a performance audit in relationship to the terms of the master agreement?
A performance audit? I'm -- 132 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
-- where they say they're going to spend them, and you have a budget and you have to spend the dollars.
But do you look at the performance in terms of participation?
All right. Well, based on this information provided to us, if it is a part of the master agreement, and you find that Kvaerner is not in compliance, do you believe that this part of the master agreement gives you the authority and the power to take some action against Kvaerner?
Well, first let me just 133 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 make a point of clarity and then I'll answer the question.
I know it refers to hiring and employment opportunities, but it also addresses contractors.
Yeah. I believe the provision that was read -- I believe this is accurate -- is a provision that is in the loan document between PIDC and Kvaerner. I do not believe -- and I didn't have time to sort of go through the whole time agreement back and forth -- that it's in the master agreement per se. So I believe that should a party fail on the provision you read, that the effect of it would be that the loan -- I guess the ultimate effect would be that the loan could be cancelled or not funded or terminated. I don't believe it's an event of default under the master agreement. Again, I don't want to say that categorically and give a legal opinion.
Does the master agreement precede the whole agreement with PIDC?
The loan agreement is 134 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734 an attachment, Councilman, to it as an independent document 'cause it's an -- it's an -- it's a --
Is there a provision in the master lease, Mr. Hankowsky, that if there is any default in the various attachments, including the loan, that there is any effect on the master lease?
I just can't cite that off -- I'm not saying there is or there isn't. I would have to sort of read the agreement in its entirety.
I understand. It's estimated that most, if not all of you, are going to be back here in a couple weeks.
So if you could get us answers to those particular questions, I'd appreciate it.
Sure. I'd be pleased to do that. 135 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
Let me try to move to the representatives from -- I'm sorry. Councilman?
Mr. Hankowsky, there's a chart up there, and I have it here in this chart. And it says: "Contractor Vendor Selection Flow Chart," and it has an approved bidder list distributed, and then it has 1, 2, 3, 4, and then it stops at 4. Send approved bidders list to African-American Chamber of Commerce. And we had met -- the Hispanic Chamber of Commerce, we had met, and one of the things that we had talked about was RFPs, bidders and bids and so on that would be sent to the Hispanic Chamber of Commerce. I don't see that list in this flow chart.
But you were supposed to communicate at Kvaerner. That's the understanding that we had at the meeting.
Right? It's not here. 136 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734
All right. Mr. Richard Ryan, you are the project manager of construction for Kvaerner; is that correct?
I'm located at the shipyard, at Kvaerner offices. 215-875-2711.
Okay. And, Mr. Thompson, I didn't get your title. Who are you in the whole scheme?
Project Director, construction. So on the organizational chart, does Mr. Ryan work for you or do you work for Mr. Ryan. 137 COMMERCE & ECONOMIC DEVELOPMENT - RES. 980734