I'd like to know. I know it's a recent bill, but I'd like to know if that is being applied, how it's been applied and has that helped in increasing the participation.
I believe it's managed by Procurement, the LBE process, but we'll --
I have a 51 3/5/08 - COMMERCE - BILL 080023 follow-up question, please.
Mr. Bell, if I could trouble you to come back to the witness table. And, Ms. Nichols, you may be able to provide an answer as well. Where is the disconnect between the work that you are doing and the success you've had in meeting the numbers and MBEC not being able to reflect that in the numbers we see here?
I don't know. We've sent the reports to MBEC every six months, as required by a City Council regulation. We've documented. I've been back and forth. So I don't know why the information is not here. But just going back, I was at the Redevelopment Authority for nine years. We consistently met the goal at the Redevelopment Authority and exceeded the goal on projects from -- housing 52 3/5/08 - COMMERCE - BILL 080023 projects, which we're working on one now, Hunter School, to larger commercial projects like Avenue North, and we got the support of the Board at that level and even from OHCD. Like I said, our biggest threat was to stop payments if goals weren't being met. So I don't know why the information is not reflected in the report, but it does not reflect well on the City, if you look at OHCD and only $60,000 are there in awards and we're tracking over $120 million in projects.
And it's a revelation for me sitting on this side to hear. That's a huge disconnect.
Generally we just include the reports as received from OHCD, but I'll have to find out what 53 3/5/08 - COMMERCE - BILL 080023 happened in this specific case, why it wasn't -- there could be a mistake there.
So then it begs the question, is this an exception that we've discovered --
Well, I think this was an exception, because you looked at the report last year. The numbers were very, very high for the housing agencies. So somehow -- let's put it this way: This report was done on very pressing time constraints and it's very possible that errors were made or things were slipped, and I fully admit that.
So I'm going to ask you, as a former manager, would you accept that from one of your staff people?
Well, I take the responsibility, because I was putting 54 3/5/08 - COMMERCE - BILL 080023 this together under extreme duress to get it, and that's the kind of thing that can happen. But it's my responsibility and no one else. So we'll get to it.
Okay. Thank you. Mr. Bell, share with us, if you would, how -- you mention that you've successfully been able to ensure that neighbors in the close area of that project get work. How do you do that?
We actually have the developers when they're signing off on a project that they have to hire -- right now one of our major challenges is going to be a project called Union Hill in the Mantua area. The developers and the contractors agreed, and then once construction started, they said you have to be union to be on the project. So we threatened to hold up the first two vouchers until that was taken off of the language, because it's a prevailing wage project. So we received approximately 40 55 3/5/08 - COMMERCE - BILL 080023 resumes. We're going through, obtaining the skill levels of these individuals, and at the next meeting next week, we're going to present a list of individuals that need to be considered to be hired to meet the Section 3 hiring requirements, the neighborhood benefits strategy hiring requirements. And we don't give them a choice. It's not a favor that we're asking the developers or the contractors, because when they --
They're getting the funding. They're getting CDBG funding either in the form of HOME, McKinney in that situation, and we don't give them wiggle room in terms of hiring people. But you also have to have skills, because with the Section 3 hiring requirements, it doesn't require you to train individuals, but if someone either has union affiliation, they have electrical skills, then it's not a favor. You have 56 3/5/08 - COMMERCE - BILL 080023 to hire this person. They live in the zip code or we're not going to process the next voucher.
So in effect, your office, your agency, did the legwork to recruit, identify and get those young individuals in the pipeline?
Okay. And then to Councilman Jones' observation that once they're on paper, you want to make sure that they are live bodies at the site.
Right. It starts with the contractor. So we get an affirmative action plan that's submitted to us by a developer on the Redevelopment Authority side, because on the Redevelopment Authority side, the contract is with the developer, whereas with PHDC, PHDC hires contractors directly. So with the developer, they take the risk, because they put the 57 3/5/08 - COMMERCE - BILL 080023 financing together, and when they sign on their redevelopment agreement, if they're going to meet the goals, that's where our hammer is in terms of making sure that the goals are met. And we had some problems recently on a project called Park West in the West Philadelphia area. A lot of the contractors are using union affiliation as a reason not to hire people. And I won't mention any trade specifically, but our ammunition is going to be the next time we see those specific contractors, if they don't have people to meet the minority hiring goals, we're not going to let them work on the projects until they can give us a plan as to how they're going to increase participation.
Just a quick question. It was mentioned yesterday by the CPO that the Separations Act costs us a lot of money in contracting. It's specifically a law that requires us anything over 4,000, you have to have a prime. Does that Act have any negative impact on meeting inclusionary goals?
I don't know specifically if it has. I think in the public works area, the most challenging thing is the bonding requirements more than that. Now, I see Councilman Jones may know more about that.
If you would look into that and just report that to the Chair.
To what degree do you employ joint ventures, in developing joint venture relationships between primes and subs?
That's one thing we need to do more of. I think we need to develop a formal mentor/mentee program. MBEC may have even had one in the distant past. We can model the federal program, because the federal program has a mentor/mentee program, and the matchmaking -- going back to Houston, my model, they've been very successful with that, because the matchmaking is really how you can help develop subs into primes so that minority and women businesses can really maximize their participation, even outgrow the need for the program. But the matchmaking has to happen, and we need to do more of that. We've done some of that, setting up opportunities for subs to meet with 60 3/5/08 - COMMERCE - BILL 080023 primes. Like Turner Construction is one I can think of. Organize an activity around matchmaking so that -- because business is built on relationship, and the more these companies are not known, they're not going to be used. It's mythology if we think that a prime is just going to look in a directory and just pick the name out of an MBE or WBE or DSBE just blindly, not knowing anything about who it is, what they can do, how they operate and that kind of thing. So to take the mystery out of it, we have to get these companies known so people know the capacity of these firms so that they can be utilized. As long as they're just names in a book, nothing is going to happen. Because what happens, primes will bring minorities or women contractors that they know and bring them to us and say, Yeah, I want you to certify them. But that's not helping people that are in the directory to get those opportunities. So the matchmaking 61 3/5/08 - COMMERCE - BILL 080023 is really the key, the mentoring. The joint ventures is really key.
This will be my last comment, Mr. Chairman. We need to holistically as a government -- that's us, that's you, that's the Administration -- work together. Let's look at some models. The 8(a) program at the federal level has worked for a long time to grow firms to capacity so that they're self-sufficient, taking subs to primes. We need to look at that. The second thing in our internal operation is the relationship between the Philadelphia Commercial Development Corporation, your office, MBEC, the new EOC and also PIDC, and try to take a firm or several firms, match them with employment goals, contracting goals and opportunities to access government and then graduate them over a period of time. We need to look at some of the 62 3/5/08 - COMMERCE - BILL 080023 contracts that the City lets. We let a lunch program every year, 1.5 million. It goes to a firm in New York. There's a Philadelphia firm that probably could do that. We cut our grass every days 8 rotation in Fairmount Park, every 17 days 9 with Recreation. We can find -- that 10 contract currently goes to a company in 11 King of Prussia. Now, I know we don't 12 want to get into a match of my contract, 13 your contract with the counties, but from 14 an economic development platform, from a procurement participation platform, from an employment-based platform for neighborhoods, we need to put together a model that works.
Thank you, Councilman. Is there a representative from Econsult here? (Witness approached witness table.) 63 3/5/08 - COMMERCE - BILL 080023
Can you briefly explain the methodology used in the disparity study?
Sure. My name is Lee Huang, H-U-A-N-G, from Econsult Corporation. The way that a disparity study works is, disparity is a fraction with utilization on the top and availability on the bottom. Each of those is itself a fraction, utilization being the percentage of contracts that go to a particular DBE category and availability being the percentage of firms that are ready to bid on that universe of contracts that are themselves DBEs. So in conducting a disparity study, we take MBEC's data and we do the math and we come up with the disparity ratios.
That was almost totally correct. The disparity study that was conducted last year used City or regional data?
The denominators 64 3/5/08 - COMMERCE - BILL 080023 for availability used metro data.
I'll give four reasons. One, we conducted a literature review of what other disparity studies do; in particular, the DJ Miller one, which was for 1998-2003 for the City of Philadelphia. They used the metro area. Secondly, the data that is available for counting businesses is at a metro and not municipal level.
Well, I should say there is more data available at the metro area than at the City.
Just to prove my point before we go any further, what percentage of businesses in the region are owned by African-Americans?
Out of six different ways of answering your question, we felt that the best way to answer it was the number of firms that 65 3/5/08 - COMMERCE - BILL 080023 employ more than one person.
That wasn't my question. My question was, what percentage of businesses in the region are owned by African-Americans?
The number of firms total that are owned by African-Americans in the region is -- there are 24,486 African-American-owned firms in the region out of 416,000, for a percentage of six percent.
What percentage of businesses are owned by African-Americans within the City?
Sixteen percent. My question is, why don't you have that information?
Well, again, as I was describing, there are four reasons why we chose in our methodology to use the metro area rather than the municipal area. First is that other disparity 66 3/5/08 - COMMERCE - BILL 080023 studies do. Second is that --
Okay. Second is that there is more data available for all of the different categories that we were looking at at the metro level than the municipal level. Third is that --
That's also not a good reason to me, but I'll get into that further. Go ahead.
Third is that when we're looking at availability, we're looking at businesses that are ready, willing and able to bid for City contracts. It could be a City firm, it could be a metro firm, it could be a firm on the other side of the country. So we have to decide from a geographic standpoint how to size the denominator, and we chose metro as a good in-between between the City universe and the national universe.
What 67 3/5/08 - COMMERCE - BILL 080023 percentage of businesses are owned by African-Americans within the nation?
So that's not a blend of six and 16. And I can tell you the amount of businesses owned by African-Americans within the state is about three percent.
But the amount of businesses owned by African-Americans in Philadelphia is 16 percent. So my question I'm leading to is, by using regional data, are you not lowering the goals by lowering the availability rate?
The lower availability rate would lead to artificially high disparity ratio 68 3/5/08 - COMMERCE - BILL 080023 results, that is correct, because --
So by using regional data, you are actually lowering the goals by lowering the availability rate?
Well, we don't set the goals. We just report the results. So I guess if they use our results to formulate goals, then the answer to that question would be yes.
Does MBEC's certification problem lower the goals by lowering the availability rate?
We felt that it did, because we found -- we know anecdotally that there are instances of minority and women-owned businesses that are not certified as minority and women-owned businesses and, therefore, they don't show up in the utilization ratio.
Ms. Nichols or Mr. Dubow, whoever else here wants to answer the question, the issue I'm 69 3/5/08 - COMMERCE - BILL 080023 raising is, one, by using regional data rather than City data, I believe it skews the availability rate, and, two, by using only MBEC-certified firms and having a certification problem that had to be dealt with lowers the availability rate, which lowers the goal in the end, and how are we going to address that?
I understand your issues, and on their face, they make sense. It's new to me, so I'll have to look into it to understand better why some other procedure was used, and then if it makes sense to go to the methodology you're talking about in future disparity studies, that's what we'll go with.
At the end of the day, Ms. Nichols -- I think we've been through this before, so I won't go through it too extensively -- there are roughly 10,000 African-American-owned businesses within Philadelphia?
Yes. About 70 3/5/08 - COMMERCE - BILL 080023 9,500, correct.
And it is, of course, understood that all of them are not offering goods and services that pertain to City contracts, nor do all of them necessarily want to do City business, but roughly out of that 10,000 still, how many are certified in terms of African-American businesses?
Just African-American businesses, out of our 1,269, I believe 600 are African-American-owned businesses. So there's a big gap there, and I will grant you that.
So there are 10,000 African-American-owned businesses in Philadelphia. Six hundred are certified to do business in the City of Philadelphia?
Correct. Absolutely. That's correct. And that's why we wanted to utilize some of the strategies that Econsult did recommend 71 3/5/08 - COMMERCE - BILL 080023 and I think this Council has encouraged us to do as well, is to look at people who, for lack of a better term, are certifiable. They're minority, women or disabled-owned firms. They may not go through the certification process, but they are being utilized by the City of Philadelphia in contracts. It's possible -- and other jurisdictions do this -- to count that, not mix it in with the certified firms, but to count that as a separate column or category, and you could capture more accurately the utilization. So we totally agree with that.
So, clearly, I'm very pleased with the fact that we amended the City Charter to require this report as part of the responsibility of the Finance Director. Clearly, I'm pleased that we are now conducting annual disparity studies and setting annual participation goals and, in its inaugural effort, believe that it provided more 72 3/5/08 - COMMERCE - BILL 080023 information than we probably have ever had, but it actually at the end of the day provided more questions and concerns than I think has been alleviated. So I'll just ask the question this way: Are we comfortable where we're at in terms of the annual disparity study and the setting of participation goals, and if not, how will we change that for a report that is due 30 days before the end of the fiscal year?
My answer would be that at this point, we're reviewing everything. So for us to say we're comfortable with any of it would not be accurate. And we also understand that in terms of the disparity study, we have to move quickly, because there's only a few months to get it done. So we'll make this a priority.
My final question is a simple question. I don't 73 3/5/08 - COMMERCE - BILL 080023 know if I have asked it already. We have a disparity study. We have annual goals. Whether we totally agree with the study or the goals, is the City actually meeting those goals for Fiscal Year '08?
So far -- I have data from July 1, 2007 through February 29, 2008, and we're actually at 15.38 percent. So we're probably a little higher --
Yes. For those 74 3/5/08 - COMMERCE - BILL 080023 quarters, yes.
If we're going to look at ways to change the disparity study and goal-setting process based upon concerns that are raised, before we simply get a report that is on time, 30 days before, can there be some communication with the Chair and the Committee about what methodologies are going to be used so we can ensure that we're getting better numbers?
But, of course, at the end of the day, my other concern is, as I stated in my last question, is that there's a goal set for 75 3/5/08 - COMMERCE - BILL 080023 37 percent and right now we're achieving percent, and even as we begin to 4 decide how we're going to move forward on 5 this issue, we've seen so many holes here 6 in terms of reporting and methodology and 7 studies and whether department heads 8 actually know what the goals are and 9 whether they actually have goals for 10 every area of contracting, there is 11 clearly a lot of work to be done, but 12 we're willing to work with this 13 Administration and we look forward to it. 14 That's all I have. 15 Are there questions from other 16 members of the Committee? 17 (No response.) 18
Is there anyone else to testify on this resolution? Mr. Jones. Thank you.
Mr. Chairman, Committee members, thank you very much. 76 3/5/08 - COMMERCE - BILL 080023 My name is Hanford Jones. From 1977 to 1989, I ran the Maryland Minority Contractors Association, a privately funded black trades association, responsible for getting the State of Maryland, Baltimore City, Baltimore County, Howard, Anne Arundel County and quite a few other state and county government agencies to have an MBE law. In 1990, Curtis Jones hired me, and in all this stuff, in '07 I retired reluctantly. On the report that's required, I would like to ask that this Committee respectfully include all TIF, tax increment financing, projects that have been passed by this honorable Council and Councils before you all, because at each and every single TIF, there are requirements that once the project is built, the operations and maintenance required to keep that project afloat, including hiring, any upgrades, improvements, normal orders for food and 77 3/5/08 - COMMERCE - BILL 080023 other things to keep that facility operating, are also supposed to have an M and WBE requirement, and nobody is tracking it. Kvaerner Shipyard has changed hands five times, four times, three times. At least three times. The last time I thought they was trying not to put the word "Philadelphia" on the shipyard sign up there off of 95. So I would respectfully request that you all add the ongoing operations and maintenance requirements. Comcast, the cable TV building, for example, that's ongoing. We're supposed to have opportunities in there. Also when you have federally funded, state funded, City funded projects. When we had that big tower at 30th Street built by one of the developers out there in Montgomery County, that money came from the state, through Commerce, through PIDC and then, of course, the developer had some of his monies. We had a black 78 3/5/08 - COMMERCE - BILL 080023 joint venture with George Pittman Real Estate, with U.S. equities managing 30th Street Station. And when the invite went out to national real estate developers, Mr. Pittman wasn't included, and he was the joint venture signature partner. Now, the lawyer for Amtrak, formerly from the City of Philadelphia, worked under Mayor Goode, didn't send him an invite, and he was a joint venture signature. When the Councilwoman asked about loopholes, there are loopholes that are by accident and there are loopholes that are not by accident. Loopholes not by accident are easy to stop, and, that is, be vigilant, constant and, like myself, stay on it. Never let it go. The other week this honorable Council and members here sat and heard this privatization of four golf courses and the Fox Chase Cancer Center, and I don't remember hearing too many MBE questions. Fox Chase is going to be building two billion, with a B, dollars 79 3/5/08 - COMMERCE - BILL 080023 worth of work. The design has already been gone.
I'd be happy to add that. That bill was actually held until we not only had a chance to have it, but a chance to read it, review the numbers, an opportunity to get back to the law firm representing Fox Chase wherein it met the satisfaction of a number of Councilmembers. So I offer that to you to reassure you that members of this Council are as serious about this issue as you are and pay close attention 80 3/5/08 - COMMERCE - BILL 080023 to that one item when major developments come before us. Can we be held responsible for that which we do not know? Absolutely. But for those projects that come to our attention at this table, we pay attention to the EOP plan. Thank you, Mr. Chair.
In concluding, I will note that the study in the future would also do disparities of the majority people who have 98 percent of all the contracts to see where they are. Because if I'm competing against a contractor that's got 400 trucks and I got four and it takes 50 to work the job, how am I going to beat him? So there's got to be some disparity realizations that we have to know about when we talk about who are we 81 3/5/08 - COMMERCE - BILL 080023 competing against. Because we have no 3 asphalt/concrete plant operators that are minority owned, it's going to be very hard to win the next paving contract. So we've got to really start looking at what is our competition in the M/WBE community. Finally, I would hope that your report breaks out by Council districts, by zip codes, who these vendors are. There's only one contract any government agency gives out, and that's the prime contract. These dollars that are represented on all these reports, 98 percent of them are subcontract dollars, which means we, the City of Philadelphia, are not giving these vendors a check. The people who have always had the work are giving them a check. So what has changed? Yeah, they're getting a check finally, but we, the City, haven't given them a check, "them" being the M/WBE, to say what clients still are not getting checks directly from the City of 82 3/5/08 - COMMERCE - BILL 080023 Philadelphia. Mr. Jones, when he was the Director -- and I will conclude -- allowed me to work out a Memorandum of Understanding between his office and, of course, the City of Philadelphia, the Federal Bureau of Prisons and the Small Business Administration, and in that Memorandum of Understanding, we were able to get the prime construction management contract, $4-some million, for the Federal Detention Center, Temple Group, and we were able all the way out Allenwood, Pennsylvania, we were able to get two Philadelphia-based 8(a) firms painting contracts in general construction in Allenwood, Pennsylvania. So there's no such thing as can't be done, impossible. You got to think out the box. Don't create the barriers. Find the solutions to the barriers, and they can be done. I'm not currently working. I think this government needs a Minority 83 3/5/08 - COMMERCE - BILL 080023 Business Advocate Office to help them. When things are too politically sensitive, that Business Advocate could tread through that quagmire of political sensitivity and still get the job achieved. Thank you very much for the time allowing me to speak.
Every time when we look at opportunities, whether it's a concession or a participation in expansion of a convention center, I know clearly that there's an advocacy group out there that holds us to a standard to make sure that we ask the tough questions. We do that almost to a repeated beat of the drum that sometimes annoys people, but we do it because we understand at the end of the day somebody gets hired in a neighborhood that can benefit from this economic development 84 3/5/08 - COMMERCE - BILL 080023 opportunity. On your point of the golf courses, those weren't the first times that they were privatized. These are concessions that annually come up, but the questions that the Chairperson asked were to make sure that, A, there was a minority; B, that these jobs weren't just the janitor jobs, that they were greening jobs; C, that they adopt a high school to create a sports opportunity for them. So beyond even the contracting opportunities, we're looking at every way that this City can empower communities, employ people and create greater tax revenues for its residents. So we're fighting for that. And I understand your passion, and I want you to know that we share it as well.
Thank you. Are there any other questions for this witness? (No response.)
Thank you, 85 3/5/08 - COMMERCE - BILL 080023 Mr. Jones. Is there anyone else to testify on this resolution? Please approach the witness table. (Witness approached witness table.)
Please state your name for the record and proceed with your testimony.
My name is E. Craig Jackson. I've listened to a lot of things going on today, and if you have one minute, I'd like to introduce you to a story.
July 25, 2003 my son was shot to death here in Philadelphia. He worked three part-time jobs. He was in the youth ministry. He didn't drink, drug, carry guns or hang out in gangs. A couple of his friends asked me about 30 days later to -- they 86 3/5/08 - COMMERCE - BILL 080023 wanted me to be their dad. I've taken some time out to do some research and found out that there are a large group of at-risk males here in Philadelphia that needed to have them addressed. What I've done was, I put together a project for 18- to 26-year-old at-risk males to renovate houses here in Philadelphia, paying them the equivalent of $25 an hour, hours a day, 364 days 12 a year for the first three years. They 13 get education, training, counseling over 14 that period of time. They'll be 15 renovating houses for senior citizens, 16 first-time home buyers and HIV/AIDS consumers. When I went to the union here in Philadelphia and told them about this project, they said there's no way that you would be able to do this here in this area. And so I told them that they would get education, training and counseling. And after I had spoken to them, there was a storm that happened down in the New 87 3/5/08 - COMMERCE - BILL 080023 Orleans area. We'll be going down there for about a year and renovate houses down there as well. Then we're going over to Africa and build a water refinery in Sudan the third year. Once they return, they'll be independent contractors for real estate redevelopment of skyscrapers. They'll have their certifications. They'll have everything that they need, and the only requirement of them at that time is that they find 50 others in this City or any other city or town across the country and teach them everything they've learned and experienced over that period of time. I would like to have the City of Philadelphia help to make this a reality. I've been working on this project now for over -- well, for over almost four years, and I've done interviews of over 150 participants, males here in this area, and I've talked to over 4,800 here and I asked them all one specific question, and the statistics 88 3/5/08 - COMMERCE - BILL 080023 was outrageously off the charts. But I asked them, I said, Where was your dad when you were growing up? And they said, My dad is either dead, incarcerated or abandoned us when we were young. There's a young man that works right here in Councilwoman Blondell's office. When he was months old, his 10 grandmother told me that they found him 11 on the floor in the basement of the 12 abandoned house. He also wants to be a 13 part of this project, and he's 14 volunteered his time here at City Hall. 15 I've interviewed these young 16 men. They're ready to go and do this. 17 We need funds of about $30 million. We 18 are under the 501(c)(3). We just had it approved January 25th of this year. And I'd like the City of Philadelphia to support this project. It would be to the advantage of the City, because if we can take a group of people that may be eligible for the new jails that are being discussed and take them from the 89 3/5/08 - COMMERCE - BILL 080023 mentality of where they're at now and get them into a mentality of being independent contractors or entrepreneurs, it would be -- it would make your City look delightful. My son went to Philadelphia, from Philadelphia to DC. I was in DC in 1994 to year 2003. And he went to school here at Mansion and he also went to school at Shaw and Dunbar in DC, and he went back and forth. He was able to see the difference here as well as there. And I say that to say this: Just by him having that exposure and being able to leave this City and go into other areas of the country, he was able to come back here, go to Leslie Pitney Elementary School and take all the different sneakers that they had in the house, dipped them in bleach and make designs on jeans with different sneaker prints and sold those designs to young people in school for $20. He did not sell drugs.
He did these things because 90 3/5/08 - COMMERCE - BILL 080023 he learned at a young age how to, and he demonstrated it here. I would like y'all to take a look at the proposal, which I did not bring to you today.
Sir, we thank you for your testimony and you can continue briefly, if you'd like. I really would like to see a copy of that proposal and I will be willing to share it with members of the Committee.
Thank you. Is there anyone else to testify on this resolution? (No response.)
Seeing none, the hearing on Resolution No. 080052 is recessed to the call of the Chair. 91 3/5/08 - COMMERCE - BILL 080023 Thank you all very much. (Committee on Commerce and Economic Development adjourned at 12:40 p.m.) - - - 92 CERTIFICATE I HEREBY CERTIFY that the proceedings, evidence and objections are contained fully and accurately in the stenographic notes taken by me upon the foregoing matter on March 5, 2008, and that this is a true and correct transcript of same. ______________________________ MICHELE L. MURPHY RPR-Notary Public (The foregoing certification of this transcript does not apply to any reproduction of the same by any means, unless under the direct control and/or supervision of the certifying reporter.)