Loose Lips

Contractor Alleges CBE Fraud

When a giant construction company from out of town wants to be considered for a city contract, it usually pairs with a local Certified Business Enterprise to form a joint venture to make the actual bid. In an ideal world, this partnership would be win-win-win. The local CBE would get the experience of partnering with a large, established firm. The out-of-towners would be more competitive in bidding on city projects because the joint venture would enjoy the CBE's preference points when bidding on city projects. And taxpayers would benefit from seeing city money spent on a local business that hires District residents and pays District taxes.

But, as anyone involved in city construction projects knows, this isn't always the case. At a recent meeting for CBE business owners organized by Councilmember Michael Brown, Brown's aide, Drew Hubbard, acknowledged that there are plenty of front CBEs that help out-of-towners game the system.

Now LL has obtained, through a Freedom of Information Act request, a letter containing some pretty serious allegations from a CBE involved in one of highest paid joint ventures in the city. Maryland-based Forrester Construction has formed joint ventures with EEC of DC on at least three city projects, including the Department of Employment Services headquarters, a Ward 1 senior wellness center, and the renovations to Anacostia High School. Last year, the city paid joint ventures between the two companies almost $100 million.

Andre Downey, who owns the CBE-certified EEC of DC, sent a letter to city officials saying Forrester has used him as a "minority partner to obtain the benefit of a District of Columbia procurement and then [found] any excuse to manipulate the situation" to Forrester's benefit. Forrester, Downey adds, "has been making all major decisions regarding the [joint ventures] without EEC's input since the inception of the joint ventures.

"In fact, [Forrester's] actions are nothing short of theft and fraud," Downey says.

In a letter to Forrester from May 14 that was sent to top city officials, Downey alleges that Forrester has broken several provisions of the city's CBE laws, including:

  • Not giving EEC of DC access to the joint venture's bank accounts, as required by law
  • Having the joint venture sub-contract most, if not all, of the work out to Forrester Construction proper.
  • "Purposely and systematically" keeping EEC of DC out of management decisions.
  • Withholding payments in order to force EEC to sign contract modifications.
  • Failing to submit required quarterly reports to the District

Downey did not immediately return calls seeking comment. Downey sent his letter to Forrester and top city officials on May 14. The letter appears to be part of a feud between the two companies. Downey says his letter is a rebuttal to "default letters" Forrester sent to city contracting officials that are "wrong and purposely misleading."

Several years ago, the laborer's union filed a complaint against EEC of DC, saying it shouldn't be a CBE because it only has a small office on H Street while its equipment and the main office of its sister company, EEC, Inc, are based in Landover, Md. Also, the complaint said, Downey was improperly receiving credit as a District resident though he lived in Maryland. The complaint was dismissed.

A spokeswoman for Forrester did not immediately return requests for comment.

A spokesman for the Department of General Services says the city is aware of the dispute between Forrester and EEC of DC and is working with both companies to ensure that the renovations of Anacostia High are finished on time in August. A spokesman for the Department of Small and Local Business Development, which oversees the CBE program, says the agency is aware of EEC's allegations and is "working with other District agencies to take appropriate action."

Downey's letter:

  • Jason

    All of the local CBE's already knew that Forrester does not pay its CBE's. Trust me people in a few years, the local CBE requirement with be abolished. Thats when you'll see how they really feel about you...
    Skip

  • RealDC

    Not surprising, the CBE in DC is a joke.

    DSLBD is a bullshit run agency that each mayor put a political hack in as agency director. This is crippling small-businesses in DC!!

  • SWester

    Kind of one sided, don't you think? Cover all the CBE's details and allegations and provide their side of things but say only that Forrester sent default letters against a company that sounds like it has a sketchy past.

    Having been part of these partnering/JV things before, many times the smaller CBE partner does very little, lets the big company do everything, sits back, and collects a check. How about digging up some more on Forrester's letters and their side of things?

    And leading people to beleive that Forrester is some out of town goliath is misleading as well. They're based out of Rockville and have something like 200-250 employees. This is hardly a Clark/Skanska/Balfour Beatty giant, but a successful suburban operation.

    The whole CBE thing is garbage anyway. The theory is good, but in practice it does little other than put some political cronies to work and generate paperwork.

  • http://www.gelbergsigns.com Guy Brami

    Like most programs of this nature there exists both good and bad participants. Many CBE's do benefit from the CBE program and the District benefits. The theory which is to award business to District based companies does work...A DC Company will obviously pay DC Tax. They will more likely hire a DC Resident. They and their employees will spend money in the District. These are facts. However the bad apples do sometimes spoil the bunch. JV's are all too often the problem. It works much better when the entire contract is awarded to a CBE (Qualified) or if it is awarded to a non-CBE the 35% requirement (35% of contract amount must be spent with CBE's) is enforced. So to use another cliche, let's not throw out the baby with the bath water and work on making sure the CBE program is well funded so it can be properly monitored and enforced. I too believe that many CBE's are merely fronts and shouldn't be CBE's at all. However the majority of CBE's are well run DC businesses who deserve to share in the dollars spent by the DC Government whether directly or by proxy in the form of tax breaks, credits and incentives. Afterall DC Businesses pay the highest taxes in the region. It's either level the playing field for DC Business owners or continue to lose those businesses to MD, VA and beyond...and with them go Taxes, Jobs and community.

  • MLander

    I kind of agree with SWester, having been on both sides. Many smaller GCs feel entitled to things that, frankly, hurt the owner. Then, when a larger GC tries to adhere to a budget and denies things like ridiculously over-priced change orders, the smaller operation gets upset. At the end of the day, it might well be about what one company can't pull over on another, even if it is protecting the financial obligations of a client, a smaller GC/sub can write a letter like this and defame any company. Basically, this is likely a "if you want to play you'll pay scenario." I've seen it all to often. It is most unfortunate this is published without any investigation regarding the other side. Frankly, corruption happens when allegation are made, perhaps unfounded and biased, and a company with a reputation for honesty and client sevice is thrown under the bus because a smaller GC who felt they could have really milked the taxpayer doesn't make out better than they suspected they would, primarily because they figured a bigger GC would cave to demands because the were "fortunate" enough to get the job in the first place. Could this be one of the reasons why city, state, and federal governments are going under by the second? One only has to look at budgets to know this is the case. Some smaller contractors are bitter they don't get kick-backs and extra money for merely being listed as a main contractor, regardless of the fact they may have done little work for a lot of cost. It's legal extortion at its very best.

  • DC Fraud

    Wow - EEC of DC is a SHAM!! - A company that has no real operating office in the District sent a letter saying that they had no control after the jobs were complete.

    All District money has Federal money.

    In NYC the attoney general hit Bovis Lend Lease for $56 Million for fraud.

    Both EEC of DC which is a pass thru and has no capability of running or managing $100 M in work and Forester should be hit with equivelent fines for their abuse. EEC knew they were going to defraud the DC Government as did Forrester. Mr. Downey acts as if he is a victim versus the poison itself which corrupts the CBE program.

    A link to the BOVIS fraud recovery in NYC.
    http://newsandinsight.thomsonreuters.com/New_York/News/2012/04_-_April/Bovis_Lend_Lease_fined_$56_million_for_fraud/

  • CBoston

    This is one of the reasons city residents can't obtain construction jobs and become productive members of society. It appeared to be all about greed between these two companies. Both sould be required to repay the city. The lost is immeasurable if you look at what the real cost to the city and its residents are. And, what's worse is the fact that these two companies are not the only companies doing this. Shame on DC Govt for not enforcing it's own laws.

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