Gray Says CBE Reforms Coming Soon, Don’t Get Your Hopes Up
Mayor Vince Gray said today on Newstalk with Bruce DePuyt that he'll soon be announcing "a number of reform efforts" to the Certified Business Enterprise, the troubled contracting system LL chronicled in a recent cover story.
Not that LL is taking credit for said forthcoming reforms. Gray tasked Harold Pettigrew, the director of the Deparment of Small and Local Business Development, to review the CBE program and propose changes earlier this summer. That report has been finished for several weeks, but the mayor's office has not given LL a copy despite repeated requests.
Mayoral spokesman Pedro Ribeiro says it's a "substantive, deliberative document" that needs lots of reviewing before being handed over to a reporter. Most likely, that's code for: "we plan on having a big news conference touting our reform of a long-troubled program and don't want to be scooped."
On TV today and at conference for contractors earlier this week, Gray has been mum on details about what his proposed CBE reforms will look like. The only clue he's given is that some of the reforms will center on beefing up Pettigrew's woefully understaffed office. The DSLBD currently has zero employees dedicated to rooting out fraud in a program that's perceived has having widespread fraud. Fixing that problem is certainly a reasonable goal, but that's the lowest of low-hanging fruit of possible CBE reforms.
Will there be more substantive recommendations? It's hard to be optimistic. As city administrator, Allen Lew will likely have a large say in what the proposed reform efforts are. And as LL's already pointed out, Lew has unanswered questions about his previous oversight of school construction spending that went to questionable CBE-certified joint ventures.
Also, D.C. mayors have a lousy track record of trying to fix the program. Tony Williams ordered up a task force to review the program in 2002. Much of that work centered on ways the city could spend more money with CBEs, and many of its suggestions never went anywhere. Adrian Fenty's efforts to change to the program also didn't offer much in tangible results.
And finally, it's doubtful that a three-month review of the CBE program will produce a rigorous, in-depth look at what the CBE program is all about. The whole bargain between the city and its taxpayers has been that the city pays a little more to local contractors in order to keep city dollars in the city, which in theory leads to more taxes being paid, more jobs for residents, etc. "I’d rather pay a little bit more for service from a D.C.-based company that’s hiring D.C. residents," is how Ward 8 Councilmember Marion Barry put it last year.
But what if the city pays a lot more and gets little in return? In its current set up, the CBE program can give certified companies a massive competitive edge in bidding on city contracts. A CBE contractor who bids $1 million on a project can beat a non-CBE company that bids $890,000 on the same job. Is that a good deal for the city? It would depend on whether that extra amount paid to the CBE resulted in higher tax revenues for the District and more jobs for city residents—metrics that have never been studied, according to several experts LL spoke with.
"I don't know of anybody who has looked at the D.C. program,” says George R. La Noue, director of the Project of Civil Rights and Public Contracting at the University of Maryland Baltimore County. These types of programs in general get scant academic attention: "These are very complicated issues, and for the most part people haven't studied them."
When asked whether the Office of the Chief Financial Officer had ever done any type of in-depth analysis of the CBE program, a CFO spokesman replied: "CBE?" He later told LL to check with the inspector general or the city's auditor. But the auditor mostly does reports on whether city agencies are meeting their required CBE spending goals.
And higher prices for city contracts aren't the only costs. Major developments have to spend 35 percent or more of construction budgets on CBE subcontractors. Finding qualified CBE subcontractors can take serious time and effort, several contractors told LL. Time equals money in construction, and that extra cost is tacked on to the final price of projects. Considering the billions that have been spent on construction in the District during the last decade, that's probably a huge, unstudied extra cost.
"There are not many people in government who look at cost-benefit analysis," says Courtland Cox, a consultant who has helped craft and execute the city's CBE policy. "If you ask me where's such a study, I couldn't point to it."
Maybe such a study would be a good place to start, rather than the small-bore tinkering that's likely about to take place.
Update: Commenter DCGovcorruption rightly notes that LL missed a study the city commissioned in 2002 to measure the effectiveness CBE program (then known as the Local, Small and Disadvantaged Business Enterprises program). The report found that the "benefits of the LSDBE program outweigh the measurable program cost." The report comes in at 25 pages (plus appendices) and its conclusions are based on estimates produced by a "proprietary PC Windows-based" program, not by following the actual money. So LL is gonna stick to the same conclusion: that a rigorous study of the District's CBE program is still waiting to be done.
Photo by Darrow Montgomery