Loose Lips

How to Fix D.C.’s CBE Program

Mayor Vince Gray and Councilmember Vincent Orange are headed for a showdown today over the fate of a bill designed to increase the amount of city and construction funds being awarded to Certified Business Enterprises.

Gray proposed reforming the much-maligned program, which is supposed to increase the share of  District-based businesses get of city contracts and private construction work, last fall. At the end of last year, the D.C. Council passed a bill that contained many of the mayor's suggested fixes (including provisions to boost the city's ability to punish CBE fraudsters) as well as Orange and the Council's proposed changes to the CBE program. At the urging of the business community, Gray vetoed the bill last month, saying the Council's provisions made the bill unworkable. Orange says he's willing to tweak an aspect of the bill (which currently would require half of all work done on each phase of a city-assisted construction project to be done by a CBE) that Gray found particularly objectionable and has asked his colleagues to override the mayor's veto at today's legislative session. Gray sent a letter to the D.C. Council yesterday asking lawmakers not  to override it.

A senior Gray official says the administration is confident Orange won't have the nine out of 13 votes needed for a veto override. And D.C. Council Chairman Phil Mendelson said he's siding with the mayor. So don't hold your breath that Orange will get very far.

But neither Gray nor the business community can afford to look like they are happy with the broken status quo. Gray says he'll introduce a CBE-reform bill in the next 60 days and the business community has called for a "working group" to study the issue. Orange says that in addition to overriding the mayor's veto, the Council should consider establishing a "task force" to look at ways to improve the CBE program.

LL has spent a fair amount of time exposing flaws within the CBE program. Since LL refuses to join any working group or task force (not that he'd be invited), here's a few suggestions to improve the program.

1) Limit the size of companies eligible to be CBEs. One of the common misconceptions lawmakers have about the CBE program is that it's designed to help small businesses grow. Wrong. In its current form, the CBE program is open to companies of any size. Consider Fort Myer Construction, the road paving behemoth that not only enjoys huge support from several councilmembers (and also, Councilmember Anita Bonds works for them), but is a longtime CBE that gets 12 preference points when bidding on city contracts. A real evaluation of the CBE program will mean asking whether a massive, successful company needs help winning city contracts and whether the current help they are getting is shutting out competition from smaller players.

2) Limit the time a company can be a CBE. The CBE program should be a temporary boost, not a permanent crutch. Consider Jeff Thompson's Chartered Health Plan, whose CBE status practically ensured it would always beat out-of-District competitors when bidding on the city's Medicaid contracts. What did Thompson do with this decade of advantage? Did he grow it beyond the District and build a strong company that wasn't reliant on any single District contract? No, Thompson milked Chartered for millions and ran the company into the ground, to the point where the city had to take over the company and find a willing buyer. Over the weekend, Post columnist Robert McCartney asked how someone the Gray administration calls a "rotten businessman" was able to win one of the city's "fattest" contracts over and over again. A large part of the answer is the CBE program.

3) End the middleman CBEs. According to ex-Fenty administration officials, there used to be a group of CBEs who would simply buy offices supplies from Staples for government agencies at a markup so the city could say it was spending its money with CBE-certified companies. LL doesn't know if that's still happening, but would anybody be shocked if it was? Several construction contractors tell LL there are plenty of CBEs willing to do similar little-to-no-work roles on construction projects. A well-functioning CBE program would ensure that CBEs who win city business are adding some sort of value to city contracts other than simply being a CBE.

LL could go on, but that should be enough for any working group to get started.

Photo by Darrow Montgomery

  • Village voices

    LL you are so wrong..First the CBE program is not a give me..You probably know first hand what it costs to do business out of DC vs Landover or chantily..The answer is DC is expensive to do business in..That means everytime we bid on contracts here we loose to Landover/Chantily..Now if all CBE's moved to Landover /Chantily then we can compete..So what is prudent course for businesses to do..All of us move out to Landover/Chantily..Is that the acceptable solution?? Would we hire labor from DC or Landover/Chantily?? And BTW Virginia supports their local businesses where they restrict/setaside business for their CBE's and so does MD and their counties..We can all collectively decide that DC is going to be just for sleeping quaters and all businesses move out to Landover/Chantily..Of course leave City Paper and all restaurents here because there is no business to be had from suburbs for City paper!!!
    Just for your information at one time DC had no income tax for DC based businesses and all businesses used to be located in DC and people went to suburbs to sleep..But it Was governor Marvin Mandell who through his congressional delegation asked and recieved that DC must charge its businesses income tax higher than MD..His delegation worked hard and DC got higher income tax and everyone gladly moved to MD for lower taxes and lower cost of doing business and then Virginia shopped DC businesses and that is how it went...

  • Former CBE

    LL is right on and, as he stated, he could go on and on because the remedies he listed really are just a beginning.

    I don't think the CBE program will ever be fixed because there's no desire to fix it either in the mayor's office or in the city council. The corruption of the CBE program and the LSDBE program before it extends across multiple mayors and multiple turnovers on the city council. It's so easy to institute measures to make the program fulfill its charter that it's clear that there is just no will to do it. Essentially, it's a matter of enforcing the rules already on the books (Title 27 DCMR).

    Multiple mayors and city councils have known the CBE/LSDBE system is wildly corrupt and they did nothing about it. That's why this will never get fixed. Those companies that are enriching themselves through this corrupt system are prolific campaign contributors, fund raisers, etc. The CBE program is an institutionalized and conspicuous payola system. It's not even a secret and it hasn't been a secret for more than a decade.

    I used to be in the CBE program and the LSDBE program before that. I just gave up after years of vigorous efforts to compete honestly in a rigged system. I didn't have cash or connections, so I wasn't allowed to participate. I just moved on. As byzantine as the federal government procurement process is, for those of us who can't afford to put a council member or the mayor on our payroll, it's easier to get a contract with the federal government than it is to get one with DC.

  • RealDC

    @former cbe-You are absolutely correct! It is the worst program of its kind, Gray should be embarrassed the way this program is run.

    CBE needs a complete overhaul and if not done by the current leadership then we need to get new leadership.

    I would support any candidate that would promise to take on the current CBE/DSLBD and revamp it.

  • truth hurts

    I suggest doing a cost benefit analysis of DC's CBE over the past decade. I suspect CBE has unnecessarily cost DC several hundred million bucks. I further suspect DC's benefit (via jobs/tax revenue)is only a small fraction of that cost.

    Here's a simple fix: impose a 2 year moratorium on CBE contracts. Do a CBE cost benefit analysis and include contracts awarded during the 2 year moratorium. Then decide whether to reinstate CBEs (with transparent safeguards) based on the cost benefit study.

    DC will save a ton of money and maybe some pay to play players will leave town, live off their winnings, and stop buying pols.

  • john

    So what most of you are saying is its ok md and va to have preference programs and exlude dc businesses but dc cant have one. why?

  • Former CBE

    John, the CBE program excludes DC businesses, too! That's the problem.

    In more than one of the third-party audits that have been done on the program over the years, it was clearly documented that for Information Technology contracts, which are among the most profitable kind to obtain, the work was going to companies based in MD and VA who actually were just middlemen for staffing companies all around the country.

    Virginia Company X would get the CBE contract, based on connections with government officials. Company X would get people to staff the contract from Company Y, which was some national staffing company. None of that money was going to DC, as the CBE program was intended to do. Company X is in Virginia, Company Y is in New Jersey or Colorado or California, and the person that Company Y provides to Company X to actually do the work is a Maryland resident.

    So it's not that DC can't have a preference program. The issue is that DC government officials, to include the mayor, the city council, the director of the contracts and procurement office, and the procurement officers themselves, all refuse to run a fair, transparent, legal preference program. One guy in the DC technology office got arrested a few years ago for taking kickbacks for contract steering. As rampant and evident as the corruption was with the awarding of those technology contracts, there's no way that guy was the only one taking money. Even one of the audits detailed how the entire procurement office would allow vendors to give them gifts, catered lunches, etc, CLEARLY in violation of common sense as well as the procurement regulations. We're talking about an entire office of corrupt procurement officers, not just one or two. This is how they did/do business all day, every day.

    I agree with you that MD and VA do this right and that there is no good reason why DC can't. I've lived here my whole life, except for college and the military, etc. So I've lived in other municipalities and seen what well-run local governments look like. I personally think this CBE program is representative of a larger lack of quality in the DC government as compared to other local governments. Too many people in DC government jobs are people who were born and raised here (like me), but who have never lived anywhere else (unlike me) and have never seen what well-run, efficient government services look like. Too many DC government employees particularly have no concept of what good customer service looks like. They give you the same attitude as an employee that they received when they called for service as a citizen. And the cycle goes on and on. The bad attitudes are institutionalized because nobody knows better. The DC government is the only government that most of its employees have ever seen, so the status quo never changes.

    I have no idea how all that can be fixed, which is why I decided that my time and efforts would be best spent pursuing work elsewhere.

  • Something Fishy

    The council has no backbone. Orange is the only one to consisently challenge his colleagues to push for a better DC. I don't understand why we should reward companies who do not follow the rules. Somehow someway some of the councilmembers and even the mayor have relationships with companies outside of DC that they do not want to damage.

  • Drez

    John: my understanding ( and others can correct me if I'm wrong ) is that a federal judge ruled DC could not base contracts (or hiring decision) solely on residency status in The District.
    It can be part of a formula but cannot be the entirety of the formula.
    Hence the theory behind the point system.

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  • biker

    having worked for the DC govt for many MANY years, I have to agree with the LSDBE/CBE program. Many of the contracting participants aren't even DC residents and keep "shadow" offices in the District to maintain their "inner city" status. The cost to the DC govt for the obscene markup that is charged to be nothing more than a pass through for technology and office supplies is criminal. Most, if not all parts/supplies/computers ordered through a CBE is *never even seen* by the CBE. They just make the order and set the delivery address as the DC Govt customer and add as much as a 20% markup for their "effort". Really? How is this helping the government save money?

    Then there's this ITSA program. Excuse me, we have the Office of Contracts and Procurement to award contracts for IT staff augmentation. Why do we need to PAY an outside entity MILLIONS of dollars of pure profit a year to do the same thing?

    The procurement/contract system is broken and you can't expect equally broken government executives fix it.

  • john

    I agree with you former cbe. So with all this fraud why isnt there tough prnalties and oversight? Did the bill not do that?

  • Larry

    In fairness, LL is only partially correct. That also means he's partially wrong. What's worse - he does not identify other significant flaws with the CBE program.

    This program is designed to keep business in the District, to encourage new business to locate in the District and to create job growth through their presence.

    LL jumps all over the size of Fort Myer Construction, but he fails to tell you that if Fort Myer goes away as a concrete subcontractor, there are very few (if any) CBE-certified subcontractors with that specialty.

    This also is where Council Member Vincent Orange's logic falls apart -- there simply aren't enough CBE companies to choose from in certain construction specialities and trades.