A block away from Anacostia Park, on Good Hope Road SE, rows of brick and glass storefronts glint under a thin crust of ice.
Directly across the street from a Department of Housing and Community Development field office, sandwiched between a pharmacy and hydroponics store, is a narrow white door. Taped on the glass window is a sheet of white paper, with the name “SAXON” printed squarely in the center.
The company, Saxon Collaborative Construction, LLC, is a firm whose specialties range from painting to carpentry and laying concrete. It regularly works on District-funded projects, including the redevelopment of Georgetown’s Hyde-Addison Elementary School and Congress Heights’ beleaguered affordable housing complex Parkway Overlook.
This Ward 8 office isn’t its headquarters. Public business registry information from the federal Department of Housing and Urban Development shows that Saxon has registered with a Wisconsin Avenue NW address in Ward 3, and business registration documents from the state of Maryland list a principal office on Massachusetts Avenue NW, also in Ward 3. But the District has registered Saxon as a Ward 8 business.
D.C.’s Department of Small and Local Business Development is responsible for ushering businesses through the Certified Business Enterprise process, a program that awards locally operated companies with a special certification that gives them preferred status during contract procurement. The roughly 80-member Saxon Collaborative, according to public DSLBD documents, is a certified Ward 8 CBE.
Most recently, Saxon Collaborative won a $4.7 million contract to work on the Entertainment and Sports Arena, a 4,200-seat stadium in Ward 8’s Congress Heights. Building the arena, whose cost eventually ballooned to $69 million, was a coup for the District—officials estimate that the anticipated return on tax dollars invested will be 4-to-1. The 80,000-square-foot arena will serve as the Washington Mystics’ home court and practice space for the Wizards, and it’s expected to attract 350,000 unique visitors annually. Residents of the surrounding neighborhood helped negotiate a community benefits agreement that, ostensibly, helps ensure that residents of the ward get a slice of the arena’s anticipated financial benefits.
Greg O’Dell, president of Events DC—the publicly subsidized company that manages sites like the Walter E. Washington Convention Center and RFK Stadium—has boasted about the number of Ward 7 and 8 businesses, and residents, that benefited from the project, emphasizing that Ward 7 and 8 CBEs were awarded $10 million in contracts. Events DC initially provided over $27 million in funding for the arena, with the District paying another $23 million. With the final cost rising by nearly 25 percent, the District will be on the hook for the bulk of that additional money.
But quarterly reports summarizing the payments made to subcontractors on the project, produced by DSLBD, show that Events DC and District officials publicly exaggerated the anticipated financial benefits that the construction of the Entertainment and Sports Arena would create for residents of wards 7 and 8 and the businesses they run. City Paper received these reports through the Freedom of Information Act.
City Paper identified over $6 million in contracts awarded to companies that are registered as Ward 7 or 8 CBEs, but have headquarters outside of those neighborhoods or separate offices outside of the District altogether. (A spokesperson for Events DC declined to make available the list of companies that received the $10 million. O’Dell says he would tell the companies to independently call City Paper. They did not.)
“On the CBE piece, we were at 62 or 60 percent CBEs,” O’Dell says. “I’m very happy about that number. Obviously the emphasis was on having [businesses] from wards 7 and 8. I’m pleased.”
Ward 5 Councilmember Kenyan McDuffie, chairperson of the Council’s business and economic development committee that has oversight of DSLBD, says that his policy team “know[s] that the DSLBD has to focus on compliance more than they have. This issue about fraud companies, shell companies, out of town companies establishing CBEs to circumvent [the system] is a problem.”
Becoming certified as a community based enterprise is disarmingly easy—there are over 1,700 registered CBEs in the District, per the agency’s public database.
Business owners can log on to DSLBD’s “CBE Wizard,” a digital questionnaire that helps determine eligibility, to download a list of documents required for the application. Eligible companies must attend a series of DSLBD-sponsored workshops over the course of several months.
Dionne Brown, a Ward 8 business owner of nearly a decade, says that she twice attempted D.C.’s CBE certification process, but eventually abandoned pursuit of it each time. She became disillusioned, she says, by the other business owners she encountered during the certification process.
Brown says that of the 10 or so business owners present for the CBE certification trainings during DSLBD workshops held in the business center of the Martin Luther King Jr. Memorial Library, “very few actually lived in D.C. It was actually the exception rather than the rule.” Several of the other business owners cheaply acquired office space east of the river, Brown says, often by sharing space as small as a cubicle with a handful of other companies.
“They just change the nameplate around,” she says. “If you’re splitting the rent eight ways, it’s pretty affordable, it’s cheaper than downtown.”
The District has few local residency requirements for CBEs. In some cases, all of a company’s employees could live in Maryland or Virginia, but as long as the company does slightly more than half of its business in D.C., it’s considered local.
McDuffie tells City Paper that his office discovered last October that DSLBD has been required to complete reviews of their CBE beneficiaries since 2006. “They’ve only done it once” since then, McDuffie says. “We’re really pressuring them to do this review. We’ve asked them about it, and they have not completed it yet. That’s an accountability mechanism that they really need to do to discover these challenges.” He suggests that the department complete random spot checks on businesses after they’ve been certified to ensure that they’re complying with the law.
Shaneka Green, a spokesperson for DSLBD, declined to elaborate on the certification process beyond what the agency posts online, and declined to make the certification team or other department employees available for further comment by press time. Green did not respond to emails describing the scope of this article.
The CBE program, created during former mayor Marion Barry’s administration, launched with the goal of helping black- and minority-owned businesses compete to receive lucrative contracts with prestige firms, which are typically headquartered in wealthier D.C. neighnorhoods. Decades later, officials still throw around the term CBE with pride to describe the construction companies involved in marquee development projects, and the implication is that those companies are locally-owned and diverse. “CBE,” along the way, became a code word for racial inclusion.
But it’s long since lost its meaning. In 2012, City Paper wrote about how companies use CBE status to game the District’s “preference points” system for awarding construction contracts. “Critics say the setup gives mammoth, politically connected firms unfair advantages, invites waste and fraud, and actually hurts, rather than helps, smaller minority-owned businesses,” City Paper wrote at the time.
A former employee of a Ward 8 office space recently told City Paper that the space “would have non-Ward 8 companies, especially those in the construction industry, show up either shortly before an RFP’s [request for proposal’s] deadline or right after they got the contract award, looking for office space. You could tell they didn’t intend to work out of that space, they just needed to check the box to fulfill some requirement for the city. Because this was contrary to our mission, we wouldn’t lease them space. But we knew others in Ward 8 would, and they did.”
The former employee says that it was “frustrating” to see Ward 8 businesses “shut out of economic opportunities that were supposedly created for them,” particularly “knowing first-hand how hard it is for Ward 8 small businesses to survive, let alone thrive.”
Adrienne Smoot-Edwards, the president of Maryland-based historic preservation company Phoenix Restoration Group, has worked on District projects like the renovation of Cardozo Education Campus, Adams Morgan’s The Line Hotel, and the Martin Luther King Jr. Memorial Library. Phoenix is also a registered CBE. (Smoot-Edwards is not affiliated with Smoot Construction.)
“I’d think if they set up an office and are doing paperwork, that qualifies as having a business that’s run in that ward. To the city, you’ve met the obligation. You’re running a business in the ward. If you have personnel there, and you have paperwork there, you have a CBE,” Smoot-Edwards says.
For the Entertainment and Sports Arena, Events DC’s O’Dell told WTOP last year that Smoot-Gilbane—the partnership of Smoot Construction and Gilbane Building Company, who jointly served as the arena’s general contractor—hired “a lot of CBE contractors,” about 66 percent of the businesses who worked on the Entertainment and Sports Arena. “So we’ve exceeded our goal for this project,” he said.
On paper, it’s true that Smoot-Gilbane hired dozens of CBEs to work on the arena. It’s also misleading.
A City Paper review of DSLBD’s quarterly Entertainment and Sports Arena reports identified millions of dollars’ worth of contracts that went to businesses that are local by the District’s standards, but are actually headquartered outside of wards 7 and 8. Some of their D.C. locations are sparse, if they exist at all.
One company, JJ Prime Services, received a $1.7 million contract for work on the Ward 8 arena. The business does not appear to have a website—just a Facebook page, which does not describe what kind of work the company specializes in. But a quarterly report from DSLBD shows that JJ Prime Services was hired for “excavation” at the Entertainment and Sports Arena.
Public records from D.C.’s Department of Consumer and Regulatory Affairs show that the company is a Maryland-based LLC, with headquarters in Silver Spring and a separate office in Prince George’s County. But D.C.’s DSLBD records show that it’s also registered as a Ward 7 local business. City Paper visited the company’s Ward 7 address, an office park off of Bladensburg Road NE, just shy of the Maryland border.
The squat building, home to another construction company, called Nastos Construction, is located directly across from a yard full of used dumpsters. JJ Aguirre, the president of JJ Prime, tells City Paper that “98 percent” of the scope of his work, including project management and bidding, is in D.C. He says that he worked out of his Maryland home before renting office space from Nastos five years ago.
B&B Floor Services, a “full-service flooring company,” received over $297,000 to do flooring in the arena, per DSLBD’s quarterly financial reports. Its business certification page on DSLBD’s website lists the company as operating out of a Ward 5 address on 28th Street NE, yet it’s registered as a Ward 8 business.
B&B also lists a Ward 8 address, on Martin Luther King Jr. Avenue SE, on its website. City Paper drove to that location, too. It looks like a single-family home just a block south of the Washington Informer office. A sign out front, which listed eight business names, did not include B&B. What’s more, Maryland’s public LLC registration site shows that B&B is based in Capitol Heights, and has been since 2005. B&B’s website says its Maryland office is in Forestville.
Another company, Global Engineering Solutions, received a $146,000 contract on the Entertainment and Sports Arena for “commissioning.” Though it’s registered as a Ward 3 local business, business filings show that its principal office is in Bethesda and that its principal agent lives in Baltimore. (Neither B&B nor GES responded to multiple emails from City Paper detailing these facts.)
And Saxon Collaborative’s principal office is on Wisconsin Avenue NW, in Ward 3. Yet DSLBD has it registered as a Ward 8 business.
Adam Sacks, Saxon’s president, acknowledges that his company has a larger presence west of the Anacostia River, and that on any given day there are only three or four employees working from Saxon’s Southeast office. But that’s intentional, he says. Saxon had to move out of its first Ward 8 office, which the company opened on the intersection of Alabama Ave. SE and MLK Ave. SE about six years ago, after several staffers were mugged in the parking lot. He says that employees’ cars were frequently broken into in that neighborhood.
“To be entirely frank, we opened our Wisconsin Ave. office because we are having difficult time getting accounting and HR [staff] to come to SE,” Sacks says. “It’s a much safer neighborhood.”
Sacks says that, in his experience, it’s difficult to find CBEs based in Ward 8 that are financially stable enough to navigate the obstacles involved in working on larger D.C.-funded projects, which are often slow in reimbursing general contractors for work and stacked with burdensome hiring requirements. (“We know that’s been an issue,” McDuffie says of delayed payments.)
Sacks cites infrastructure work Saxon has completed on the St. Elizabeths East campus, and the beleaguered Parkway Overlook project (“truly a disaster,” Sacks says) as examples of poorly run D.C. projects in terms of timely repayment and subcontractor hiring. Work on the St. Elizabeths campus “required splitting contracts a million different ways, especially in light of the government’s inability to flow funding. We didn’t have a GMP [final price] executed with the D.C. government until two months before the [$80 million] project began. We don’t know a lot of CBEs that can front that money for any period of time,” Sacks says.
D.C.’s First Source hiring law requires beneficiaries of large, publicly subsidized projects to hire District residents for newly created positions. Construction company executives have long complained that these requirements are burdensome and unreasonable, given the perceived dearth of skilled laborers in the District. “When you go to Ward 8 and the Department of General Services comes down with a mandate and says, ‘This is what D.C. wants’ … they just don’t exist. People like me, we have a very difficult time with hiring people and doing the soft skills stuff just to get people from Ward 8. [Saxon] gives 7th and 8th and 10th chances to [workers]. We’ve been doing that for years,” Sacks says.
He adds: “I have to stress, we’re really the good guys. If someone works eight minutes of overtime, they get paid for eight minutes of overtime. They have full health benefits, and people are actively knocking on our door to work for us … we don’t take advantage of employees. Everything is above board.”
Sacks says that DSLBD is aware of Saxon’s Wisconsin Avenue office, which is also registered with the department.
Chrystal Stowe, Smoot Construction’s director of community relations, says that she is not aware of any CBE subcontractors hired for the Entertainment and Sports Arena that are based outside D.C. Asked if she is aware of the practice more generally, she says “no, it has not happened on any projects that I’ve been involved in.” Stowe says the company confirms subcontractors’ CBE status with D.C. before hiring them, but that that is the extent of their vetting process.
As Smoot-Edwards of Phoenix Restoration Group points out, there is a challenge in the construction industry, particularly for specialty companies, in setting a standard for what really constitutes an office. “The subcontractors, once they mobilize—everything they need to do is handled at the project site,” she says. “There’s payroll, which could be done out of that office which they set up, or when they have meetings. An electrician doesn’t need to have an office—they can call their supplier and say, ‘Deliver X number of wires to this project location.’ If they have a trailer at the site, they receive and process it there, and transit the paperwork to an office.”
And the most common place to establish these secondary offices? “Definitely wards 7 and 8,” she says, adding that the city’s drive to “generate more [workers]” from those wards further entices construction companies to establish an address there.
Sacks says he’s also familiar with the practice. He rattles off three buildings notorious for renting desk space to businesses outside of D.C., including a building next to the Anacostia Playhouse.
“There were not a lot of non-native Ward 8 companies” working on the Entertainment and Sports Arena, says Sacks, who lives in upper Northwest D.C. “Maybe you’ve tried to make the argument that we are. We’re a little bit of both.”
City Paper asked O’Dell how much inter-agency communication Events DC has with D.C. agencies during the construction process. He says that the work “is driven upfront, in setting goals and parameters. Each project has to self report. DSLBD has been very supportive when we’ve needed or asked questions, and I suspect they do outreach as well. [But] the structure is really required for people to define goals clearly up front, and self report against those goals.”
Which raises the matter of hiring local. A third quarter financial report from 2018 generated by DSLBD for the Entertainment and Sports Arena—the most recent report available—shows that, of the 39 CBE subcontractors who completed work on the arena that quarter, only 10 reported employing D.C. residents.
Saxon Collaborative, which made $4.7 million from the Entertainment and Sports Arena—one of the more lucrative subcontracts—hired 49 new workers for the project, 16 of which were D.C. residents, eight of them Washingtonians from wards 7 and 8. B&B Floor Services, which made about $300,000 from its work, hired three. JJ Prime Services, the company registered as a Ward 7 CBE that made almost $2 million dollars from the arena, hired five Ward 8 residents. Global Engineering Solutions, a Ward 3 CBE, did not report hiring any D.C. residents.
The mayor’s website boasts that construction of the arena was anticipated to generate a total of 300 permanent jobs and 600 temporary construction jobs. Events DC’s O’Dell says that, so far, it has generated only 30 full time jobs on Events DC’s operations side. About half of those, he says, are residents of wards 7 and 8.
Brown, the Ward 8 business owner, became discouraged each time she began her local certification process, in part for this reason. “They have contempt for our communities—that’s the thing that bothers me,” she says. “They want to come to Ward 8 to make money, but they wouldn’t live here and they wouldn’t want to employ us.”
Correction: A previous version of this article stated that Hyde-Addison is in Columbia Heights.