Correction of this imbalance was the purpose of the roundtable convened earlier this month by At-Large DC Council Member Vincent B. Orange (D). For nearly nine hours on Dec. 8, Orange quizzed the top brass of each District agency on their efforts to spend more of D.C.'s $10 billion budget with local small businesses.
A 2005 District law requires each local agency to spend 50 percent of its expendable, or discretionary, budget on D.C.-based certified small business enterprises (CSBE). According to Orange and his staff, in recent years, local small business contracting has apparently been less important than getting projects done "fast."
This claim is borne out by the findings of D.C. Auditor Yolanda Branche whose office examined local spending of the 75 District agencies with procurement authority. For fiscal year 2010, while D.C. agencies were required to spend at least $221 million with CSBEs, they managed to meet only $103 million of their goal, shorting local businesses by $118 million in contracting revenue.
Branche attributed this shortage to the last administration's failure to "[E]nsure that agency SBE goals were accurately and promptly established and submit required expenditure reports to assess compliance." Specifically, of the agencies that bothered to report their 2010 local small business contracting numbers, only 19 met the 50 percent spending mark as required by law, noted Branche.
During the first months of Mayor Vincent Gray's administration, Branche reported there was no improvement in spending by CSBEs, in fact, it has worsened. While the data on fiscal year 2011 has not been finalized, out of the approximately $270 million spending requirement for the entire year, only $50 million was spent with certified local businesses in the first nine months, according to Branche, who reports to the D.C.Council, not the mayor.
"It was extremely important for District of Columbia begin to circulate its dollars in the District of Columbia," Orange said. "By circulating those dollars, we're able to get back corporate franchise taxes. If our businesses hire D.C. residents, we can get employment taxes and we're putting people to work. It is incumbent that District agency leaders do their part in meeting their CSBE compliance obligations."
Harold Pettigrew Jr., Mayor Gray's newly confirmed director of the Department of Small and Local Business Development (DSLBD), acknowledged the setbacks to local small business spending under both the Fenty and Gray administrations. Pettigrew, who worked for both Fenty and Gray administrations, explained the recent decline in spending on CSBEs was chiefly due to a spending freeze established at the start of Mayor Gray's term as well as the lack of compliance staff in his office. In years past, CSBE spending compliance was overseen by a team of five. Due to budget cuts, this job is now being performed by a single staffer. Pettigrew points to his move in placing CSBE contracting compliance under his direct supervision and the creation of a new compliance system established jointly by his office and that of D.C. Auditor Branche as the tools needed to help turn around the District's low level of local small businesses contracting.
"With the new system, we have much greater control of the process, and can avoid many of the mistakes made in previous fiscal years," Pettigrew said.
Adrienne Smoot, of AVSmoot LLC, a CSBE specializing in painting and historic restoration, is optimistic about what she hears from Mayor Gray's team. However, Smoot urges that an updated database of qualified small business should be given to each District agency along with the mandate to spend more money with CSBEs, right away. Moreover, Smoot recommends the District make some structural changes to ensure local small businesses can compete with larger contractors.
"It would be nice if D.C. government would find a way to create a bonding program for its CBEs," said Smoot.
In the months ahead, Smoot is hopeful the council and mayor "can establish an environment in which CBEs can get the bonding needed and increased contracts from D.C. agencies, and then we can meet the District's goals of employing the unemployed unskilled worker."