Local Businesses Shortchanged by More than $100 Million

Talib I. Karim | 12/22/2011, 2:26 p.m.

It's 6 p.m. and while the D.C. Superior Court is mostly out of session for the day, there is a crowd of men waiting to get through security. No, these men don't have cases going before the after-hours judge; instead they are members of work crews reporting for the night shift.

As the men head to their work sites in the building, it appears that all of the men are Latino and, from the looks of their travel gear, don't live in the District. A random survey of members of these after-hours workers reveals four are from Maryland, one from Virginia. This is not an unusual scene in the District. In fact, it's repeated nightly in virtually every D.C. government building.

While the District spends hundreds of millions annually on capital improvement projects and maintenance services, a D.C council hearing last week revealed only a sliver of these funds are paid to contractors and workers who live in D.C.

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."