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7/1/2013 | Construction Blog

The fact that contractors working in the City of Philadelphia have routinely used work-arounds to get work classified as minority-owned, woman-owned, or disabled-owned is among the construction world’s worst kept secrets. One of the strategies – hiring businesses that qualify for DBE contracts and using them as a pass-through – recently came under serious scrutiny by the City. In an effort to crack down on what City officials argue is an abuse of the system, the Office of Inspector General has started to investigate more claims. It also recently identified and cited a number of prime contractors for violating the DBE rules. One contractor, William H. Betz, Inc., was the center of recent attention.

Investigating on behalf of the Office of Economic Opportunity, the Inspector General reviewed 19 Philadelphia Housing Development Corporation contracts and found multiple prime contractors that used JHS & Sons Supply Company to achieve the above described work-around of the City’s DBE rules. As part of weatherization work, a sham agreement was reached with JHS in which it was represented that JHS was actually participating in the project. Instead, it was being paid for nothing more than the use of its name and minority certification with the City. The actual labor and materials were being “passed through” JHS on paper only.

In January 2012, the City entered into a $100,000 settlement with UGI and removed JHS from its list of certified minority contractors. It also started debarment proceedings against Betz. More recent reports show that a settlement was also reached with Betz under which it agreed to follow the City’s Equal Opportunities Procedures Policy and pay $128,000.

The City of Philadelphia is cracking down on abuses of these “work-arounds” because it believes participation of minority, women, and disabled owned businesses in City contracts is a significant part of its anti-discrimination policy. Whether you agree with the politics of it or not, it is a reality for anyone involved in the construction business. If you are working in the City of Philadelphia and using a minority, woman, or disabled owned company, be sure to follow the rules and document what you have done. The City of Philadelphia is paying closer attention, so you should too.