D.C. AG Karl Racine responds to DSLBD compliance crisis

Are D.C.’s Department of Small & Disadvantaged Business and the City Council itself ignoring requirements to award more contracts to small local businesses?

D.C. Attorney General Karl Racine.
D.C. Attorney General Karl Racine provides a business briefing at a recent National Business league breakfast forum. (Photo credit: Malcolm Lewis Barnes)

WASHINGTON, June 20, 2015 – At a recent business briefing hosted by the National Business League at the Bladensburg Road Denny’s restaurant in the District of Columbia, a standing room only crowd of concerned and angry Certified Business Enterprise (CBE) members were anxious to hear from newly elected Attorney General Karl Racine. He did not disappoint them.

The hottest hot-button issue on the table for discussion was the recently released inspector general’s audit report on the District’s compliance with its small business expenditure (SBE) goals. The report (OIG No. 15-2-03EN) singled out “a significant decline in agencies’ expendable budgets that reduced SBE spending goals during the third and fourth quarters of FY 2014 from $779 million to $229 million.”

The net result for the CBE community was that access to a half billion dollars of potential SBE contracts was taken off the table by the lame duck administration of former Mayor Vincent Grey. The IG found the Department of Small & Disadvantaged Business (DSLBD) at fault for not providing adequate oversight of D.C. Code 2-218.41, which requires the district to meet contracting goals of 50 percent on an annual basis.

AG Racine stated that he is taking steps to proactively reach out to DSLBD and its newly appointed director Ana Harvey to get ahead of this issue.

“I can tell you she was very concerned with the IG’s report and we are working with the new DSLBD leadership to get them in the driver’s street to discuss how the waivers are being utilized,” said Racine.

In response to the attorney general’s remarks, DSLBD director Harvey later replied that, “DSLBD welcomes the support of all interested agencies and stakeholders in our efforts to implement the ‘Small and Certified Business Enterprise Waiver and Recertification Amendment Act of 2014’ and educated district agencies on their compliance requirement.”

National Business League (NBL) spokesman Roscoe Grant told the group, “qualified groups have notified OCP (Office of Procurement), DSLBD and the office of the mayor that they are prepared and able to provide the goods and services for prime contractors that are seeking waivers. This is a crisis that will cause CBEs to lose millions of dollars if waivers are granted when qualified SBEs are available.”

Also in attendance were several representatives from MBI Health Services, the designated CBE subcontractor on the $61 million corrections contract to Corizon Health, Inc., that was rejected by the city council despite the mayor’s support and winning a competitive award from the OCP.

To add insult to injury, Unity Health Care, the corrections department incumbent providing inmate medical services, received a waiver, and a second extension of their “sole source” contract by DSLBD was approved last week. It included a subcontract plan that allowed 1 percent CBE participation for medical records and miscellaneous staffing services.

“What if DSLBD is not doing their job? Would I defend the agency in a lawsuit? I am using the independence of the office to get inside and make sure they understand the law, and re-stating the obvious by setting up a dialogue,” reiterated AG Racine in his closing remarks.

When asked what steps the new leadership at DSLBD is taking to reverse their abysmal record of CBE compliance in previous fiscal years under the former administration, Harvey stated she has already taken aggressive steps to reverse the downward trend in CBE compliance.

“DSLBD worked closely with the office of the inspector general and agrees with the findings and recommendations of the report. In fact, we have already begun to implement many of those recommendations, and others will take effect with the start of FY 2016,” she said.

“Supporting the Bowser administration, DSLBD is taking a fresh look at the program, and we are putting systems in place to improve the areas identified in the audit. DSLBD appreciates the guidance provided in the report and will continue to work aggressively to rebuild databases, establish clearly defined objectives, and develop a transparent system of management accountability.” she said in an official reply through her public information officer.

But many of the CBEs in attendance indicated they are running out of patience and are no longer willing to give the district the benefit of the doubt in what they describe as a “compliance crisis.”

“That is a power we have as an independent office to convene different offices and we will work with Ms. Harvey to a make sure we are on the same page,” said Racine in response to the NBL’s action alert, which is calling for the CBE community to launch a public awareness campaign leading up to a hearing in early July by the chair of the economic development committee of the council, Vincent Orange.

The perception that the district is ignoring the “Small and Certified Business Enterprise Waiver and Recertification Amendment Act of 2014” law that requires the district to award 50 percent of expendable budgets to qualified local businesses has only been reinforced by the findings of the inspector general’s report.

The “1 percent solution” along with last week’s waiver approval of the continuing sole source award to Unity Health Care flies in the face of logic and fairness for many struggling CBEs and may have made this a watershed issue for the Bowser administration’s stated efforts to right the ship and level the playing field for local small and disadvantaged businesses.

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