A program designed to help minority- and women-owned businesses gain equal footing in the city and county of Denver is not meeting its goals, according to a report released Thursday by Denver Auditor Dennis Gallagher.
While the number of participants in the Minority/Women Business Enterprise swelled 171 percent to 720 in the eight years from 2007 to 2014, no more than 31 percent are getting repeat work from the city, the audit found. During that same period, only nine companies “graduated,” meaning they grew too large to be included or hit a net worth of $1.32 million.
“This program is broken, and the city is breaking its word to those it has promised to help,” Gallagher said. “It troubles me that stakeholders, including the public and firms in the construction and professional services industries, do not know whether this program is working.”
But the city says the auditor’s office is holding the program accountable for some things that are not in its control.
The M/WBE program — administered by the Division of Small Business Opportunity, part of the Office of Economic Development — was formed to help minority- and women-owned construction businesses land city and county contracts, with the ultimate goal of helping them to grow into larger firms that can compete for contracts outside the scope of city work.
The program was scrutinized by the auditor in 2011, but among the 16 recommendations in that audit, only six were implemented, according to a September 2013 report issued by the auditor’s office.
Of the 19 recommendations in the most recent audit, eight were carried over from 2011.
Denver OED Executive Director Paul Washington, who took over the department in August 2011, said there is no excuse for not implementing the audit committee’s past recommendations.
But, while he pledged to do better at reporting, tracking and record keeping, he pointed out there are some items out of the small business office’s control.
Specifically, he said, the office does not decide which firms are hired and cannot control which firms grow large enough to graduate.
“We cannot have enough programs within the city to graduate these firms,” he said. “How you graduate from this program is you participate in programs outside the city and grow your firm that way.”
Much of the auditor’s report focuses on a large contract for work on Denver International Airport’s hotel and transit center.
When announced in January, the $39.6 million contract with Burgess Services for mechanical work was touted as the largest-ever granted by the city to a minority-owned business. However, .
Burgess Services, owned by a black woman who is certified as a construction manager, was not equipped to carry out the work. Burgess subcontracted $23.3 million of the work to RK Mechanical Inc., a large company that does not qualify as a minority contractor.
The city set a goal that 30 percent of the DIA project’s $365 million general contract — about $109 million — was to be set aside for minority- or women-owned businesses. Only about $800,000 of the $39.6 million contract went to Burgess.
Burgess and general contractor Mortenson Hunt & Saunders say the city’s ordinance allows for the entire contract to count toward the project’s minority-participation goal.
An disagreed, stating that only work performed by Burgess and certified M/WBE subcontractors would be counted.
The audit report agrees with that assessment, additionally noting that lack of documentation and out-of-date data has contributed to an additional $20 million of M/WBE contract awards not being counted toward the project’s goals.
Laura Keeney: 303-954-1337, lkeeney@denverpost.com or twitter.com/LauraKeeney
