City Paper is not for tourists
Calvin Reid did everything he was supposed to.
The 59-year-old has lived in Shaw for over three decades. Formerly a schematics engineer for General Electric, Reid founded a D.C.-based steel fabrication company in 1996, Atlas Manufacturing Company, Inc., and it grew into something he was proud of.
Since the mid-2000s, Reid has operated his company out of a two-story rowhouse on Martin Luther King Jr. Ave. SE in Ward 8’s Congress Heights. At its peak, Reid says his company employed over 30 workers, many of whom stuck beside him for a decade or more. Photo collages of his family hang on the white doors of his office, which is stuffed with leather-bound books and filing cabinets.
The building is a 25-minute walk from the neighborhood’s brand new Entertainment and Sports Arena, a 4,200-seat, $69 million stadium that will serve as the Washington Wizards’ practice court and opened to much acclaim last fall. Construction of the arena was intended to help businesses like Reid’s—home-grown, locally operated, and run by people of color, or other minority groups.
Last week, City Paper reported that District officials exaggerated claims about the extent to which businesses based in wards 7 and 8 financially benefited from the development of that arena. While they claimed that $10 million in contracts were awarded to companies based east of the Anacostia River—an amount equal to roughly one out of every seven dollars spent on the project—City Paper discovered that over $6 million of those dollars actually went to businesses primarily based in the more affluent Ward 3, if not outside D.C. altogether.
It’s an all-too-common loophole in the District’s Certified Business Enterprise system, a mechanism by which D.C. awards “preference points” to locally operated businesses during the contract procurement phase of a project. Entities that want to buy or develop D.C. property must subcontract 35 percent of the project’s adjusted budget to CBEs, with certain projects setting more rigorous, hyper-local hiring goals.
Getting a leg up in contract bidding for a project in, for example, Ward 8, can be as simple as cheaply renting a cubicle from a shared office in Ward 8. “It’s easy to stand back and say, ‘Oh, we want more participation from minority-owned and small businesses,’” Reid says, “but it’s a three-card show game. It’s about who’s participating versus who’s actually benefiting.”
Atlas was CBE certified for over 20 years. But after years of working on high-visibility, high-value District projects, like St. Elizabeths Hospital, the Cardozo Education Campus, and the Petworth Neighborhood Library, Reid says he can’t afford to stay in business anymore. Merely “participating” became too financially draining. And the deciding blow against Atlas, as Reid tells it, was the Entertainment and Sports Arena.
As early as October of 2016, Reid expressed concerns about the management of the project in an email to architect Michael Marshall. Two development companies, Smoot Construction and and Gilbane Building Company, were to jointly serve as ESA’s general contractor. That strategy “always seems to manifest a few jobs for some, but rarely provides an economic boost to other existing businesses in this city,” Reid wrote, according to a copy of the email he provided to City Paper.
Despite those reservations, he submitted a bid for structural steel work on the arena. He lost, and is still smarting from it. The winning bid went to SteelFab, a structural steel fabricator with headquarters in Charlotte, North Carolina, and 14 other locations across the American Southeast. (City Paper asked the offices of Brian Kenner, the Deputy Mayor for Planning and Economic Development, and the Department of Small and Local Business Development, the agency that runs D.C.’s CBE certification program, for a comment on why SteelFab received the contract over Atlas. They declined to submit one.)
Coupled with other financial losses over the year—Reid estimates that he’s owed about $2 million in back pay since 2007 from working overtime on District projects that his company wasn’t reimbursed for––missing out on the ESA contract made it nearly impossible to keep his company financially solvent. Reid compares owning a small construction business in D.C. to being “the hamster on the wheel,” constantly scrambling for new contracts just to compensate for losses on old ones.
Now, he says, “I’m not doing that anymore.” He has laid off dozens of employees, many of whom were Ward 8 residents making between $40,000 and $60,000 annually, and had worked with Atlas for over a decade.
SteelFab is far from the only company based outside of D.C. hired to work on the arena. (Greg O’Dell, Events DC’s president, told City Paper last week that around 60 percent of companies hired to work on the arena were CBEs. Events DC is the publicly subsidized facility management company that operates RFK Stadium and the Walter E. Washington Convention Center, and will now run ESA.) City Paper identified four CBEs headquartered outside the wards in which they achieved their CBE certification. Three of those businesses claim to operate in either ward 7 or 8: Saxon Collaborative Construction, LLC, which won a $4.7 million contract on the ESA; JJ Prime Services, which won $1.7 million; B&B Floor Services, which won about $300,000; and Global Engineering Solutions, which received a nearly $150,000 contract.
(In 2017, D.C. Auditor Kathy Patterson sent a letter to Ward 8 Councilmember Trayon White, copying Council Chairman Phil Mendelson, detailing the results of an investigation into a single-family home at 3215 Martin Luther King Jr. Ave. SE where about 30 companies claimed to operate a business. One of those businesses is B&B Floor Services. Patterson noted that B&B’s self-reported rent payments on tax returns filed between 2012 and 2014 are inconsistent with each other and with the rent listed on its commercial lease agreement. “These apparent rent discrepancies also may indicate that a particular company was not actually operating out of 3215 MLK,” she wrote at the time.)
Kristi Whitfield, the director of DSLBD—the D.C. department responsible for processing and approving CBE certification applications—tells City Paper that “I think it’s easy to focus on the frustrations that people might have, and the risk is that you overlook the good it’s doing. I think that the last year, the government procured over $820 million of CBE [contracts], and so I think it’s hard to say that a program isn’t working. I think that like any big program, we can work to make sure the spirit and intent of the law is being considered.”
City Paper asked Whitfield whether the $820 million figure accurately represents the scope of contracts awarded to locally-owned and operated businesses if some of those CBEs don’t actually have headquarters in the District. In response, Whitfield says that there are “conceptions … that this is supposed to be a race—some contemplation of race or gender, which is not the test of CBEs.” (It’s true that prospective applicants don’t have to be people of color or women to apply, but Marion Barry, who was mayor when the CBE program was created in the late 1970s, reportedly told senior staff to “direct more city contracts to black-owned companies.” The CBE program predates DSLBD by over 20 years.)
Referring to the businesses City Paper wrote about, including Saxon Collaborative—which made nearly $5 million from the ESA and has a secondary office in Anacostia––Whitfield says that “having more than one location should be seen as a good thing, because there’s more investment in different places. We’re looking for fraud. … If a business is working in two places in the city, it’s harder to see that as a problem to me.”
City Paper then asked Whitfield how she responds to comments made by Saxon president Adam Sacks that his company has struggled to find staff willing to work in Ward 8 because of safety concerns. “There were other things that business said that made me recoil … what he said was abhorrent [about] communities east of river,” she says. “I didn’t appreciate that comment. It’s difficult to sort of be defending him, but I know that when our team went there, that he was there and high level managers were there.” (Ward 5 Councilmember Kenyan McDuffie has suggested conducting random spot-checks of businesses registered as CBEs to ensure compliance with the program’s requirements.)
Whitfield also tells City Paper that she cannot immediately think of specific changes she would like to make to the CBE program. “Let me not just glibly shout off something,” she says.
In the meantime, Reid, the Ward 8 business owner, says operations like his are struggling. “I couldn’t do it anymore, after 15, 20 years,” Reid says. “It was so oppressive, it just makes you want to die.” Atlas was CBE certified between 1996 and 2018, but Reid finally let his certification lapse when it expired last October. “It did not improve my condition when I was certified,” he says. I have the ulcer to prove it.”