Gray announces crackdown on D.C. shell companies

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Photo - D.C. Mayor Vincent Gray (Examiner file photo)
D.C. Mayor Vincent Gray (Examiner file photo)
Local,DC,Liz Farmer

D.C. Mayor Vincent Gray on Wednesday rolled out major reform plans aimed at cracking down on companies in the District that are used solely to gain an edge in bidding for city projects because they are locally owned, but inevitably don't play a main role in the work done.

The preference given to bidders with a locally owned business partner, or Certified Business Enterprise, has come under scrutiny in recent years as several joint ventures have been found to be abusing the system. "Shell companies," or companies that claim to be locally owned but simply have a mailing address in the District, are still obtaining CBE status from the city and being attached as majority partners on bids for city projects.

By their mere existence on that bid, the joint venture gains significant points toward its total bid score from the city for having a locally owned component -- even though the team isn't following the spirit of the law. But D.C. has not had the staffing to crack down on such joint ventures.

"Frankly, there is no question there have been some bad actors. There have been some people who really have taken advantage of this program, and we intend to crack down on that behavior," Gray said.

The reforms include approving $1 million to fund 10 new positions in the Department of Small and Local Business Development that will be devoted to ensuring compliance and enforcement in the CBE program. New penalties would also be created, including a two-year ban from CBE participation for any business found violating the program requirements.

Gray asked the director of the Small and Local Business Department in July to craft recommendations on the CBE program. The mayor said Wednesday he hopes to have legislation to the D.C. Council by the end of the month.

News reports have highlighted problems with the practice. In September, the Washington City Paper profiled a dispute between locally owned Environmental Engineering & Construction and Rockville-based Forrester Construction, which formed a joint venture to renovate Anacostia Senior High School. Now, EEC is suing Forrester because the latter did most of the work and got most of the pay while the D.C. company served as a front.

And last fall, the council held a hearing after questions were raised in media reports about the legitimacy of a CBE company that was awarded a portion of the city's grass-cutting contract.

lfarmer@washingtonexaminer.com

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