In a move that would close what critics say is an unfair loophole in New Orleans’ program to assist disadvantaged business enterprises, Mayor Mitch Landrieu’s administration unveiled a proposal Wednesday designed to prevent DBEs from being used as pass-through companies, funneling work to white- or male-owned subcontractors that was officially going to minority- or woman-owned businesses.
The new rules come weeks after news broke of an investigation by the Housing Authority of New Orleans involving developer HRI Properties, general contractor Woodward Design+Build and certified DBE subcontractor Nolmar Corp.
Those companies are accused of violating HANO’s contracting policy when Nolmar funneled more than 90 percent of the value of its contract to work on redevelopment of the Iberville public housing complex to non-DBE firms, HANO officials said.
The redevelopment project has a total value of $600 million. HRI is the master developer.
The firms involved counter that HANO had approved their work arrangements when the agency was under federal receivership. HANO returned to local control last year.
The changes also come two years after Landrieu and the City Council established stricter remedies for noncompliance with city DBE requirements, and months after the council approved another measure to require city departments to file annual reports documenting success at achieving DBE participation goals.
Under the proposed rules, DBEs would be required to perform at least 51 percent of the value of their subcontracts themselves. They can assign the rest of the work to other companies, but only work completed by other certified DBEs would count toward the city’s overall goal of having 35 percent of work done by DBEs.
The policy also firms up rules for DBEs acting as prime contractors on city projects. Those DBEs need to perform only 30 percent of the work themselves.
The proposed rules, which city officials have said are expected to be fully detailed by January, were unveiled Wednesday at a public hearing packed with contractors, labor activists and other interests. They may be amended, based on public input.
There were only a few protests at the meeting.
Steven Kennedy of the real estate advisory firm REO LLC, a certified DBE, expressed some concerns but mostly applauded the city. “All of y’all have done an excellent job in creating a policy that has some teeth,” he said.
Kennedy questioned whether the policy would address DBEs that receive contracts “over and over, again and again,” which critics have said raises questions about whether those firms are truly disadvantaged, but he praised HANO for its actions with the Nolmar and Woodward case.
It’s not clear how many DBEs with city contracts have funneled significant amounts of their work to non-DBE firms, or how severely those that have done so will be affected by the changes.
Nolmar Executive Vice President and General Manager Al Wallace did not immediately return a request for comment Thursday. Neither did Paul Flower, Woodward’s CEO and president.
Wallace has said in the past that his firm’s ability to find capable DBEs to employ varies with the trade.
Follow Jessica Williams on Twitter, @jwilliamsNOLA.