Not one but two companies that were supposed to be big beneficiaries of rules aimed at making sure companies owned by minorities and women got some of the work on the massive redevelopment of the former Iberville public housing complex in fact passed on most of the money they received to subcontractors that don’t qualify as either minority- or woman-owned, newly released documents show.
It was revealed last month that the Housing Authority of New Orleans was scrutinizing the work of one of those companies, Nolmar, which accounted for the biggest chunk of supposed spending on minority-owned subcontractors by Woodward Design+Build, the lead contractor on the Iberville project. HANO says that 90 percent of the money that Woodward paid to Nolmar ended up with white-owned subcontractors.
New records obtained by The New Orleans Advocate show that some of the money passed through by Nolmar actually went to subsidiaries of Woodward.
Further, the documents show that HANO has discovered that 95 percent of the money Woodward paid a company called Strategic Planning, which was supposed to satisfy HANO’s requirement that women-owned firms participate in the project, also went to subcontractors that aren’t certified as women-owned, at least in the first two phases of construction.
Revelations about the Iberville development have raised new questions about the effectiveness of so-called disadvantaged business enterprise programs, or DBEs, at local agencies.
Last week, Mayor Mitch Landrieu’s administration moved to close a loophole in its own program to keep companies certified as DBEs from being used as pass-throughs — a step that took on particular urgency because Woodward is also involved in redeveloping the old World Trade Center building and at one point listed Nolmar as a potential subcontractor.
HANO, which began the $600 million redevelopment of the Iberville house complex in 2013, has an official goal of directing 20 percent of its spending on the project to minority-owned firms and another 5 percent to those owned by women.
HRI Properties LLC is the master developer in charge of the project, and Woodward is one of the prime contractors.
According to HANO, the arrangement between Woodward and Nolmar ran afoul of the agency’s requirements.
HRI officials, in a statement last month, pointed to HANO’s previous approval of Woodward’s methods at a time when HANO was under federal receivership. The housing agency returned to local control last year.
HANO officials have said they are reviewing HRI’s response to the allegations before making a final judgment.
Newly released documents show that Nolmar accounted for a major portion of Woodward’s spending, at least on paper.
Woodward was awarded contracts for all three phases of the redevelopment, totaling $77 million.
Nolmar was supposed to account for 21 percent of the total, or about $16.3 million. But more than 90 percent, or more than $14.7 million, of Nolmar’s $16.3 million went to non-DBE firms, HANO said.
One of those firms is Woodward itself. Nolmar subcontracted $20,428 of its work on the first phase of construction, $203,383 of its work in the second phase and nearly $1.3 million of its work in the third phase to Woodward Masonry Group and Woodward Steel Group, two Woodward Design+Build divisions, the documents show. That’s about 9 percent of Nolmar’s total $16.3 million.
Woodward President and CEO Paul Flower said that arrangement was not entirely the original plan. He said Nolmar initially contracted with a steel company that failed to perform. “So, Woodward’s steel division went in to pick up the slack, if you will, to go in and finish the work on a timely basis,” he said.
That was not the case with Woodward Masonry Group, however. That division performed most of the masonry on the first and second phases, Flower acknowledged, “because they were the low mason bidder on everything. So if they were the low mason bidder on our buildings, they were also the low mason bidder on Nolmar’s” share of the work.
Although the documents indicate that Nolmar subcontracted $395,631 to Woodward Masonry Group in the contract’s third phase for a “complete turnkey masonry system,” Flower said that work was minimal and that another firm actually performed most of the masonry work in that phase.
He added that working within HANO’s budget was problematic. “We were forced to take the lowest prices we could take in order to get the project,” he said.
HANO’s contracting policy requires contractors to enforce DBE participation at all contract levels. It also has been HANO’s practice, whenever a subcontractor passes on much of its work to other firms, to count only the first company’s own work toward the overall DBE participation requirement, according to HANO documents.
Asked if HANO is reviewing Nolmar’s subcontract to Woodward divisions, HANO Executive Director Gregg Fortner said officials will “identify any and all inconsistencies that may have compromised or circumvented HANO’s DBE policies, and HANO will determine appropriate corrective action when all evidence has been evaluated.”
In the case of Strategic Planning, a certified woman-owned DBE that offers consulting and construction management services, Woodward contracted with that firm as a key way of meeting HANO’s separate requirement for 5 percent participation by woman-owned business enterprises, HANO officials said.
But documents show that Strategic Planning subcontracted more than 95 percent of its contract value in two phases of the Iberville revamp to non-DBE firms.
Strategic Planning’s first- and second-phase contracts totaled $2.1 million, about 4 percent of the project’s total first- and second-phase contracts, documents show.
Woodward paid Strategic Planning to oversee painting work, and Strategic Planning later subcontracted that work out to KMT Painting & Decorating.
“SPA remained engaged in the management and supervision of this scope and was ultimately contractually responsible for the completion of the paint scope,” Woodward Vice President of Operations Lane Louque wrote to master developer HRI, a letter ultimately sent on to HANO.
Like HRI’s previous defense of Woodward, the newly obtained documents highlight HANO’s past approval of the hiring of Strategic Planning and Nolmar.
Flower and Charlotte Burnell, the owner of Strategic Planning, also pointed to HANO’s previous approvals. “You do half a project one way, and then it’s approved, and in the middle of the project it changes. That’s a little bit difficult,” Burnell said.
“We’re not a pass-through,” she insisted, citing her company’s supervision of KMT and pointing out that she owns 100 percent of her company. “I’ve never seen anything that says that a DBE has to do 100 percent of the labor themselves.”
Regarding the actions of past administrators at HANO, Fortner released a statement last month saying the agency “continues to work with the master developer HRI on documentation and the specific circumstances of its contract approval by the former HUD receiver.”
HANO said it expects to complete its review of the situation within the next few weeks.
Follow Jessica Williams on Twitter, at @jwilliamsNOLA.