Unfair Treatment of Turner Group Construction “Only the Tip of the Iceberg”

Posted in Army Base Jobs, City Auditor’s Report

By Ken A. Epstein

The City of Oakland’s failure to offer Turner Group Construction an honest shot at winning the Oakland Army Base demolition contact is “only the tip of the iceberg,” and explains, at least in part, the city’s continued dismal record of employing small, local contractors and African American construction workers on its projects, according to Councilmember Desley Brooks.

“What does (Turner Group’s experience) say about how Oakland’s flawed process?  Here is a company that in seven years has gotten less than $50,000 in contacts with the City of Oakland.  They spoke up, but there are a lot of firms that are afraid to speak up because they think they will get penalized,” Brooks said.

The obstacles small contractors face can be traced back to the staff and their overly cozy relationship wit the big contactors, she said.  “In this instance that staff was going right along with sole sourcing contracts even though they knew it was in violation of the rules. And would have done it were it not for a Turner Group Construction or me and Larry (Reid) asking: Why are you sole sourcing this?’”

“Our staff is letting (the big contractors) dictate what is happening on our projects,” Brooks said.  Most of the rest of the City Council is “ eager to let them do what they’ve always done. And that’s why the economics are the way that are in the city.”
Joe Debro, president of Bay Area Black Builders, agrees that the unfair procedures are connected to city staff and their ties to big contacts.

“No matter what the council policy is, the staff does what it wants to do,” Debro said.  “This has been going on for the last 30 years or so. The politicians pass what are fair laws, but they don’t have any way to enforce them.”

The staff has all the information and controls the process, he said. Frequently, Debro said,  “They come in at the last minute (at City Council meetings), needing something passed that night, or they are going to lose the money next week. But they’ve known that for six months. “

Unfortunately, the influence of developer Phil Tagami and other large contactors on the process is the normal operating procedure, she said. “I’ve been saying consistently since I’ve come on the council. We have to make sure the playing field really is level, not just lip service.”

There will never be significant hiring of Oakland workers on projects as long as the city relies on big out-of-town contactors. Local hiring cannot be separated from ensuring that contracts go to small, local construction firms, she said.

According to Brooks, one way to improve opportunities for small firms would be to create self-insurance, bonding and an owner controlled insurance program (OCIP), all of which would reduce the amount of capital that companies must  take out of circulation for long periods of time to guarantee their job performance.

An important reform was putting all the Army Base project hires and where they live on the web, a policy that Brooks advocated.
Another significant reform has been the city’s prompt payment policy.  “If the city actually implemented that policy, which I wrote, small contractors wouldn’t have to carry the city while they wait to get paid,” said Brooks.

In examining the city’s record of offering contracts to small companies, it is important “to follow the dollars,” not just the numbers of companies, according to Brooks.

In one $14 million deal, the developer hired contractors for $10 million, and a “good percentage went to African American contractors,” she said. ”But it was only for a total of $160,000 out of $10 million worth of contracts.

“It’s not just the percentages of participation – let’s look at the distribution of the dollars and wealth.”