New Orleans Mayor Landrieu orders sweeping reforms of city contractingBy Cheryl Hentz
For years, a myriad of problems have been reported with contracting in the city of New Orleans, including claims of corruption, patronage, and overspending. In addition, the city’s program for directing contracting opportunities to Disadvantaged Businesses Enterprises (DBEs) has long been criticized as poorly organized and ineffective. That is set to change – the result of executive orders recently signed by the city’s new mayor, Mitch Landrieu.
During a June 3 press conference, Landrieu unveiled and signed several Executive Orders that enact sweeping reforms of city contracting procedures.
“With these Executive Orders, we are fundamentally changing the way business is done at City Hall and taking a major step forward in restoring the public trust,” said Landrieu during the press conference. “New Orleans deserves an open and honest government. That’s why I am putting processes in place that will help us spend tax dollars wisely and encourage a more robust local economy.”
Highlights of the Executive Orders include:
• Establishing a Chief Procurement Officer, who is an experienced professional in large-scale public procurement
• Removing the Mayor from the selection process
• Creating a Provisional Certification Program to expand the pool of DBEs that can immediately compete for city business
• Commissioning a disparity study to determine the gap that exists between the availability of DBEs and the utilization of such businesses by the city
• Requiring on-going disclosure of subcontractors
• All documents, including evaluations of selection committee, are public
• Institutionalizing the role of the Inspector General in the contracting process
The first Executive Order significantly expands opportunities for Disadvantaged Business Enterprises (DBEs). It establishes a Provisional Certification Program for DBEs, which will immediately open the door for hundreds of additional businesses, which are currently certified by selected state and quasi-city agencies, to compete for city business. It also creates an advisory committee to reform and strengthen the city’s DBE program; creates a contract review committee for procurements; commissions a disparity study; and explores the creation of a surety fund for the bonding of DBE’s.
“The actions taken today by the Mayor indicate that we need to be more effective in building capacity within local small businesses, which are vital to a strong and enduring local economy,” said Charles Teamer, chairman of the board of Dryades Savings Bank and the New Orleans Chamber of Commerce and co-chair of the Transition New Orleans City Contracting and DBE Task Force during the press conference. “The disparity study will provide hard facts and data to guide efforts to build a more inclusive and effective DBE program. Money is not black or white, but green.”
“With these reforms, the procurement process does not end with the award of a contract, but continues with monitoring and accountability,” said Daniel Davillier, Chairman of the New Orleans Regional Black Chamber of Commerce. “For DBEs, that means when they are promised work by a contractor, Mayor Landrieu and his team will guarantee they get that work or the contractor will be penalized.“
The second Executive Order establishes a central Procurement Office, housed in the Department of Finance and headed by a Chief Procurement Officer (CPO). The Procurement Officer will be a professional with a minimum of five years of experience in large scale procurement and will hold an advanced procurement certification. “These reforms establish the foundation for open and transparent selection processes, and for the follow-up accountability, to allow all city contractors and suppliers to understand the performance criteria and ensure the government gets the best value when spending taxpayer dollars,” said Jay Lapeyre, president of Laitram, LLC, and co-chair of the Transition New Orleans City Contracting & DBE Task Force. “This also enables the local small and DBE business development critical to a healthy local economy.”
A key aspect of the entire reform package was the involvement of the Inspector General in the procurement process, ensuring unprecedented transparency on contracting matters. The Chief Procurement Officer will be required to notify the OIG at the commencement of each procurement to ensure that the OIG receives all necessary information to carry out its charter-mandated functions. The OIG will also review the standardized RFP and RFQ templates annually.
“The mission of the Office of Inspector General is to prevent and detect fraud as well as promote efficient and effective government,” said Inspector General Ed Quatrevaux. “The best way to prevent major fraud is to instill integrity and openness in the contracting process, and this policy is a huge step forward for every citizen of New Orleans. At Mayor Landrieu’s request, the OIG examined practices in other cities and made recommendations about the process and mechanisms to ensure fair, open and honest competition.”
The third Executive Order outlines the competitive selection procedure the CPO will use for the procurement and awarding of professional service contracts, including setting advertising standards and developing standardized Request for Proposals (RFPs) and Request for Qualifications (RFQs). It also sets guidelines for the establishment of Selection Committees with subject-matter expertise.
The final Executive Order creates a Director of Supplier Diversity to oversee the rebuilding of the DBE program. The Director of Supplier Diversity will develop and implement a model supplier and contractor diversity program that incorporates national best practices. The Director will also be mandated to meet regularly with bank leaders, community development financial institutions and other financial entities to seek resources to support DBEs.
Following the press conference, Gregory St. Etienne, deputy mayor of operations for the City of New Orleans, spoke in greater detail about the reforms with the Louisiana Business Journal. But he also spoke about why the reforms were necessary, saying the previous system was broken and dysfunctional.
“The last administration instituted a system that attempted to be race and gender neutral, and they had a (lengthy questionnaire) that tried to establish different ways that an individual could have been or was disadvantaged or discriminated against somewhere in their life, or in their business,” he said, adding that the applications would then be reviewed by a panel of university administrators who would decide whether the applicant was truly disadvantaged.
“It was a very cumbersome process, to say the least, and very few business owners participated because they thought it was too detailed, too qualitative in a way and asked irrelevant questions. The process dissuaded participation (even though there are many small and minority-owned businesses in the city) who fit the description. And although small in size per business, we have a number of them,” St. Etienne said.
“In addition to that, there was only one individual assigned to process all applications, monitor all applications, monitor contracts, monitor performance, and so forth. That person was ill-equipped to get that job done and as a result we had applicants who waited in queue for months before their application was processed. So the reputation was soured,” he continued. “It was as if the administration at the time did not want to have businesses certified; the contracting process did not include any sort of reviews pr enforcement following the evaluations, etc. So it was not a functioning system.”
Last summer the New Orleans City Council president introduced an ordinance which established goals of 50 percent for local participation and 35 percent for minority participation. It was nice statement for him to make but they were goals without enforcement, said St. Etienne.
“As different mayors have come and gone in the past, we’ve had four or five Executive Orders in the past that tried to emphasize the importance of having full participation and inclusion in the contracting process,” he said. “But none had real enforcement and none put real money into staffing to make sure that folks understood the process, were helped during the process and were evaluated after contracts were let. So all these different elements caused a break down.”
Under the Landrieu administration – which has adopted a slogan of “One fight. One team. One voice. One city,” it is expected things will be different.
“The mayor has talked about building capacity, and he means not just within the walls of City Hall – which is a big emphasis for us – but also within our city borders. That means we have to focus on directing the many millions of dollars that we spend every year plus the new reconstruction or recreating dollars as we rebuild our city to help build the capacity of our businesses. Our policy should say that a local business which has similar skills and abilities with good value to their proposal should have an edge over people who come from Timbuktu. And we should practice that policy,” said St. Etienne. “Knowing how business owners think, if I saw that in action and I lived in Timbuktu but wanted to get some business out of New Orleans, I would think maybe I should open an office in New Orleans and hire some New Orleans people so I can compete and get favorable consideration because I’m now a New Orleanian. Growing our business community means we grow our tax revenue and consumer spending instead of having monies leave and go to Tennessee, or Seattle, or wherever. It’s not just about a social correction. It’s an economic development strategy. The more folks we can grow, the more folks who can grow our city.”
Landrieu’s office hopes to have a full set of policies developed and implemented by the end of the summer. Ads for the two positions being created will be placed right away and some aspects of the reform program can be implemented right away, things such as utilizing a different certification process for DBEs and rewriting their evaluation criteria to give some sort of preference to small local businesses.
“We have to be careful to be litigation proof because that would stall our efforts. But I think just because of the situation we don’t have to necessarily focus on gender and race,” said St. Etienne. “We can say ‘We want local, small businesses to be the preferred vendor where the capability and the value are demonstrated.’”
Any time there is this kind of sweeping and necessary legislation, there is a voice of opposition from those who don’t want to give up any of their pieces of the pie. But St. Etienne suspects that initially there will be no meaningful reaction to these reforms from the prime contractors and others who are accustomed to getting the majority of the contracts.
“It’ll be a ‘wait and see’ kind of thing. I think if we push for race and gender-focused programming, there will be some push back,” he said. “If you take the usual objections, then you can tackle them one at a time…But as long as we’re not race- and gender-focused, I think we’ll be okay.”
So what happens if once the reforms are in place a contractor blatantly violates the terms or spirit of the executive orders?
“If a contractor doesn’t want to play ball by our rules, then they can go play somewhere else. Our initial concern was that a contractor would say they were going to do something and then after getting the award do something totally different. For that situation, we want to make sure we’re monitoring the awarded contracts, we post online the subs they said they were going to use so everybody can see it and then we have people check to see if those subs were actually used,” said St. Etienne. “This is going to be an active department…If we find something like that has happened, payments can be withheld or there can be some other kind of financial penalty. We’ll have rules built into the contract about those things.”
It’s important to set everything up right but it’s also important to move expeditiously because they have a large amount of construction work upon them.
“Those dollars are still a result from Katrina and they’ll be spurring that side of the economic equation. Unfortunately the oil spill is going to suck out some of the services side of our economy. I think we’ll see negative impact on our convention traffic and tourism. That will have a negative impact on our hotel and restaurant industry, and that will have a negative impact on revenues that come to the city,” said St. Etienne. “So we’ll have positive on the construction side, but this BP thing is nothing but a negative. And you can’t even estimate the damage on the environmental side – it is tremendous.”
To develop its recommendations, the Transition New Orleans City Contracting & DBE Task Force consulted with experts from around the nation, examined best practices in other cities and shared expertise regarding contracting issues. The Task Force also held a public hearing on the evening of April 14 to engage the citizens of New Orleans in the process.
“So what the task force has already started to do, giving us a good blueprint, is to evaluate some of the best practices, both at the corporate level and at the government level, to see how we can get an effective and efficient system in place that does not alienate any segment of the community, while at the same time promoting inclusion,” concluded St. Etienne.
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