Greg R. Lawson, Research Fellow at The Buckeye Institute
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Dayton officials argue the program is a valuable economic development tool that gives smaller companies a leg-up after two consecutive city-funded studies have shown that local minority- and women-owned businesses are under used.
Small businesses face challenges, including lack of leverage in buying power and access to capital and networks, said Erica Fields, executive director of the Human Relations Council. The city’s goal is to give those businesses an opportunity to succeed and to grow, she said.
To do that the city sets aspirational goals — not quotas — for larger contractors to use certified Minority Business Enterprise, Women’s Business Enterprise, Dayton Local Small Business Enterprise and Small Business Enterprise companies for a portion of contracts. That’s known as the Procurement Enhancement Plan or PEP.
Erica Fields, executive director Dayton Human Relations Council. CONTRIBUTED
The city also certifies companies for similar federal programs and follows those rules for federally funded projects like those at the Dayton International Airport.
In 2018 PEP-certified companies received more than $6.2 million worth of contracts or subcontracts out of nearly $47 million in PEP-eligible construction, demolition, repaving and other city public works projects, according to Chrisondra Goodwine, contract compliance officer for the Human Relations Council.
Supporting and enhancing small businesses is an important role of government, Dayton City Manager Shelley Dickstein said. Encouraging a diverse pool of contract bidders helps taxpayers get the best value, she also said.
“We know that in the city of Dayton we are a community of small businesses,” Dickstein said.
Dayton City Manager Shelley Dickstein. CORNELIUS FROLIK / STAFF
The city’s small business contracting figured in at least two of four federal indictments announced on April 30 as part of what prosecutors say is ongoing investigation into corruption in the Dayton region.
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Joey D. Williams, 53, was indicted on a count of corruptly soliciting a bribe when he was a Dayton city commissioner. Williams is accused of taking more than $50,000 in money and benefits from an unnamed individual in 2015 in exchange for using his influence to get the city and CityWide Development Corp. to award them contracts. Williams pleaded not guilty. That indictment makes no reference to the disadvantaged small business programs.
Dayton businessman Brian Higgins, 48, was indicted on three counts of mail fraud and one of wire fraud for allegedly defrauding an insurance company in 2014 and 2015 with a claim involving a leaking fish tank that damaged his home.
Higgins, who pleaded not guilty, has not held public office. But his GSSP Enterprises had a contract to haul bodies for the Montgomery County Coroner’s office from 1996 until 2012, when the contract was terminated after a Dayton Daily News investigation found he had unpaid taxes and a business relationship with the coroner’s office director.
Brian Higgins, owner of GSSP Enterprise Inc., in his Dayton office on 130 West Second Street.
The other two indictments were directly related to the city’s disadvantaged small business contracting programs.
Former state Rep. Clayton Luckie, 56, of Dayton, was indicted on one count each of wire and mail fraud. On July 2 he pleaded guilty to mail fraud. Federal prosecutors agreed to drop the other charge and recommend probation. Luckie is scheduled to be sentenced Nov. 15.
Luckie used an affiliation with an unnamed disadvantaged business to assist a local demolition company fraudulently complete projects that required minority-owned business participation, according to a statement of facts Luckie signed with his plea agreement.
The disadvantaged company did not actually do the work. Luckie accepted $2,000 from the unnamed demolition company, created fake invoices and bought magnetic signs to put on the demolition company’s trucks to make it appear that a disadvantaged firm was on the job site in case city inspectors checked, according to the statement of facts.
Clayton Luckie, a former state representative, agreed to plead guilty to one count of mail fraud in a scheme to defraud the city of Dayton’s Minority Business Enterprise contracting program.
Also indicted was RoShawn Winburn, 45, who was hired by the city in 2014. He alternately worked as the Human Relations Council’s business and technical assistance administrator and as director of the regional Minority Business Assistance Center, which the council hosts for the state, using city employees and a state grant.
Winburn, who previously served on the Huber Heights City Council, pleaded not guilty to three counts of honest services wire fraud, two counts of corruptly soliciting a bribe and one count of making a false statement to the FBI.
The city fired him May 3, a decision he has appealed to the city’s Civil Service Board. His attorney declined comment.
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The indictment alleges Winburn solicited and accepted more than $20,000 in cash from individuals and companies between 2014 and 2017. In return, Winburn allegedly provided PEP and other minority and small-business certifications without performing complete verification of qualifications.
He’s also accused of disclosing confidential information on upcoming projects and influencing city employees to not fully sanction those who failed to comply with contractual obligations.
None of the indictments name the companies involved. City officials say they either do not know or cannot say which companies the indictments reference. Citing the ongoing federal investigation, Fields, Dickstein and City Law Director Barbara Doseck declined to comment on the allegations but said multiple efforts are underway to ferret out and prevent wrongdoing in city offices.
Any organization can have “employees who engage in criminal activity,” Doseck said. “I’m cognizant as an attorney of the inability to create policy that stops a criminal intent. So there has to be a very thoughtful review that considers having strong policy that works and understanding that even the strongest policy is not going to always stop bad actors.”
In the wake of the indictments the city retained Green & Green Lawyers of Dayton to do an internal investigation. The city also is doing a comprehensive audit of its procurement process, and expanding training on procurement and ethics. Once the internal investigation and audit are complete, Fields hopes to hire a consultant to assist with implementation of those recommendations.
It also will soon roll out an employee whistle-blower program that was in the works before the indictments were unsealed, Dickstein said.
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Ohio Auditor Keith Faber said he could not comment on the federal investigation. But as the city looks to tighten its processes, he said transparency is the best way to prevent fraud and corruption in government.
“Having people watch what’s going on, watch the transaction, know what the transactions are. If transactions look too cozy and too sweetheart, that you have too many closely affiliated people getting certain lines of work — almost to the exclusion of other people — generally those can be some red flags,” Faber said. “But sunshine is a great disinfectant.”
Fields said her department has struggled to stay fully staffed in recent years. In the wake of Winburn’s firing, she contracted with Lynn Donaldson, a retired city deputy law director, to review bids and PEP certification. Consultant Adrienne L. Heard of Trotwood was brought on at the Minority Business Assistance Center and a new director will be hired.
The business center is one of seven regional centers the state operates through the Ohio Department of Development Services. It gives free assistance to minority, women and small businesses in Montgomery, Greene, Clark, Darke, Preble, Mercer, Auglaize, Shelby, Logan, Champaign, Madison and Miami counties.
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Winburn headed the minority business center twice, first for a year after he was hired in 2014 and then from 2016 to until early April, when he was promoted to the business and technical assistance administrator.
Former city of Dayton employee RoShawn Winburn, 45, was indicted on federal corruption charges in September 2018 and his indictement was unsealed in April. In May he was fired from his job with the city of Dayton’s Human Relations Council. Winburn served as the HRC business and technical assistance administrator and earlier had been director of the state’s regional Minority Business Assistance Center, hosted by the HRC.
He’d previously held the administrator job from February 2015 to the summer of 2016, and in that position was directly involved in reviewing requests for bids, setting PEP goals and certification of small businesses. The business center is not involved in any of those functions, according to Fields. But the indictment says Winburn was in the MBAC role when he allegedly committed the crimes outlined in the indictment.
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Normally the PEP process involves multiple people, Fields said, but there were periods when her office was short-staffed. In those times, she said, employees like Winburn might have done tasks they normally did not do.
“Fully staffed, there are checks and balances that are built into the process so that the administrator is not doing this solely on their own,” Fields said. “They actually just sign off on it. They actually are not supposed to be doing the certification.”
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Dayton has seen a steady increase in the number of PEP companies winning public works contracts. In 2016 about 16 PEP companies won contracts or subcontracts. The next year 21 received awards, and last year 38 did, eight of which served as the main contractor on a project.
A few companies have “graduated” from the program, Fields said, growing so much they no longer financially qualify.
John Scott, president of Bladecutters Inc. The company tearing down houses for the Montgomery County Land Bank and also does work for the city of Dayton. The company is a small business that is certified through the U.S. Housing and Urban Development to participate in public contracting programs. Until recently it was certified in Dayton as a Women’s Business Enterprise but has outgrown that program because it has been so successful, which is one of the goals of these programs designed to help disadvantaged small businesses become more successful. This house at 720 La Salle Dr. in Dayton was taken down last week. TY GREENLEES / STAFF
One such company is Bladecutters Inc. of Harrison Twp. Founded in 1987, the company started out mowing and landscaping but in 2008 began demolishing houses. It now does that work mostly for the city and Montgomery County Land Bank, said John Scott, founder and president.
Ten years ago his wife, Laura Luft-Scott, became the owner and the firm was certified as a women-owned business. It also has a federal certification that requires it to hire people from economically disadvantaged areas, Scott said.
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The company grew from being a subcontractor on landscaping jobs to being the prime contractor on demolition projects. It started out with seven employees and now has 45, Scott said, and revenues have increased by 300 percent since 2007. Because of its growth the company is no longer eligible for the city’s PEP program.
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“We started with one track hoe and one dump truck. Now we are at 10 track hoes, 10 dump trucks, mini-bobcats and loaders and a lot of other equipment,” Scott said.
He praised the city’s small business contracting program.
“They serve a good purpose,” he said. “They help small companies out. They helped us out.”
How the program works
The Procurement Enhancement Plan is just one of the tasks assigned to the Human Relations Council, which was established by the Dayton City Commission in 1962 and has a commission-appointed volunteer board that sets policy. The council also enforces civil rights and anti-discrimination ordinances. And it is involved in community relations initiatives like the Welcome Dayton immigrant integration efforts and the Community-Police Council.
State, federal and local governments also have a variety of programs that set goals for small and disadvantaged businesses to get shares of public contracts. The city must comply with those rules on federal- and state-funded projects, such as roadwork or airport construction.
In the 1980s the U.S. Supreme Court invalidated programs that set quotas, and Dayton’s program was overturned in 1989.
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To pass constitutional muster, Dayton must do disparity studies to determine if certain types of companies are underused in the market. The last study was done in 2008 and has expired. A new one is nearly complete, said John Musto, chief trial counsel for the city.
The contracting process begins with technical specifications drawn up by the requesting department, Musto said, and an engineer’s cost estimate that remains secret until bids are opened. The Human Relations Council staff members review the project to come up with specific PEP goals for it, based on broad participation goals established by the disparity study, an annual review of the current market, research on what kinds of companies are actually available to do the work and other factors.
Contractors submit sealed bids that include names of small companies that will do some of the work or request a waiver if they cannot meet the goals. HRC reviews the waiver requests. Contracts are awarded to the lowest and best bidder, a criteria that includes meeting the small business participation goals but also considers the overall cost, the company’s qualifications and how the bid compares to others.
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The broad PEP goal is that 26 percent of construction, demolition, paving and other public works contracts should go to certified small businesses, according to the HRC 2018 first quarter report. Within that larger goal, the city aims for 15 percent of them to be minority-owned, 5 percent women-owned and 6.5 percent Dayton local small businesses. The city does not require that each of those categories be met in every contract, Fields said.
“Each individual project goal is going to look different based on the needs of that project. The hope is that the cumulative effect will reach that annual and aspirational goal,” Fields said, adding that, with some exceptions, the city typically meets or exceeds its annual goals.
Fields believes that program is an effective way to address racism and discrimination and hopes that the program doesn’t suffer in the wake of the indictments.
Even if allegations of wrongdoing prove true, “that doesn’t speak to and it shouldn’t speak to the quality of the program and the impact of the program,” Fields said.
“I would hate to think that people want to restructure or remove the program because of an isolated incident,” she said. “That would be unfortunate.”
City of Dayton Procurement Enhancement Plan program
The city's PEP sets goals for small, minority-owned and women-owned business participation in construction, demolition, repaving and other city public works projects
|Eligible project total contract award***||Small Business Enterprise||Minority Business Enterprise||Women's Business Enterprise ||Dayton Local Small Business Enterprise |
|2018|| $48,206,738 || || || || |
|PEP category award*|| || $6,748,943 || $5,784,801 || $1,446,202 || $3,615,505 |
|PEP category percent of award **|| ||14%||12%||3%||7.5%|
|PEP category goal || ||26%||15%||5%||6.5%|
|2017|| $29,145,000 || || || || |
|PEP category award*|| || $6,703,350 || $4,371,750 || $3,788,850 || $2,331,600 |
|PEP category percent of award|| ||23%||15%||13%||8%|
|PEP category goal || ||25.5%||15%||5%||5.5%|
|2016|| $20,444,025 || || || || |
|PEP category award*|| || $4,351,754 || $4,129,199 || $2,478,993 || $779,081 |
|PEP category percent of award || ||21%||20%||12%||4%|
|PEP category goal || ||20%||10%||5%||9%|
|2015|| $25,352,379 || || || || |
|PEP category award*|| || $5,757,616 || $3,535,956 || $1,205,935 || $1,813,204 |
|PEP category percent of award|| ||23%||14%||5%||7%|
|PEP category goal || ||15%||9%||5%||10%|
|2014|| $27,495,360 || || || || |
|PEP category award*|| || $4,186,965 || $2,087,444 || $1,007,410 || $2,907,507 |
|PEP category percent of award|| ||15%||8%||4%||11%|
|PEP category goal || ||15%||9%||5%||8%|
Notes: * Individual contract awards can meet more than one goal. For example, all companies certified by PEP are Small Business Enterprise firms. Dollar amounts for PEP categories can include double counting and so categories should not be added together.
**2018 includes a $17 million project with relatively low 8 percent MBA goal, an outlier that city officials said helped keep the city from reaching its annual goals.
***For a variety of reasons not every city project has PEP goals and those awards amounts do not appear here.
Source: City of Dayton Human Relations Council
|How to spot fraud and theft in government offices|
|Ohio Auditor Keith Faber said there are "red flags" that could be signs of fraud, which can be reported by calling his Fraud Hotline at 866-FraudOH or emailing firstname.lastname@example.org|
| Employee lifestyle changes such as owning expensive cars, jewelry, homes or clothes.|
| Refusing to take a vacation or sick leave.|
| Poorly defined job duties and inadequate monitoring.|
| Excessive and/or unauthorized voided receipts.|
| Inordinate volume of manual checks.|
| Unsupported financial transactions or adjusted journal entries.|
| Photocopied or missing documents.|
|Source: Ohio Auditor's office|
|City of Dayton Procurement Enhancement Plan|
|All companies must meet Small Business Enterprise rules|
|Owner's maximum personal net worth - $750,000|
|Employees - maximum 99|
|Minority Business Enterprise ownership - at least 51% African-American, Black American, Hispanic American, Asian American or Native American|
|Women's Business Enterprise ownership - at least 51 percent female|
|Dayton Local Small Business - located in Dayton and meets annual gross receipts limits|
|For more information see daytonhrc.org or call (937) 333-1413|
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STAYING WITH THE STORY
The Dayton Daily News first broke the news about a federal investigation into corruption in Dayton. The newspaper will continue to dig into this important story to find out what’s really going on. If you have tips or any information on this investigation, please call or email Lynn Hulsey at 937-225-7455 or email@example.com. or Josh Sweigart at 937-328-0374 or Josh.Sweigart@coxinc.com.