Denver City Council members are pushing for ordinance changes that would provide more protections for minority- and women-owned subcontractors to ensure they get paid what they’re owed by main contractors on city projects.
Councilman Wayne New has spent much of this year putting together the proposal, against some resistance from Mayor Michael Hancock’s administration, after meeting with small contractors. He said he heard accounts of having payments delayed by contractors for work the subcontractors had completed.
In some cases, the subcontractors were short-changed even when meeting the standards set by contract adjustments, he said.
“Cash flow is critical for these small companies,” New said. “That’s one of the big complaints: Even if they got paid correctly, it took them a while to get paid.”
The proposal would create additional payment requirements for contractors and payment-tracking by the city for the 829 businesses that were certified in the Minority and Women Business Enterprise program as of last year. The changes also would apply to the Small Business Enterprise program, for which the city listed 1,033 certified businesses, many of them overlapping with the MWBE program.
New and co-sponsors Debbie Ortega and Paul Kashmann are preparing to take their proposal to the council’s business committee for an initial briefing Oct. 18.
It’s likely the proposal will be met with some objections from main contractors. One of the biggest changes would require contractors to pay their subcontractors within 35 days after most work is completed — even if the city hasn’t paid the contractor yet.
“I’d be stunned if there’s no pushback,” Kashmann said. “And I get that — legislation is a tug of war at times.”
Among the business organizations consulted by New is the Associated General Contractors of Colorado. Attempts to reach Michael Gifford, the group’s president and CEO, last week were not successful.
There is other uncertainty about the proposal — including whether Hancock’s administration will back the proposed changes. Several could be accomplished through policy revisions rather than council action, but New said Hancock’s appointees haven’t agreed to them.
A statement issued Friday by the mayor’s office in response to questions about New’s proposal said administration officials “share the value of developing our minority and disadvantaged contractors, ensuring that they’re well supported and have the opportunity to be successful in the city.”
But the statement continues: “Any policy adjustments in this area must be evaluated carefully, to ensure that we do not create any barriers or unintended consequences. We look forward to working with City Council to put the best foot forward for our small businesses.”
Denver’s Office of Economic Development and its Division of Small Business Opportunity oversee the programs. The city doesn’t set contract quotas for minority participation, but it has worked on strategies to increase MWBE and SBE participation in city contracts, using a variety of mentorship programs and tactics to reach its goals.
In 2014, when the council approved the last major update to the ordinance, the city increased its MWBE goals to 24 percent of the value of construction contracts and 33 percent of the value of professional services contracts.
Last year, the city’s annual report said city contracting neared the targets — with 23 percent of construction payments going to MWBE-certified firms and 30 percent of professional services payments going to such firms.
A city consultant is beginning the most recent “disparity study” to evaluate the MWBE program and the city’s goals. Based on the study’s timeline, city officials have said they plan to propose updates to the minority contracting ordinance in 2019.
That’s too far away, Ortega said — especially given that the city is gearing up for a massive renovation of the terminal at Denver International Airport, the $1.1 billion National Western Center project and, if voters give their approval next month, a $937 million bond package that includes potential projects across the city.
“We can’t wait, because we have all these projects coming online,” Ortega said. “We want to get this cleaned up before we see all this work being done around the city — and will have all these same challenges and problems going on.”
The proposal also would mandate an evaluation of the small business office’s responsibilities and staffing, which the council members contend is insufficient.
Other proposed changes under the latest draft of the council proposal include:
- Prohibiting program-certified contractors from excluding subcontractors from performing project work awarded by the city if the subcontractor helped develop the contractor’s proposal.
- Requiring the city’s small-business office to create a form for subcontractors to report each month on change orders they have received, payments received and the percentage of work completed, among other information. The form would be modeled on one used by the Regional Transportation District.
- Requiring contractors to quickly pay retainage after work is completed, as long as there’s no claim against the subcontractor. Retainages are a percentage of the contract withheld by the city until all work is done to encourage good performance.
New and business groups for subcontractors say those with complaints are reluctant to make noise publicly, fearing retribution on future contract bids.
The retainage issue is important for many of the small companies that belong to the Hispanic Contractors of Colorado, an organization that now has a broader base of members beyond Hispanics.
“I have companies that have waited two years to get retainage,” said Helga Grunerud, the group’s executive director, who connected New with members. “From my businesses, from what I hear, this release of retainage is sometimes even more important than a timely payment on a project because of the fact that the retainage is out there so far. And then they don’t have the capital to pursue more work.”
Here is more information about the council proposal:
Denver’s 2016 annual report for the division of Small Business Opportunity:
