The State of Minority- and Women- Owned ... - Cleveland.com

The City of Cleveland’s Cleveland Small Business, Minority Business Enterprise, and
Female Business Enterprise Program: Overview and Feedback Interviews
While MBEs’ experiences often differed markedly from non-M/WBEs, one area of agreement
was the need to thoroughly eradicate the use of “front” firms or “passthrough” firms to create the
appearance of participation.
A lot of people in the room have used just a pass through.
There are cases too where we would get a project and give it to the MBE firm even
though they weren’t qualified to do everything in that task. And they then would go and
get somebody else to come in and do the stuff they couldn’t.
The City has, has cleaned up their act on fronts but they’re still alive and well out there. I
just think they’re getting a lot more educated on how, you know, people are getting
creative on this stuff.
The contractor had to buy the equipment from an FBE.… I had quoted him a price. I had
quoted her a price. I didn’t even know about her having to be involved.… She basically
marked on the, marked up and then I was just supposed to bill her. I handled all the
equipment. I handled everything direct to the contractor.… She never took delivery of the
equipment.… She was putting on ten percent.… We wound up walking away from that
job.… I just didn’t want to do business that way.
We’ve actually had to sub our equipment to a third party in order to get … the contractor
to buy it because they had to meet a certain goal. They were short on the rest of their
project.… So now our product which was awarded the contract has to be sold through an
MBE, FBE. And for merely accepting that fax and putting it through the machine on the
other side they, they’re taking ten percent.… That has happened several times.
We’ve dealt with this [type of supplier arrangement] now on four different jobs in the last
two years. And it’s never been the same company.
You look at the WBEs that they’re using and you look at the last names of the officers,
chances are all they did was create an offshoot company in the name of their spouse or
daughter or whoever it is.… That’s what the City is driving them [to], and saying this is
what you must have, and there in many cases are no legitimate entities out there, MBE,
FBE, whatever you’re trying to achieve. There are no legitimate entities out there that
have the size and the wherewithal to handle these projects. If your goal is 25 or 30
percent on some type of a construction contract and you got a 30 million dollar contract,
that’s a hell of a lot of money. And you can set up that little shell company with your
relatives in it because that’s a sizable contract.
You get passthroughs that are almost boiler room type operations where I don’t even
know if they have an office. They probably have a fax and a phone and that’s it.… I don’t
think it’s really what the City has in mind when they’re trying to further their goals.…
All that does is actually a negative effect by doing nothing more than adding ten percent
NERA Economic Consulting 308