Contract awarded to friend of Fenty's included fee that may mean extra $700,000
Thursday, April 15, 2010
The job was to oversee a $50 million renovation of D.C. parks and recreation centers, and a friend and fraternity brother of Mayor Adrian M. Fenty's (D) was picked to manage the project. It was a lucrative prize for Fenty's friend, Omar Karim: Not only did his company receive a $4.2 million management fee, but it also got an unusual second fee that procurement experts say is generous and unorthodox in a public project.
The "consultant's markup" gave Karim's firm, Banneker Ventures, 9 percent of fees charged by each subcontractor working on the parks projects. The extra fee could add more than $700,000 to Banneker's earnings.
Fenty's aides call the arrangement "standard." But when Bill Slover, then chairman of the D.C. Housing Authority's board, learned of the additional fee in the fall, he called a special meeting of the board that oversaw the parks project. He urged the panel to halt Banneker's work and withdraw from supervising the project.
Deputy Mayor Valerie Santos, who serves on the housing board, immediately implored Slover not to delay the project. But Slover charged ahead: The Housing Authority issued the stop-work order Nov. 20. That same day, according to Slover, Tracy Sandler, who oversaw the mayor's appointments to boards and commissions, called to inform Slover that Fenty was removing him seven months after having appointed him chair.
Slover said he was given no reason. "I didn't ask. I knew," he said. "I haven't heard from them since."
Since the fall, the mayor and his aides have faced questions about D.C. contracts granted to a cluster of Fenty's friends. The D.C. Council is investigating the awards of the parks contracts to Karim's firm, questioning both the selection of Banneker and a deal some members called generous. The council canceled Banneker's contract in December and appointed a special counsel last month to determine whether Fenty's team showed favoritism in the contract awards.
The questions about contracts come as Fenty begins a reelection campaign in which his critics argue that a mayor elected as a populist reformer has run an administration that has enriched some of his friends. Fenty said that he has stayed out of decisions involving his friends and that those contracts amount to a tiny portion of the city's business.
The mayor and his advisers said they stayed within industry standards for compensation in crafting Banneker's deal. "I am extremely comfortable and confident with the fees that were negotiated," David Jannarone, who supervised negotiations with Banneker as the city's director of development, told the council. "They're well within market. I have no hesitation with the deal."
But administration officials have been unable to cite an example in which a project management team not involving Banneker has been awarded a flat fee plus a markup on subcontractors' charges.
Karim declined to comment for this article; he told the council that Banneker Ventures' "fee is very reasonable."
The unusual markup granted to Banneker meant that if a subcontractor such as Liberty Engineering charged $30,020 for a survey, as it did in November, Banneker collected 9 percent of that charge, or $2,701. With more than a dozen subcontractors working on the parks, the fee was expected to add $744,000 to Banneker's base fee of $4.2 million, Jannarone testified.
City officials say the markup is a way to compensate Banneker for taking responsibility for the subcontractors' work. Santos told the council that the 9 percent markup is "fairly standard industry practice" and gives a project manager incentive "to make sure that all subs are performing at the highest levels." But not everyone in the administration thought the Banneker contract was reasonable. In a meeting with Fenty in December, Allen Y. Lew, executive director of the District's public school renovation program, complained that Banneker's fees were "outrageous," according to a source with direct knowledge of the discussion. After the council canceled Banneker's contract, the mayor reassigned the parks project to Lew's agency, which replaced Banneker with a new firm. Lew, who declined to comment for this report, paid the new project manager a flat fee with no markup.