The General Accounting Office reported yesterday that the District of Columbia's minority business opportunity program has given too much of its money to a handful of well-established firms and done little to improve the lot of struggling minority entrepreneurs who were the target of the city's ambitious, four-year-old minority contracting law.
Of some $39 million in minority contracts surveyed by the GAO last year, almost $30 million went to only nine of the 391 firms certified as minority contractors, the report said. Most of these firms already were relatively successful and the city contracts did "nothing to increase their business capability," GAO reported.
In addition, the report found that about $5 million was awarded to minority firms that lacked ability to carry out the task and who subsequently subcontracted the work to nonminority firms.
The report acknowledged that in total dollar amounts the city government surpassed the goal of the legislation, which sought to award 25 percent of all city contracts to minority firms. In the fiscal year ending last Sept. 30, a total of $68 million was given to minority firms -- 32 percent of the total money spent by the D.C. government on construction, procurement and services contracts.
However, the report concluded, "the majority of the recipients [surveyed by GAO] reported little or no business development, increased employment or expansion of the District's tax base," which the GAO said had been the intent of the legislation establishing the program.
Mayor Marion Barry, who took office in 1979 saying that promotion of minority business would be a top priority of his administration, declined to comment yesterday. A spokesman said the mayor had not read the report.
Courtland Cox, head of the city's Minority Business Opportunity Commission, which monitors the program and certifies firms eligible to participate, characterized the report as "a loose cannon rolling around on a ship."
He said he has strictly enforced the law, which requires him to ensure that the city sets aside a certain amount of its contracts for minorities regardless of the size of the firm. What the GAO is looking at, he said, is the intent of the legislation, which Cox said is not relevant since it is not explicitly stated in the law.
"I think they've made some fundamental mistakes in what they're looking at," Cox said.
"We are not looking at whether that company is needy or not. We are trying to provide minority firms access to the marketplace," he said. "The GAO wants to argue that's not enough. They want to say we should provide marketing and legal and other support. The law does not mandate, nor is that office structured, to deliver that kind of support service."
The GAO's findings regarding the city's program were similar to problems the congressional watchdog agency has reported finding in federal minority business development programs.
Cox said he does not support the practice of minority firms being, in effect conduits for nonminority firms. New legislation that took effect last September closed a loophole that permitted the practice to take place, he said. Now, all firms receiving contracts must perform at least 50 percent of the work. The case cited by the GAO stemmed from the earlier period, Cox said.
The GPO, however, said that at the conclusion of their field work last January no action had been taken under the new legislation. In the approximately six months between the time the new law became effective and the end of their field work, the GPO report said, "contracts have been awarded firms that are subcontracting the entire work to nonminority firms."
As an example, the report cited an award for supplying and delivering margarine and shortening for $35,000 that was made on Oct. 3, 1980, to two firms, one of which said it would subcontract the entire contract requirement to a nonminority firm.
As late as last November, top city officials appeared to be unaware of the new law, the report said.
GAO surveyed contracts awarded to the leading 25 minority firms that had done business with the city. Of those firms, 13 reported no increase in their business capability, 11 said there had been no increase in minority employment and 17 said that their business taxes either did not increase or increased only marginally.
The GAO concluded that this was due to disorganization within the city commission over program goals, and recommended that "decisions are needed on the future direction of the program if minority businesses are to gain a toehold in the competitive marketplace."
Arrington Dixon, chariman of the City Council, said last night he had not seen the report either, but that he generally supported the GAO's view that the intent of the legislation should be implemented, rather than Cox's view that only the law verbatim is germane.
"But that is not meant to be an indictment of the proper application of the law by Mr. Cox, because I know him and I know he would support the law," Dixon said.
The GAO report also found that "officials of the minority business enterprises we interviewed all expressed concern over slowness of contract award notification, purchases falling short of the estimated contract quantities, and consistent late payments."
The businessmen particularly were troubled by the fact that the District government is taking one to six months from the date of invoice to pay the minority businessmen, the report said. This cause the businessmen hardship because of loss of working capital, and the credit and interest costs they incur.
The GAO also criticized the city for a weak certification process, charging that 10 of 70 minority firms whose qualifications were reviewed by the GAO were found to be ineligible and that 68 were certified even though they did not submit the information that is needed by the commission to determine the eligibility of the applicant.
Most of the files revealed that there had been no substantiation of information supplied by the applicants, and the GAO could find no one responsible for performing this task.
The report also noted that, even though Distinct law allows contracts to be rejected for "excessive" costs, no one has determined what constitutes an "excessive" cost.
In some cases, the District is paying substantially more for the minority contracts than if they were offered on the open market. Six of the minority contracts that the GAO studied cost the city $2 million more than if they had not been sheltered, the report said, yet no one had determined if any of this cost was excessive.
In some of these instances, Cox acknowledged problems and said he was moving to correct them, the report said, and in other instances he did not respond to the GAO findings.
The report did not identify any firms by name, and GAO associate administrator Art Goldbeck said no names would be released without the permission of the city. Cox said that he did not know the names of some of the firms referred to in the 51-page report.
For years, city officials have championed the intent of the legislation. They saw it as a way of remedying past practices under which minority businessmen in a city that is 70 percent black received a disproportionate small share of the the city's contracting dollars and, according to the City Council, were hampered in their development by racial discrimination.