The new Washington Convention Center, a showpiece for Mayor Marion Barry's efforts to increase minority entrepreneurship, is scheduled to open its doors in January with the largest service contract held by a white-controlled joint venture.
The award of the $20 million to $40 million exclusive food services contract illustrates some of the pitfalls and ironies of Barry's aggressive and sometimes controversial minority contracting program, which has been a boost to minority businessmen and enhanced Barry's political popularity.
His administration took extraordinary steps to direct the 10-year contract to a black-owned firm, and the convention center board initially chose three black businessmen.
But the board canceled that award in August after, officials said, financing could not be secured as promptly as it had hoped. With the deadline for the January opening approaching, the board selected a joint venture controlled by Sportservice Corp., a white-owned firm based in Buffalo.
Only later did the public-image conscious board learn that Sportservice's parent firm had been convicted in 1972 on a federal conspiracy charge involving a loan to two Detroit Mafia figures.
The board was assured that the 10-year-old conviction had no bearing on the company's current operations, which include food concessions at professional sports arenas, convention centers and various airports, including National Airport. In September, the contract was signed.
Largely because of the delay in awarding the contract, the center's kitchen will not be in operation until next spring--a blemish on the Barry administration's pledge to open the $98.7 million center on time and within budget. Hot food will be trucked in until then.
"Some may argue that the staff and board waited too long before dropping the minority contractors ," said Michael C. Rogers, the deputy convention center manager and the official in charge of the contract. But, he said, referring to the three black businessmen, "working with those guys, day after day, it wasn't as if they weren't working hard and just sitting on their duffs."
The city's effort on the food service contract proved to be a gamble. No minority-controlled firm has operated a major convention center food service. Moreover, in this case, the vendor, not the convention center, was required to raise the $2.4 million to $3 million needed to build and equip he center's kitchen. Few, if any, small food companies could be expected to easily raise so much money, especially in times of high interest rates.
Since becoming mayor in 1979, Barry has made a special effort to reverse past D.C. government practices of awarding most contracts in the predominantly black city to white-controlled firms.
The city's minority contracting program was designed in part to eventually place minority businesses on equal footing with others by providing them with often elusive experience in handling major government contracts.
Courtland V. Cox, special assistant to Barry and one of the chief architects of the plan to give the food service contract to minorities, said recently the unsuccessful effort signaled the government's commitment to minority economic development.
"It was a hell of a hill to climb, but I think it's a hill that could have been climbed," Cox said. "We've raised expectations that it's something within the realm of possibility." Others involved with the contract said it was unrealistic to expect small, inexperienced firms to come up with the necessary start-up capital. The contract calls for the vendor to build and equip the kitchen, cater convention banquets and operate a cocktail lounge, cafeteria and concession stands.
Michael Waters, a black businessman whose Rockville catering firm owns 25 percent of the joint venture with Sportservice, said he doubted any local black catering firm could have handled the contract on its own. "It would have been unwise to try to bite that bullet alone," said Waters, vice president of the family-owned Waters Catering Service Inc. who also teaches hotel management at Cornell University.
Marie C. Barksdale, a convention board member who strongly backed the mayor's minority-contracting policies, said she agreed with the board's decision to drop the minority contractors. "I would not put minority participation above a successful food-service operation," she said.
The center, located on New York Avenue between Ninth and 11th Streets NW and scheduled to host its first convention Jan. 5, is a centerpiece of Barry's efforts to boost the city's downtown economy and hotel industry. Minorities have received nearly half the center's $3.2 million in nonconstruction contracts.
Cox first raised the idea of earmarking the food service contract for minority firms in early 1981, after, he said recently, talking to several local black food service operators. At the time, he was executive director of the D.C. Minority Business Opportunity Commission, which monitors and coordinates minority contracting in city government.
The board decided to comply with his recommendation, but without taking a formal vote, according to Rogers. Instead, Rogers said, he and convention center general manager George W. Demarest Jr. made the decision after consulting with Cox, board chairman Edward A. Singletary and Carroll B. Harvey, who was then the director of the D.C. Department of General Services.
In all, five groups bid on the contract the first time around, including a firm headed by black businessman Arthur McZier, and a joint venture consisting of Carthur Drake and William Dickerson, which had retained former mayor Walter E. Washington as a counsel.
McZier, who was a member of Barry's reelection finance committee, has food service contracts with two military bases. Drake is the former owner of a downtown restaurant, the Barn-Cue, and former part owner of two discos here. Dickerson is president of a food service company in New Orleans. He gave $2,000 to Barry's reelection campaign.
A six-member evaluation panel rated McZier's bid and the one submitted by Drake and Dickerson as the top two. Sportservice-Waters, the only bid involving a major, national food service company, was ranked fourth--primarily because it was only 51 percent minority controlled and offered a lower rate of return for the city, according to Rogers.
But concerns voiced by board members and staff that neither of the top two bidders could individually finance the deal prompted the top two competitors to take the unusual step of joining forces and submitting a new joint proposal.
The convention center board approved the McZier-Dickerson-Drake joint venture, partly on the strength of an endorsement of the arrangement by Szabo Food Service Inc., retained by the board as a consultant.
Dickerson said recently that Cox encouraged the three men to form the joint venture. At a meeting in December 1981, according to Dickerson, Cox told the businessmen that it was "too bad" blacks could not work together and that it would be much better if all the minority firms came together.
Cox denied last week that he encouraged the joint venture. "He [Dickerson] might have asked me and I didn't oppose it, but I didn't come to him and say it was a good idea," Cox said.
The proposed arrangement was unusual enough to prompt board members to seek a legal opinion from general counsel David Wilmot, who advised that it was permissible.
The joint venture repeatedly missed deadlines the board set to line up long-term financing, according to convention center officials. Their troubles were in part due to the refusal of several area banks to loan money to a venture with no track record in the field unless the city guaranteed repayment--something city officials said they could not do.
Although the businessmen said they were close to nailing down the long-term financing, the deal collapsed last July after Drake withdrew his one-third share of the $500,000 in operating capital that the joint venture had been told by the board to deposit in a local bank.
"We had the deal, but we blew it. It's that simple," explained McZier.
Drake said he pulled his money out because it was not a good business practice to leave the funds in a non-interest-bearing account. Dickerson said the convention center board "felt the credibility of the joint venture had been destroyed" when Drake withdrew his capital from the joint venture.
Rather than reopen the bidding process, the board, pressed for time, invited ARA Services Inc., Ogden Food Service Inc. and Sportservice to bid and reduced the minority participation requirement from 51 percent to 25 percent.
Sportservice had the advantage of having already selected Waters as its minority partner, while Ogden and ARA had not yet found minority partners at the time they submitted bids. Sportservice's agreement with Waters calls for it to lend Waters the full amount of its equity if necessary.
After selecting Sportservice-Waters but before signing the contract, the board became concerned when an anonymous tipster sent newspaper clippings about the 10-year-old conviction of Sportservice's parent company to Ivanhoe Donaldson, the mayor's campaign manager, who in turn notified the convention center.
The parent company, Emprise Corp. (now known as Delaware North Companies Inc.), was convicted of a felony charge of providing $712,000 as part of a conspiracy by two Detroit Mafia members to obtain hidden ownership in a Las Vegas casino. Emprise was fined $10,000.
Company officials, who attended a special meeting called by the board, told members that the conviction was ancient history, involving events that took place in 1966 and 1967, and that the company had long ago reorganized. The company's explanation satisfied the board.