The bill — which, according to its text, is aimed at “closing loopholes to prevent program abuse and manipulation” — would prohibit contractors from subcontracting work to companies in which they have an ownership stake to fulfill the law’s requirements.
It would also require businesses applying to be considered local to certify “under penalty of perjury” that the information they provide is correct. The bill would require more evidence from businesses that they are local, create a tip line for reporting violations, and increase the frequency of site inspections.
Council member Robert C. White Jr. (D-At Large), the main sponsor of the bill, said in an interview Tuesday that it “was inspired by concerns that arose from Intralot.”
“The Intralot situation brought to light for the council some issues and loopholes in our law,” White said.
In July, the council narrowly approved a $215-million no-bid contract to Intralot to bring sports gambling to the nation’s capital and to continue running D.C.’s lottery. Intralot said more than half the work would go to a firm called Veterans Services Corp.
A document signed by a top Intralot executive to show compliance with the local business inclusion law affirmed that Veterans Services would “perform the ENTIRE subcontract with its own organization and resources.”
But in other documents and in response to questions from The Post, Intralot officials said the subcontract would be performed by DC09, a company in which Veterans Services owned a 51 percent stake but which was controlled by Intralot.
A Post investigation published in August found that Veterans Services had no employees and that its website touted executives who did not work there. The small firm’s chief executive was an employee of DC09 and lived in Maryland, records showed.
White expressed concern about the findings in a September letter to Kristi Whitfield, director of the District’s Department of Small and Local Business Development. She had told council members that Intralot’s arrangement satisfies requirements.
White asked Whitfield a series of questions, including: Did her department “review DC09’s involvement and its ownership structure?”
“No,” Whitfield replied in a letter. “The joint venture DC09 was not included in the subcontracting plan and was not submitted for certification” by her agency.
White asked when the department had last inspected Veterans Services to verify its eligibility as a local business, and Whitfield said in 2012. This week’s bill would require site inspections every 18 months.
White asked Whitfield whether Veterans Services’s lack of employees raised any concern about its ability to perform the subcontract; she responded that her department did not have authority to make such judgments.
In similar written answers to White’s questions, D.C. lottery’s director, Beth Bresnahan, said that “Intralot’s subcontracting arrangement with VSC through DC09, LLC has been in place since the onset of the District’s contractual relationship with lntralot and has satisfactorily supported the operations of the Lottery for nearly a decade.”
Bresnahan told White that the question of whether the arrangement satisfied local business participation law was outside of her department’s purview.
White said in an interview Tuesday that the legislation would “impact Intralot’s involvement on the lottery contract” when it comes up for renewal in five years.
Tuesday’s bill also attempts to address concerns about city contractors failing to pay their subcontractors. This summer, The Post reported on a host of local companies that built a new homeless shelter in Northwest Washington but were struggling to get paid.
“We have an obligation to ensure that we are maximizing the benefit of our public spending by investing in locally owned small businesses,” White told colleagues as he introduced the bill. “We can’t do that as long as large outside businesses are able to exploit the system by pretending to be [certified local business enterprises], abusing joint ventures, or by refusing to pay subcontractors.”
The bill enjoys broad support on the council. Council members Kenyan R. McDuffie (D-Ward 5), Mary M. Cheh (D-Ward 3), Anita Bonds (D-At Large), Brandon T. Todd (D-Ward 4), Brianne K. Nadeau (D-Ward 1) and Trayon White Sr. (D-Ward 8) introduced it. David Grosso (I-At Large) signed on as a co-sponsor.