Program increased City spending with minority firms
By Dan Yount
The Cincinnati Herald
As he was surrounded by City officials and African American business leaders Tuesday, City Manager Harry Black defended the successes of a Pilot Third Party Administrator Contract (TPA) program, following the filing of a lawsuit questioning the ethics of the program.
In lawsuit filed in federal court last week, Cincinnati Police Capt. Jeff Butler claims Black is running City purchases through a company run by his friend Al Foxx, who was Public Works director in Baltimore when Black was that City’s Finance director.
According to the lawsuit, Black insisted City purchases go through a purchasing clearinghouse, BFX, LLC, requiring a 12 percent mark-up. BFX was incorporated by Foxx.
The lawsuit claims: “Black’s insistence that City purchases go through the clearing house owned by his close friend inappropriately enriches those friends to the detriment of Cincinnati taxpayers.”
In the press conference Tuesday, Black said he wanted to set the record straight as it relates to recent allegations that have been lodged against the City’s Pilot Third Party Administrator Contract (TPA).
Black said, “When I arrived in Cincinnati as city manager, I realized that the City’s procurement function was being treated and managed as a low value business function. I immediately began to work to change that. We inserted more effective internal controls that allowed us to be able to assert more effective accountability in the process. We overhauled the City’s procurement policies and procedures, which in many cases had not been reviewed in nearly 20 years. We trained City staff on the new policies and procedures. And we now have a system that is indicative of best in class structure with best in class policies and procedures.’
He added the TPA contract and strategy was directly related to the procurement reform efforts
He noted that at the time he and his staff decided to pursue this procurement approach, the City’s facilities management/maintenance function was in disarray. Internal controls were minimal to non-existent in many cases, he said. In some cases, departments were not adhering to requirements such as prevailing wage, appropriate insurance coverage, and the misuse of procurement vehicles for things that they weren’t intended to be used for.
As a result, Black said that late last year at the recommendation of Patrick Duhaney, the City’s chief procurement officer, and with his approval, the City initiated a new, temporary pilot program as authorized by Cincinnati Municipal Code. This program was modeled after a similar TPA approach taken by the State of Ohio and is completely optional for City departments.
“In that we were confronted with procurement deficiencies that needed to be addressed with a sense of urgency, we decided to pursue the TPA PILOT approach,’’ Black said. “Our partners in the creation of this pilot are BFX, LLC a joint venture of two longtime City-certified minority owned businesses D.E. Foxx Construction and Browne E&C. These companies were chosen because they were uniquely qualified to immediately deliver the services necessary.
A traditional RFP process was not an option because the program was new and the pricing and cost information necessary to assemble a meaningful bid package was not possible, he said.
Therefore, a direct award was extended to BFX.
“This joint venture with the two companies is reflective of their proven track record of success in doing business with the City for many years,’’ he said. “They were already mobilized locally, allowing us to move swiftly in addressing procurement issues associated with the City’s facilities maintenance and management contracting practices.’’ D.E. Foxx is a long-time provider of facility services for Fortune 500 companies, including P&G internationally. He adds his friend, Foxx, has no equity interest in BFX.
Black said it is important to note the potential of the two firms to provide work for minority and women businesses that have never been able to secure City work.
He explained the pilot project uses a fee for service payment structure and includes absolutely no “mark-ups” for goods, commodities or products. About 11 departments are using this procurement process, he said, although departments are not required to use it. “We are presently gathering information, feedback and observations from departments about the program for the purposes of issuing an RFP at the end of the year to, perhaps, continue the program on a permanent basis.’’
Rev. KZ Smith, a member of the Economic Inclusion Initiative that has worked to increase minority participation in City contracting, said minority contracting, which was a about 2 percent of City contracting, is now up to 17 percent. “We want to see minority businesses grow, but attacks like this lawsuit bring that effort down,’’ he added.
Black says the lawsuit is “frivolous,’’ adding, “I am very confident our law department will prevail in a very successful fashion.’’ He called Butler a disgruntled employee who was not successful in in becoming an assistant chief.
The lawsuit states Black and others, including Assistant City Manager Shelia Hill-Christian, are involved in a conspiracy “to retaliate against Captain Butler for challenging their blatant misuse of state tax funds which should have been utilized for emergency services and instead were unlawfully utilized for general Cincinnati budget purposes.”
Butler oversaw the City’s 911 emergency communication center since January 3, 2016, but claims he was stripped of his managerial duties “with virtually no notice” on January 1, 2017. According to the lawsuit, Butler was seeking to be made an assistant chief and be compensated for lost wages and benefits along with compensatory damages for “emotional distress.”
City Solicitor Paula Boggs Meuthing said that in 2001, Cincinnatians amended the City Charter to make the rank of assistant police chief unclassified and exempt from Civil Service.
“Captain Jeff Butler is dissatisfied that he was not selected by the current city manager for this important management position in the police force. The City’s law department will defend the City’s Charter mandated selection process, and the City is confident that it will prevail in the lawsuit filed by Captain Butler. In the meantime, the lawsuit will progress in federal court according to the regular legal process and the City’s comments will be limited to its court filings,” she said.
Black said the 911 Emergency Communications Center provided “ongoing challenges preventing effective call service apparent upon my beginning as city manager in 2014. Changes were made in the best interest of the citizens of Cincinnati, and were not personal in nature.’’