The announcement of this week’s debarment of a company that faked city contracts to meet minority participation goals is proof that the city is serious about enforcing its goals, said the official in charge of monitoring participation.
“This investigation and settlement represents another example of the commitment this administration has made to inclusion practices in the business community,” said Angela Dowd-Burton, executive director of the Office of Economic Opportunity. “The administration will continue to improve the participation of [minority-owned businesses] and will aggressively pursue those businesses that circumvent their commitments to [them].”
Mayor Michael Nutter agreed.
“The city will not tolerate any business that fraudulently circumvents our anti-discrimination policies,” he said.
Earlier this week, Inspector General Amy Kurland announced that a company called JHK, a city-registered woman-owned business, would be barred from doing business with the city for two years because it allowed a company that contracted with the city’s prison to use its name — but did not provide services — in order to allow a company called Prison Health Services (PHS) to meet minority participation goals stipulated in its contract.
The city has begun debarment proceeding against JHK and entered into a $1.85 million settlement with PHS.
Kurland said her office discovered that PHS, also known as Corizon Health Inc., subcontracted with JHK to make it appear that JHK had provided pharmaceutical supplies for the city’s prisons. However, according to Kurland, JHK did not actually provide the supplies, but allowed PHS to use its name in return for 1 percent of the total contract.
In documents provided to the city, PHS represented that it had entered into a subcontract with JHK worth 40 percent of its $196 million health-care contract with the Philadelphia Prison System. Instead, from 2007 to 2011, Secure Pharmacy Plus LLC, and Maxor National Pharmacy Services Corporation actually provided pharmaceuticals to the Philadelphia Prison System, while PHS paid JHK more than $410,000 to make it appear that JHK was supplying pharmaceuticals.
PHS took the position that it fully disclosed its subcontractor arrangement with JHK to the city. However, while PHS did request and receive approval from an employee at the Philadelphia Prison System who oversaw the city’s contract with PHS, PHS never notified the Office of Economic Opportunity, which oversees the city’s anti-discrimination policies, as it was required to do.
To comply with the city’s anti-discrimination policies, minority-owned businesses must perform a commercially acceptable function under any subcontracting agreement. OEO defines a commercially acceptable function as performing, managing or supervising meaningful work or supply efforts that are distinct from other parts of the contract and consistent with the anticipated cost of business.
“Many disadvantaged yet qualified small businesses are still struggling to keep people on the payroll. We’re committed to leveling the playing field here in Philadelphia so all businesses can compete for city contracts and create jobs for talented minority-, women- and disabled-owned businesses,” Kurland said. “We hope this investigation sends a message that compliance with the city’s anti-discrimination policies is essential.”
The settlement agreement and case executive summary are available at http://ph.ly/OIGReports.