MTA takes a new look at minority-subcontracting rules.

Some critics say low bidders often lose to nitpicking 

Facing criticism that its equal opportunity regulations are so technically complex they are unnecessarily costing taxpayers millions, the Metropolitan Transportation Authority is re-examining its policies requiring that contractors use minority- and women-owned subcontractors.

At issue is whether the MTA, in awarding multimillion-dollar contracts, is applying overly burdensome rules and unfairly eliminating some low bidders in favor of awarding the contracts to higher bidders. As a result, minority subcontractors, in some cases, are losing out on work, said an attorney for a contractor that lost out on a recent bid.

Minority business leaders, for their part, said they aren't bothered by the rules' strict enforcement and some feel the MTA doesn't go far enough toward guaranteeing work for minority-and women-owned subcontractors.

Phyllis Papen, an alternate MTA board member and a city councilwoman in Diamond Bar, raised the issue of studying the MTA's equal opportunity policies at a recent board meeting at which two contracts were awarded to the second highest bidder because the lowest bids were ruled non-responsive.

In each case, the winning bidder's price was more than $2 million above the low bid. And both losing bidders claimed they had made a good faith effort to include minority subcontractors but were eliminated based on paperwork technicalities.

"The MTA goals appear to have become mandates because of the minute regulations used to implement the goals," said Papen. "As an elected official, I have to be concerned with costs. With the financial constraints on the MTA, this has to be checked. There has to be some consideration of what it's costing the taxpayer, in light of the MTA budget deficit."

MTA Chairman Richard Alatorre asked Gwen Williams, acting director of the MTA's equal opportunity program, to study the MTA's policies in light of other government agencies' approaches.

Williams said she has already begun surveying other city and county agencies, in addition to transportation authorities in Portland and Seattle. She also is convening a committee to study the survey results, and she hopes to have the committee meet prior to the MTA's next meeting on Feb. 23.

"We hope to come up with something that is less contentious, but still meets the MTA's goals," said Williams. "When something is contentious, my approach is to compare to what others are doing."

Tony Wong, president of Rosemead-based KAWES & Associates, an engineering consulting firm, and an Asian Business Association member, said he believes the MTA's rules regarding contracting are proper and necessary.

"I think they are just being fair, and I don't think they are nitpicking," he said.

The MTA wants prime contractors to take certain steps to insure minority subcontractors are being given a fair shake, and those rules need to be enforced, Wong said.

"I think these programs are necessary if we are going to (secure) more business with minority-owned companies," added Phillip Ramos Jr., founder and chief executive of Santa Fe Springs-based Philatron International, an electronic wire manufacturer. Ramos also sits on the MTA's Transportation Advisory Board Council.

Bishop Lynn Brown of the Christian Methodist Episcopal Church in Los Angeles said the MTA is not going far enough to insure contracts for minority and women-owned businesses. He testified on behalf of a group of black community leaders before the MTA board on Jan. 26.

"African-American minority business men and women have been and continue to be denied access to significant contracts allocated by MTA," Brown testified.

"There is no major long-term development program designed to select and empower (minority-owned) firms to participate in the vast number of contracts which will be forthcoming over the next 20 to 30 years of the Metro Rail construction plan," he continued.

George Kieffer, an attorney with Manatt, Phelps & Phillips, is representing PCL Construction Services Inc. of Irvine in its protest of a bid award to a Kiewit-Shea joint venture for construction of a Metro Rail station. PCL was the low bidder at $36.6 million, but Kiewit won the contract with a bid of $38.9 million when PCL was eliminated for equal opportunity reasons.

Firstly, the MTA staff found PCL did not meet the disadvantaged business enterprise (DBE) subcontractor goal of 25 percent, partly because PCL failed to list an address for a subcontractor and failed to explain every subcontractor's "scope of service."

Secondly, PCL failed to prove it had made a "good faith effort" to find minority subcontractors because it didn't send letters to prospective subcontractors by registered mail with return receipt requested, the staff reported. PCL's attorney claims that not only did PCL exceed the DBE goal, but that it had more minority subcontractor work in its bid than did Kiewit.

"These are absolutely two different issues -- defining good faith efforts vs. doing enough to help minority firms. No one would say they should do less," said Kieffer.

"You can have a very good DBE program that is fair. You can save money and have a program that's more supportive of minorities. ... My view is they do have to re-examine the good faith requirement or they risk undermining the entire DBE process."

But Ramos said details such as addresses of subcontractors on the prime contractors' applications are absolutely necessary to prevent the fraud that often pervades the contracting process.

Kieffer claims that no one, including Kiewit, can meet the MTA's good faith test once the contractor's percentage is challenged, and that the MTA is the only known entity to have made regulations regarding forms of mail delivery.

Williams said that once in three years a contractor who failed to meet the percentage goal was awarded a contract based on passing the MTA's good faith test.

"PCL would have easily met the City of L.A.'s good faith requirements, for example," said Kieffer. "The problem we have is when the system turns into a 'gotcha' system."

Papen said she would favor a system that is "goal oriented, but not an absolute mandate." "What I'd like to see is a range and variances allowed," said Papen. "This issue is coming up on every major contract."

Another company that lost out on a contract -- because it failed to send out its letters to women-owned businesses by certified mail as required by MTA staff to prove good-faith effort -- was Brutoco Engineering & Construction of Fontana. Brutoco bid $10.56 million on a bridge demolition and construction contract that went to Kiewit Pacific Co., with a bid of $12.76 million.

Brutoco Executive Vice President Tom Salada said Brutoco protested the staff recommendation to award to Kiewit, but received no response from the MTA. This week, he plans to protest the MTA board decision.

He agreed that the problem is the staff's enforcement of MTA regulations, not the MTA's goals and policies.

"If you look at the affirmative action plan for the MTA, it's fine, but that's not the way it works in real life," said Salada. "What they've written is reasonable. The application is not reasonable."