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Review of Minority and Women-owned Business Enterprise Participation on Public Building Commission Projects

June 15, 2011

Summary

For the past several years, IGO investigations and policy reviews of the City’s Minority and Women-owned Business Enterprise (MWBE) program have uncovered systemic problems in the program’s administration and numerous instances of outright fraud.

Executive Summary

As part of our analysis of the program, the IGO undertook a review of 15 PBC projects that were completed in 2009 in order to calculate the actual MWBE utilization and compare it with the MWBE participation statistics reported by the PBC. The results of that review are contained in the accompanying report.

By calculating the amounts actually paid to legitimate MWBE subcontractors, primarily based on project lien waivers, the IGO found that actual MBE participation on these 15 projects was 39 percent less and WBE participation was 3 percent less than what the PBC reported publicly.

Based on these findings, the report calls on the PBC to more diligently monitor MWBE participation on the construction projects it manages. More specifically, the PBC should scrutinize underlying documentation to determine how much money is actually paid to MWBEs. Doing so will better ensure reporting accuracy and program accountability in achieving the objective of fostering economic opportunity for historically disadvantaged minority and women-owned businesses in Chicago.

Additionally, in conducting this review, the PBC only partially complied with the IGO’s requests for information. The PBC denied the IGO full access to documents regarding five school construction projects that were funded, in part, with TIF dollars. However, the IGO has jurisdiction over every City program and because TIF funds were used in the construction of these five schools and TIFs are a program of the City, our jurisdiction includes these projects.

The PBC is managed by an Executive Director and an II-member Board of Commissioners, currently chaired by the Mayor of Chicago. Because the City of Chicago adopted the original resolution to create the PBC, by state law, the Mayor of Chicago appoints a majority, (six members), of the members of the PBC board. Additionally, the Chicago Public Schools (CPS) and the Chicago Park District (park District), whose leadership also is determined by the Mayor, each appoint one board member. Finally, Cook County, the Forest Preserve District of Cook County Forest Preserve, and the Metropolitan Water Reclamation District of Greater Chicago each appoint one board member. As a result, the PBC is predominantly a creature of the City of Chicago operating under the auspices of the Mayor. Therefore, the disagreement over the IGO’s jurisdiction requires resolution which the Mayor, in his capacity as Chairman of the PBC Board of Commissioners, should provide. If a project receives City tax revenue, the IGO has the right to scrutinize that project. The Mayor should direct the PBC to cooperate with the IGO in any audit, review, or investigation into PBC activities involving any City funds.

Review of Minority and Women-owned Business Enterprise Participation on Public Building Commission Projects - publication cover