Denver council tries to end exploitation of businesses owned by women, minorities

These smaller companies often work as subcontractors to large firms and sometimes get stiffed on change orders and wait months or years for payment.

(Kevin J. Beaty/Denverite)

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A dusty cloud from a Brighton Boulevard construction site is illuminated by late-afternoon sunlight. Dec. 12, 2017. (Kevin J. Beaty/Denverite)  rino; five points; brighton boulevard; kevinjbeaty; denver; denverite; colorado;

A dusty cloud from a Brighton Boulevard construction site is illuminated by late-afternoon sunlight. Dec. 12, 2017. (Kevin J. Beaty/Denverite)

The Denver City Council on Monday approved a series of changes to the local law that is meant to support small businesses and companies owned by women and minorities.

The current law requires city-funded projects to spend certain amounts of their budgets employing those classes of companies.

The changes approved on Monday aim to get these subcontractors paid quicker and to ensure they’re not exploited or retaliated against by the big companies that do much of the city’s construction work.

These smaller companies often have been hesitant to come forward and give public testimony, citing the fear of retaliation.

“We couldn’t get hardly anyone to come. They came to us privately,” said Councilman Wayne New, who spearheaded the initiative alongside Councilman Paul Kashmann and Councilwoman Debbie Ortega. Mayor Michael Hancock, staff and others also participated.

One major issue: In some cases subcontractors aren’t getting fully paid when their work is done. Portions of their pay can be retained for years until the full project — an airport expansion, for example — is done.

In one recent instance, money was withheld for more than two years, New said.

Another major problem, he said, is that contractors will issue “change orders” — asking for additional work — and force the subcontractor to negotiate the price after the project is done, when the subcontractors have little leverage. This legislation doesn’t prohibit change orders, but it requires new data collection that the city could use to prevent abuse.

Here’s what the new legislation would do:
  • The parties will have to submit regular information about billing activities, such as change orders.
  • The city will voluntarily release retainage money early.
  • The city will ensure that subcontractors get “letters of intent” that lay out a construction schedule.
  • Retaliation will be prohibited.
  • There will be an evaluation of the city’s Division of Small Business Opportunity.

“The spirit of it is excellent,” said Mowa Haile, the founder of Sky Blue Builders, at a committee meeting in November, in reference to the existing regulations. “It also has almost crippled us. I’ve worked on two massive projects that have lost my company over $700,000.”

Still, the program had helped him grow his business from five to 45 employees, he said.

Councilwoman Debbie Ortega said she had to ask airport authorities to intervene in a case where a subcontractor claimed to be owed $5 million.

“The fear of retaliation is real,” she said at the committee meeting. “With the over $6 billion of work that’s going to be happening in this city … it is vital that we have this piece.”

Council members “heard many stories from subcontractors about payment issues, change orders being pulled together … not being able to participate,” New said.

“One issue we hear over and over again is really the need for more training and education. Helping those subcontractors to grow and develop is so critical.”

Council members heaped praise on New, with Councilman Paul López saying he was “eternally grateful.”

Council President Albus Brooks said it was a “great day” for small businesses, but he said that “the real work starts now” to make sure the rules are followed. The measure passed unanimously.

Have you participated in this program or had problems working on a city project? Email me.