Minority contractor under fire speaks out

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by SUSANNAH FRAME / KING 5 News

Bio | Email | Follow: @SFrameK5

KING5.com

Posted on June 15, 2012 at 10:10 PM

Updated Friday, Jun 15 at 11:06 PM

The owner of a Washington contracting business, who’s under investigation by the FBI, the state Department of Transportation, and the state Office of Minority and Women’s Business Enterprises (OMWBE), says a KING 5 Investigators series on fraud and mismanagement in a state program benefiting women and minority-owned businesses has been a good topic to expose. He thinks the public should know about millions of transportation dollars that have gotten into the wrong hands. But he doesn’t believe he should be on the list of minority-owned businesses under fire.

Barry O'Young, CEO of Seattle-based OMA Construction, said he has already spent 20 hours talking with FBI investigators about the state contracts his company has landed. He talked to them and to KING 5, he said, "because I haven't done anything wrong. I'm not hiding anything and I'd like to get the story out."

KING 5 findings
In a series of reports over the past six weeks, KING 5 revealed minority contractors being used as a “pass-through” because of their minority status by large non-minority owned companies. In that scenario, the minority-owned company takes a cut of the contract funds while the larger company does the work.

KING also exposed companies that never should have been allowed into the Disadvantaged Business Enterprise (DBE) program because they weren’t actually run by a woman or minority.

Being a certified DBE comes with an advantage: big contractors are required to sub-contract a certain percentage of work on federally funded transportation projects to certified DBE’s. In addition, the KING 5 Investigators have shown that OMWBE has mismanaged the certification program by ignoring cases of fraudulent activity and certifying firms even when there was evidence the company didn’t meet the requirements or had cheated the system.

O'Young said OMA Construction is a legitimate DBE with 20 employees and plays by the rules, despite the conclusion of state inspectors. Since 2008, OMA has been awarded more than $30 million in government contracts as a certified DBE.

Allegations against OMA Construction
Public records obtained by KING 5 and sources close to the minority contracting program allege that OMA has a suspicious relationship with a giant general contractor: Tri-State Construction, based in Bellevue. O’Young worked for Tri-State as a project manager for ten years before going out on his own. The allegations are that Tri-State hired OMA to fulfill its federal requirement of utilizing minority-owned contractors on projects, but that OMA didn’t do all of the work. Instead, Tri-State performed work slated for the minority-owned company, which is against federal regulations.

“I’m not a front for them, I’m not a pass through so they can get contracts, that’s never happened,” said O’Young. “But we have a relationship, we strategize on bids, I rent equipment from them, but that’s what mentors do. That’s what relationships are. That’s what networking’s about.”

State investigators from WSDOT’s Office of Equal Opportunity (OEO) said that Tri-State, not OMA, completed a road project in Eastern Washington in 2000 that OMA, as a certified DBE,  was hired to do. O’Young said the first he’d heard of this allegation was from KING 5.

“I’ve never heard of that investigation. No one even contacted me about it,” said O’Young.

In 2009, OEO investigators concluded OMA was paid $1.2 million to build noise walls along SR 518 near SEA-TAC Airport, but that the general contractor on the job, Tri-State Construction, installed the walls instead.

On the SR 518 work, O'Young said a routine change order created a scheduling conflict, which required Tri-State to do the work. He said OMA never tried to hide that from the state but that the OEO investigators didn’t understand the process.

“The people doing the audits don’t understand the construction industry. How are you auditing me when you don’t understand the construction business?” said O’Young.

Beyond that, O’Young said no one from the state, not WSDOT’s Office of Equal Opportunity or OMWBE, alerted him about the results of the SR 518 review.

“How are we supposed to make changes without knowing the issues? Both OMWBE and OEO are in over their heads. They don’t understand construction, they write these reports, and then don’t share the results. How are we supposed to adequately respond and address the concerns?” O’Young said.

Last year, program monitors from OEO reported they caught OMA again getting paid for work the company didn’t perform, this time in Moses Lake. The job was to install median barriers on SR 17. State investigators found non-minority trucking companies, not OMA, delivered the barriers to the site. Tri-State Construction was the general contractor on that job.

O’Young said the trucking was a small portion of the work and that OMA installed the barriers, which was exactly what they were hired to do. State reviewers interpreted the job differently.

“It is also possible that there was an intent to fraud due to the fact that the DBE owner did not advise the project owner or prime contractor that it was using non-certified firms to perform work in which the DBE firm was going to allow to be counted as (minority participation on the job).” wrote the OEO investigator.

According to KING 5 sources, federal and state investigators are most concerned about the relationship between Tri-State and OMA Construction. Tri-State hires OMA more than any other general contractor to help meet mandatory DBE utilization goals. Investigators believe the two have had a convenient relationship designed to skirt federal rules.

“There’s a documented history of OMA Construction and Tri-State Construction maintaining a less-than-arms-length relationship,” wrote an investigator in 2009.

“The principal issue of concern is whether Tri-State Construction and OMA Construction have a contrived relationship to defraud the federal government from monies obtained fraudulently under the DBE program,” wrote state investigators. “Clearly, Tri-State violated, aided, and abetted (OMA) in a fraudulent practice.”

"Whoever wrote that is totally off. [The author] might think that or actually believed it but that is 100 percent off base. It's total error," said O’Young. “Every contract I’ve ever been awarded has been legitimate. I’ve never had any intention of defrauding the DBE program. I think the confusing issue is in the actual contract administration of the project by the state.”

Lawmakers involved
State Sen. Mary Margaret Haugen (D-Camano Island) is in the process of researching and drafting legislation to address fraud in the DBE program. Haugen is the chair of the state’s Joint Transportation Committee. At stake are billions of federal dollars for transportation projects. Administering the DBE program in good faith is a requirement to obtain the funding.

"We have so limited transportation dollars and so much need, to think that money is being wasted by cheats, is unacceptable, purely unacceptable to me," Haugen said.

OMA remains a certified DBE in Washington state. O'Young said OMWBE, the small state agency which certifies and de-certifies DBE’s for the state DOT, contacted him about an investigation last year, but that he hasn’t heard anything from the office since. O’Young told KING 5 that he’s confident he will beat any charges OMWBE may lodge against him and that he will again be re-certified as a DBE.

“I qualify, definitely. I fall within the guidelines, I have the experience. That’s what my whole career is based on. I want to be a minority contractor in the state of Washington,” said O’Young.

Tri-State Construction did not respond to KING 5's request for comment about this story.

 

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