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Community Benefits Agreements: Contracts tying stakeholders of large projects to objectives that benefit a project-affected community, e.g., targeted hires of women and minorities.

CBAs are now a hot topic at the intersection of social justice and public contracting. Four years ago, the city of Portland established a pilot program to measure the efficacy of the emerging contract delivery method using two Water Bureau projects as test cases. Now, the results of an independent evaluation are in and they don’t portray a sweeping success.

Among the criticisms in the report: a community oversight board charged with disbursing 鈥渟et-aside鈥� funds that was burdened by too many responsibilities and that operated near the line of conflict of interest 鈥� with board members receiving more than 80 percent of the money allotted by the board. Another was the inclusion of a $500,000 line item by the contractor to administer the pilot program. Plus, 鈥渇ew鈥� of the programs funded by set-aside dollars had anything to do with the two Water Bureau projects.

For the reasons outlined in the report, city officials are concerned about a repeat of the pilot project, and worry about using pure CBAs again.

Conflict building

Portland had business goals for hiring more women and minorities prior to a 1989 U.S. Supreme Court ruling striking聽them down and others like them. In 1994, the Portland City Council established the Workforce Training and Hiring Program under then-Mayor Vera Katz. Other efforts to crack a construction workforce almost entirely white and male followed, including the Sheltered Market Program in the late 1990s, and later the imposition of Good Faith Effort requirements.

Despite these efforts, observers note a stark lack of progress. Some have complained that through the current building boom the city has been able to hit its diversity targets only through increased utilization of minorities in the 鈥減eripheral鈥� trades 鈥� hauling, flagging, custodial work, etc. 鈥� that pay less, are more dangerous, and, some say, reinforce damaging stereotypes.

Community Benefits Agreements were devised as a way to hold developers to promises they often make to governments to win project approval 鈥� through the use of contracts with stakeholders and regular check-ins.

In September 2012 the City Council resolved to test CBAs on two Water Bureau projects. Using best practices devised by the UCLA Labor Center as a guide, coalition members spent two years drafting the contracts used in the pilot project, according to Kelly Haines, a senior project manager with Worksystems Inc., an administrative entity involved.

For the $57 million Kelly Butte project, an above-ground 10-million-gallon steel tank was replaced with a 25-million-gallon reinforced concrete underground reservoir. For the $35 million Interstate Maintenance Facility renovation, a 28,000-square-foot building and a 38,000-square-foot building were constructed to replace an outdated bureau facility. Hoffman Construction was the general contractor-construction manager for both projects.

The CBA coalition was made up of community organizations, labor unions, minority business owners and pre-apprenticeship training programs. It was charged with overseeing broad aspects of the two projects, including the dispersal of 1 percent of total construction costs earmarked for CBA-related services (around $769,000). To distribute this money, it formed a group called the Labor Management Community Oversight Committee (LMCOC), which was made up of representatives of groups including the Urban League of Portland, Oregon Tradeswomen, Constructing Hope and Worksystems Inc.

Where the money went

The sole entity responsible for the management of funds and implementation of CBA programs was the LMCOC. According to the report, this arrangement led to numerous issues.

For one, the relatively small group of people who managed the CBA wrote the requests for proposals used on both projects. Though the report states that 鈥渘o evidence鈥� of actual conflicts of interest was found (members were said to have recused themselves when necessary), the LMCOC’s actions created the appearance of conflict of interest, according to the report by Framework LLC. The private evaluation, released in May, also found no evidence that LMCOC members ever signed conflict of interest statements 鈥� a standard move for leaders managing public funds.

Of the $769,651 from the 1 percent set-aside that went to CBA programs, 83 percent was awarded to members of the LMCOC. They include:

• Constructing Hope: $169,600
• Oregon Tradeswomen: $158,793
• WSI/CAWS: $111,687
• Portland Youth Builders: $96,200
• F.M. Burch & Associates: $61,743
• Emerald Cities-Portland: $37,310
• Urban League of Portland: $1,400

The city’s cost to administer the pilot program is estimated at $130,597, or 17 percent of the 1 percent set-aside. This includes staff time for the Procurement Services office, which spent an estimated 460 hours attending LMCOC meetings and preparing minutes and reports 鈥� at a direct cost of $25,000. Some of these services are already provided by the city for projects of this nature, according to the report.

Additionally, Hoffman Construction spent $542,000 to meet its workforce and contract diversity requirements, charging the costs to a line item titled, 鈥淐BA administration.鈥�

鈥淲hile some of these costs were related to LMCOC meetings and CBA reporting requirements, it is likely that most costs would have been incurred with or without a CBA,鈥� the report states.

To this, Hoffman Construction Senior Vice President Bart Eberwein said the charges accurately reflect the cost to perform adequate outreach to minority communities and send senior staff members to regular meetings for three-plus years. He noted the pilot project achieved almost all of the city’s lofty diversity goals.

鈥淭hey put their money where their mouth was,鈥� he said. 鈥淚 mean, this stuff doesn’t happen without a lot of time and effort. It’s to the city’s credit I think that they put diversity right up there with quality and schedule in terms of importance. And they had to put a little dough into it. And I think people should take their hats off to them.鈥�

Beyond who got the money, there’s the matter of what work was completed. The report mentions that little of the 1 percent set-aside actually went to the Kelly Butte or Interstate projects.

鈥淔ew of the workers and firms participating in CBA-funded programs 鈥� were placed on or subcontracted to the two Water Bureau projects,鈥� the report states.

In light of the issues mentioned in the report, Fred Miller, head of Portland’s Office of Management and Finance, has pushed to not employ a CBA on the upcoming Portland Building seismic upgrade/renovation, which his office is overseeing. The $195 million project is currently in preconstruction, and its own 1 percent set-aside has been the subject of scrutiny by the city’s Equitable Contracting and Purchasing Commission, and elsewhere.

Miller pointed to a portion of the report comparing the two pilot program projects against other contract delivery methods used by the city 鈥� Sheltered Market and Good Faith Effort.

鈥淭he aggregate results are not appreciably different from other projects,鈥� he said.

Miller is pushing to use a modified form of CBA for the Portland Building project.

鈥淚’m uncomfortable with a set-up where people don’t sign conflict of interest statements,鈥� he said, 鈥渁nd the vast majority of the money is allocated to themselves.鈥�

Target practice

It’s worth noting that in one important sense, the pilot project was a sure success: achieving its stated mission of meeting the city’s ambitious diversity targets. Fifty percent of apprentice hours for the Kelly Butte project were worked by minorities (the goal was 18 percent). A third of hard construction costs for the Interstate project went to M/W/DBE firms (12 percent was the goal). With the exception of women journey-level workers, all CBA targets for the two projects were hit.

The Framework report doesn’t tell the whole story, according to Haines. Her group issued a clarification following the report’s publication. In it, she wrote that LMCOC members recused themselves whenever their organizations were under consideration for contract awards. She notes that city staff members served on the committee, attended every meeting and prepared meeting minutes.

鈥淚f there was any concern about conflict of interest, they were able to voice those concerns,鈥� she said.

Conflicts are hard to avoid in this arena, Haines said, because few groups in Oregon are qualified to perform the services requested by a CBA. Only four organizations in the region were qualified to provide pre-apprenticeship services for the pilot project, and one 鈥� Portland Community College 鈥� declined to participate.

鈥淚t’s kind of a small pool with few fish,鈥� she said. 鈥淚t’s hard when you want to work with qualified and experienced training providers, and there’s only so many in this area.鈥�

Overall, Haines called the experience 鈥渁 little bit frustrating.鈥�

鈥淭hat evaluation pulled out some lessons learned about the pilot program and how we can improve on it,鈥� she said. 鈥淏ut at the end of the day, all the money’s accounted for, people recused themselves 鈥� so it was all appropriately managed. But going forward, there can be more formalities in place.鈥�

Several major projects lie ahead for the city, including the Portland Building project, the Washington Park Reservoir project, and park renovations being paid for with a $68 million bond.

Faye Burch of F.M. Burch & Associates said the pilot project retained more minority subcontractors than she’d seen before. The city benefited from having experts like OTI, Portland Youth Builders and Constructing Hope involved with the CBA, she said.

鈥淭hey helped us get the numbers that we wanted to achieve,鈥� she said.

However, CBAs aren’t right for all projects, Burch said.

鈥淚 think they fit some projects, and some projects, they don’t,鈥� she said. 鈥淚 think you can do it without a CBA, but I think this CBA had some great results.鈥�