Less Than $1K Of $1.67M In Public Contracts For County Morgue Went To Minority Firms
Editor’s note: This story was originally published in the St. Louis American.
In early April, officials at the St. Louis County Department of Public Health made a grim realization: The region would need a temporary morgue for anticipated deaths from COVID-19.
They worked with St. Charles County to build an overflow facility they called the Dignified Transfer Center in Earth City in about 10 days. The project cost almost $1.67 million, with St. Louis County paying more than $1.13 million and St. Charles County paying about $531,000. But, as with so many other aspects of the COVID-19 crisis, business opportunities resulting from these contracts were not awarded equitably.
A joint investigation by the St. Louis American and Type Investigations found that African American contractors earned only a tiny fraction of the publicly financed construction dollars available. Despite a county law requiring 24% of contract dollars go to minority-owned business enterprises, less than $1,000 was awarded.
If minority businesses had received 24% of contract dollars, they would have earned nearly $400,000.
In fact, officials at the St. Louis County Office of Diversity, Equity and Inclusion, which oversees compliance of the 2018 inclusion law, were not informed about the morgue’s construction, in violation of protocol. The director of the inclusion office said her team learned about the morgue from a news broadcast.
The American has found that the county’s failure to comply with the law predates the current crisis. Pre-existing “on call” contracts used for emergency situations like the morgue project were never adjusted to include the minority contracting requirement. These lapses have left Black contractors out of business opportunity in the midst of a crisis that has impacted their community more than any other.
St. Louis County has a population of about 1 million people. African Americans make up about 26% of the county’s population. To the east, St. Louis has about 300,500 residents. Almost half are African American.
Of the 500 people who had died of COVID-19 in St. Louis County as of June 15, 186 — about 37% — were African American. Black residents of St. Louis County are dying from COVID-19 at almost twice the rate of white residents: 77.4 per 100,000, compared to 42 per 100,000 for white residents.
“The African African community is disproportionately dying because of COVID, and we needed to ensure that our businesses didn’t roll up and die as well,” said Yaphett El-Amin, executive director for MOKAN, an advocacy group for minority contractors.
St. Louis County isn’t the only place where minority-owned businesses have been left out of contracts for emergency building funded through the CARES Act. Throughout the country, temporary facilities for hospital overflow were built quickly as well, and it appears that minority contractors were also left out of this work.
About $721.6 million has been spent on building nearly 40 facilities nationwide. Minority-owned construction companies earned $26.2 million, or about 3.6% of those dollars. Black-owned businesses were awarded $66,856 in contracts — or 0.009%.
Since the American began making inquiries, El-Amin said that St. Louis County Executive Sam Page has called on MOKAN to assist the county in writing inclusion language for awarding federal COVID-19 response dollars going forward.
“We are going to make these changes,” said Page’s spokesman, “and we’re going to work with our procurement department. We’re going to work with our Office of Diversity, and we're going to work with minority contractors to assure that there are no carve-outs or exemptions to the bidding process — emergency or not.”
‘It’s a total disregard for us’
When media outlets began reporting on the temporary morgue in early April, Hazel Erby started getting calls from black business owners.
“They were pretty upset with me because they felt I was not fighting for them, and that wasn’t the case,” said Erby, director of the Office of Diversity, Equity and Inclusion. “We pressed upon them that we did not know anything about it. They went around us.”
Erby told the American that her team found out about the morgue project on the news, just like county residents. Contracts had been awarded by the county’s Department of Transportation and Public Works, without her knowing. She and her team immediately started asking questions.
According to protocol, Erby’s office must be given an opportunity to review contracts to ensure compliance with the inclusion law. She said she received no information or answers.
Twelve contracts were generated to complete the temporary morgue, including ones for electric, plumbing, roofing and general contracting. The 2018 law stipulates that 24% of the money awarded to each of these contractors must go to minority-owned subcontractors. On this project, only one of those companies met that goal: Professional Environmental Engineers, or PE, the only business that is itself minority-owned. This firm received the second-lowest contract at $1,650; $690 of that total was subcontracted to a non-minority business. The minority-inclusion stipulation was included in only one of the 12 contracts — about $450,000 for electric work — but that company, Reinhold Electric, did not award any of the money allocated for the morgue project to a minority-owned business.
One black contractor said the exclusion of minorities on this project was “unfortunate, sad and ridiculous.”
“Small businesses are getting hit harder than anyone else,” said Tony Thompson, chairman and CEO of Kwame Building Group, a black-owned firm based in St. Louis. “So you would think that when there’s an opportunity like this to provide business to smaller firms, that they would be all over it. And that has not happened. It’s almost like whenever there’s misery in the world, minority firms get the brunt of that as well.”
Thompson said the rumbling from the minority contractor community about the morgue job was immediate.
Because the project had to be completed within a week, county officials said that they largely used their “on-call contracts,” which are standing agreements with businesses that have already gone through the bidding process the county has in place in case of emergencies.
All of the on-call contractors that worked on the morgue had their contracts extended or issued after the inclusion law was in place; however, only one contract — the one with Reinhold — included the minority-inclusion stipulation.
Jennifer Keating, acting director of administration who oversees procurement, recently told members of the St. Louis County Council’s Oversight Committee that they haven’t included the minority-participation stipulation in these agreements when they come up for extension. Keating said the terms and conditions couldn’t be changed on existing contracts, even when they were being extended.
This is one of many ways procurement officials have gotten around adhering to the inclusion law, said Jack Thomas, the county’s former chief diversity officer.
“The county counselor said we could not do that because we were changing the terms,” Thomas said. “Our position was if negotiated ... the contractor could either agree to include minorities and women at that point or they could disagree, in which case we would rebid the work. It seemed like a pretty simple solution to us.”
That was a battle that Thomas repeatedly lost during his nearly two-year tenure at the Office of Diversity, Equity and Inclusion.
Doug Moore, spokesman for the county executive, said the actual execution of the emergency on-call contracts was likely appropriate in the morgue project.
“But what was not executed appropriately were these continued renewals of the contracts without amending them, so that a group is exempt” from the minority-participation requirements, Moore said.
Thomas took his position as the county’s first chief diversity officer in July 2018 and built the MWBE program from scratch. But he left his post in March after being disheartened by the program’s slow progress and constant pushback from county administration, he said. The American asked how he would have reacted if the morgue had been built without his knowledge.
“I would have been livid, and I would have let that be known,” Thomas said. “It’s a total disregard for us, our role, the community and our constituency.”
According to internal emails between Reinhold and county officials, the company was hired as the electric contractor by the general contractor, Landmark Contract Management, which is based in St. Charles County. A Reinhold employee wrote that the company was not told the morgue project was a St. Louis County job until the end of construction. The employee wrote that Reinhold was not aware it was being hired through its standing on-call contract with the county, which includes the minority-inclusion stipulation. Reinhold’s supplier, Butler Supply, accounted for all of the project’s women-owned business enterprise participation — which was 4.2%.
St. Louis Electric was the minority subcontractor listed in Reinhold’s contract. James Jackson, president of St. Louis Electric, said he would have sent workers over had he been called, but they weren’t hurting for work at that time. Jackson isn’t surprised that the project had virtually no minority participation — had such guidelines not been established by the city and with other public entities in the region, his business would have never got off the ground, he said.
“A lot of these big projects — were there not minority participation requirements, obviously, they would go through their friends, their associates,” Jackson said. “So minority participation has definitely been an asset to me throughout the duration of my company.”
Jackson’s company has now been certified for more than 25 years, he said, and has been the prime contractor on multimillion-dollar contracts.
In a statement to the American, Reinhold said, “Reinhold Electric complied, in full, with each and every requirement provided by the owners’ representative.”
Despite county officials’ claim that they used pre-existing contracts that lacked the minority-inclusion stipulations for the morgue project, that wasn’t the case for every company. There were two major contracts that were new: the general contractor, a $375,944 contract, and the roofer, a $12,300 contract.
Minority participation could have easily been included in these two contracts, Thomas said, especially if the Office of Diversity, Equity and Inclusion had been brought to the table. The businesses that were contracted have been around a long time and know how to employ minority contractors, he said.
Tony Thompson, of Kwame Building Group, agreed.
“At this juncture, everyone knows who the viable minority firms are and who they are not,” Thompson said. “However, they were able to select those majority firms to get this work done. They could have easily selected the minority firms at the same time. And they didn’t do it.”
Overall, it didn’t matter that the on-call contracts didn’t have minority participation written into them, Thomas said. The county could have simply asked the contractors: These are the goals, what can you do? Most of the companies have some familiarity with minority-participation requirements because their other customers have them: the City of St. Louis, the St. Louis Housing Authority, Metropolitan Sewer District and even some of the universities, Thomas said.
“It was a foreign concept to the county but not to most anybody else,” Thomas said. “You might not have had the 25 and 10 (% minority participation), but you certainly would have had more than zero.”
‘Zero or pretty close’
The City of St. Louis has had an inclusion program to ensure the participation of minority businesses on publicly funded projects for almost three decades, but St. Louis County only established its program in 2018 when then-County Executive Steve Stenger tapped Jack Thomas.
“It was that challenge of being able to start a program from scratch in an area where there has not been one,” said Thomas, who had helped lead the city’s diversity initiatives for many years. “I knew that there would be some resistance. That was, by and large, what I found.”
Thomas brought on a team of three officials, most of whom had decades of experience working in compliance in the region.
He and his team were up against a small but authoritative group from the Office of Procurement, Department of Transportation and the county counselor’s office, who had a “vested interest” in keeping things the same, Thomas said.
Thomas said these people would have preferred a weak inclusion law that had a lot of loopholes. As part of the process, the contracts had to go to Thomas’ office before they were awarded to ensure that there were sufficient minority subcontractors employed on the project — or that the contractors at least had made “good-faith efforts.”
On several occasions, Thomas’ team would advise against the prime contractor getting the contract, for a variety of reasons.
Sometimes the minority- or women-owned firms weren’t certified or were so-called pass-through companies — which is when a prime contractor agrees to pay a pass-through company, but that subcontractor agrees to subcontract the work to a non-diverse firm. Yet, the Office of Procurement would ignore the recommendations of Thomas’ team, Thomas said. In some cases, he added, his team wouldn't even be told that the contract was awarded.
This is why the fact that protocol wasn’t followed on the morgue project wasn’t surprising, Thomas said. And the fact that the project came back with almost no minority participation was even less of a surprise.
“We tend to know the outcome if nobody is pushing it up front,” Thomas said. “If there is no requirement or if it’s not stressed in the bidding process, then we know what to expect — that it will be zero or pretty close to that.”
Page, the current county executive, recognizes that “change often takes far too long,” said Moore in an email, adding that Page is committed to this work.
“As part of his commitment, the county executive asked MOKAN and other stakeholders to help identify the best way forward to increase the opportunities for minority-owned and women-owned businesses,” Moore said. “We look forward to working with them to move the initiative forward."
Rebecca Rivas is a reporter with the St. Louis American, a news partner of St. Louis Public Radio.
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