Affirmative Action Derailed

With Prop. 209 looming, an airport contract battle shows how S.F. has failed to keep faith with minority business

The lawyers stream into Courtroom No. 8 like air sucked into an empty lung. Pinstripes. High heels. Briefcases. Briefs, spit from laser printers, are passed back and forth with high purpose. A clerk resorts to drawing up a seating chart, just to keep the names straight.

"All rise." Judge William Cahill enters. Cahill, considered perhaps the top civil law judge on S.F.'s Superior Court bench, confides at the outset of the hearing that the case is the "most complicated, hard thing I've ever encountered since I've taken this job."

A crackling Socratic debate ensues. At issue: whether the award on a major airport contract complies with the city's affirmative action requirements. Questions posed by Cahill are swatted back by counsel on both sides as they try to move the judge toward their view. But proceedings take a perilous turn early for senior S.F. Deputy City Attorney Mara Rosales. The judge calls the affirmative action ordinance she wrote "a mess." Indeed, the independent-minded appointee of Gov. George Deukmejian sounds particularly irreverent today. Over the protestations of Rosales, he dismisses the relevance of how S.F. has enforced affirmative action the past 12 years, saying: "What if you've been doing it wrong forever?"

To which Rosales responds, "It is unfortunate that we are here." She then acknowledges the thorny issues before the court. "In my career as a city attorney," she says, "this is the most difficult case I've had to deal with."

But Rosales' misfortune is another's good fortune. He's seated two rows back among the packed house. Terry Sanders has been working toward this moment since last summer.

Back in September, Sanders was seated in a leather armchair 10 stories above Kearny Street. He opened the Yellow Pages to Page 534. He ran his finger down the directory's listing of concrete contractors. But he wasn't in the market for concrete. He was looking for cracks.

Sanders sells and installs automated electric-powered light-rail trains. Been doing it for three decades. But 10 days earlier -- on Aug. 23 -- he had received unexpected bad news. The $155 million bid his company had put forth to construct a train for San Francisco International Airport had come in $19 million over the bid of his only competitor, Mitsubishi Heavy Industries America. Sanders is the western region senior manager for ABB Daimler-Benz Transportation Inc., or ADtranz. Needless to say, the Mitsubishi bid had practically obliterated the chances of ADtranz landing the airport light-rail contract.

Unless Sanders could find a crack -- in the foundation of Mitsubishi's low bid.

His first target: Mitsubishi's subcontractors. Specifically, the subs Mitsubishi had designated in its bid as "independent S.F. minority- and women-owned businesses" (MWBs). Under a city affirmative action ordinance, the airport had made it a condition that 12 percent of the project be handled under subcontracting agreements with local MWBs. Sanders couldn't believe Mitsubishi had met that obligation at such a low price tag.

Just nine entries down the page.
Aha.
He didn't have to look far.

B & F Concrete -- slated to perform more than $4.2 million of work under Mitsubishi, the second largest piece of the MWB pie. For Sanders, it was the first bit of good news in a week and a half. The company listed a Hayward address, a fair hint it wasn't S.F.-based; that made one likely breach of the local legislation.

Four entries farther down, the crack widened. B & F's Concrete's address, 1970 National Ave., Hayward, was also claimed by Casey Fogli Concrete Contractors, a white-owned firm. It seemed B & F was not really independent. And maybe it was a front.

His suspicion piqued, Sanders set aside the Yellow Pages. He hired a private eye. The gumshoe was able to further discredit B & F's claims to being a bona fide local minority firm by using surveillance and public records. And he raised similar doubts about another Mitsubishi subcontractor -- Metalset Inc., which was in line for the most MWB work, to the tune of $4.9 million.

If the exercise sounds distasteful and wholly self-interested, Sanders won't concede the point. "We think the social goals are worth it," he says of the city's affirmative action ordinance. "We also think the law should apply to everybody."

In the ensuing months, Sanders' detective work would lead ADtranz to the brink of snatching the light-rail contract from Mitsubishi. It also touched off an unprecedented bureaucratic battle in S.F. that has revealed some essential realities of affirmative action in the city: The policy does not exist in an ethical vacuum. It is vulnerable to abuse, and checks on exploiters are inconsequential. Legitimate MWBs lose when the city bureaucrats fail to mind the store. The universe of beneficiaries is itself racially and ethnically fractured. The agency with responsibility for monitoring compliance on big contracts has been a paper tiger. It's hard work to make affirmative action successful. Moreover, these truths have been flushed out into the open at a very delicate time.

For one, the local ordinance under which S.F. steers business to its minority- and women-owned firms expires June 30. Before a replacement ordinance is introduced, the city must justify it legally, a time-consuming job that will entail both public hearings and the commissioning of a so-called "disparity study."

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