Dirty Pool

As the Bayview waits for a rebuilt MLK pool, the project, a stated mayoral priority, keeps gobbling money and time--making it the prototypical city contracting fiasco.

Barbra Viltz is a spokesperson for the neighborhood's pool advisory committee and is mad as hell about the delay. "Myself and the other little old ladies got this pool off the ground," the 64-year-old Viltz recalls. "We marched in front of the mayor's office in 1996. My daughter laughed. She said, "You old bats should sit down before you fall down; there will never be a pool, and if there is, the water will leak out.'

"They knew that damn pool would have problems from the beginning. It doesn't take two years to build a swimming pool. It's ridiculous that city money has been taken and wasted like that. Our esteemed mayor let this stupidity go on."

City records show that, during the past few years, Chiang's construction firm has been paid $28 million for work on an array of small city public works projects. One such job, a $4.5 million contract for the Richmond District Community Center and Gymnasium, was due to be completed in May 1999. Two years later, it is still not finished. A frustrated Public Works official wrote in a memorandum that "C.M. Construction is playing this paper writing delay game" on the project. The state labor commissioner fined Chiang $146,000, alleging that excessively low wages were paid to workers on the gym job.

A reasonable person might ask why Chiang's company, which had performed so miserably on the Richmond gym project, would be hired for the King pool, a mayoral priority. One answer to this question involves the methods used to select Public Works contractors in San Francisco. Those methods are not necessarily reasonable.

Public Works employees enjoy a lot of discretion in deciding who qualifies as the low bidder on a city construction contract; winning a bid is not simply a matter of submitting the lowest price. An array of requirements -- having a city business tax license, employing the correct number of minority subcontractors, putting decimals in the right place -- comes into play after a bid is made. Officials have the power to kill a low bid based on the technical violation of a particular rule or regulation, thereby giving the job to the next lowest bidder. Conversely, officials can decide to waive technical violations, or let a bidder correct them without penalty.

In March 1999, officials disqualified all six bids to build the King pool, on the basis that the lowest price submitted was a half-million dollars higher than the city engineer's estimate of how much the pool should cost. When the city put the job out to bid again a few weeks later, Chiang, who did not bid in the first round, won the prime contract, even though his $6.4 million bid was, still, more than $400,000 above the city engineer's estimate.

One of the losing bidders, Alvarado Construction Inc., filed a protest with the Human Rights Commission -- which has veto power over Public Works contracts -- asking that Chiang be disqualified because, in his bid, he improperly listed his wife as a subcontractor who would help satisfy city affirmative action requirements.

In San Francisco, a city contractor is required to use local minority- and women-owned businesses as subcontractors for a set percentage of the dollar amount of any particular job. The Human Rights Commission sets these quotas as a way of ensuring that governmental work goes to such "disadvantaged" companies, which have not, historically, been able to compete with richer, more established companies. There are strict definitions of ownership for disadvantaged firms, designed, among other things, to prevent the use of "front" companies that obtain government work under disadvantaged status, take a cut, and then pass the bulk of the work on to a "non-disadvantaged" firm.

In the end, some 20 percent of the MLK pool job was to have been done by minority-owned subcontractors, with another 4 percent done by women-owned subcontractors. To meet the quota for women-owned businesses, Chiang used a $675,000 subcontract with OWA Steel Inc. The choice of steel contractor does not appear to have been coincidental.

Starting in the early 1990s, Chiang and his wife, Lori O.W. Chiang, each had ownership stakes in C.M. Construction and OWA Steel Inc., according to the California Contractors State License Board. The Chiangs had other partners in each of the companies, and Robert withdrew as an owner of OWA Steel in 1997. Still, the two businesses are run out of the same warehouse-garage, a block from the MLK pool, in a building owned jointly by the Chiangs. Clearly, the two businesses are interlocked; when the pool contract was won by Chiang, Lori held ownership in each company, according to public records.

Because of Lori's ownership stake in both companies, C.M. Construction had violated city affirmative action rules, Alvarado Construction claimed. Indeed, city contracting regulations do not allow a disadvantaged prime contractor to meet its quotas by using a minority- or woman-owned business in which it holds ownership. The reason is easy to understand: Without such a prohibition, construction companies would form "minority-owned" or "women-owned" shadow companies in the names of their spouses or children, defeating the intent of these affirmative action programs, which is to spread government-contracting dollars to as wide an array of legitimate disadvantaged firms as possible.

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