More than a year after Wichita’s new airport terminal opened and record crowds passed through the $100 million terminal, small disadvantage business owners Cynthia and Willone Eubanks are still waiting to enjoy s piece of the pie.
By pie, we mean 6.5% of the total terminal construction price; the amount general contractors Key/Walbridge committed to subcontract to Disadvantaged (minority- and women-owned) Business Enterprises. For the Eubanks, owners of Lawrence KS-based Win Construction, their piece of the pie was a $3.8 million contract to purchase and install “architectural specialty” items in the new terminal building. However four years after securing the contract of their dreams, the company they built is closed, they’re being sued and hounded by their suppliers and Key Walbridge, the prime contractor on the terminal project, still hasn’t paid the company $1.3 million their owned.
The City of Wichita has accepted Win’s work as complete, and by late November 2015, KW had indisputably been paid by the Wichita Airport Authority for work Win completed as part of the contract. Nearly a year and half after the new terminal opened, why hasn’t Win been paid.
That’s exactly what Atty. C. Edward Watson, a partner with Foulston Siefkin LLP is trying to find out. The Eubank’s hired the firm to represent them in lawsuits with their suppliers and to help them get the money they’re due.
According to Watson, state law, Federal Department of Transportation regulations, and the Wichita Airport Authority DBE manual require prompt payment by contractors to subcontractors. According the Federal policies KW is required to pay its subcontractors within 30 days of receiving payment from the City. Kansas State law requires payment with 7 days.
Watson and the Eubanks are frustrated with KW, but they’re equally frustrated by the City of Wichita and the Wichita Airport Authorities failure to intercede, since they are aware of the situation. By law, the City of Wichita can demand KW either pay Win or return the money to the WAA.
“It’s either incompetence or indifference,” says Watson about the City’s unwillingness to take action.
Failure or Fumble?
The city’s failure to take action may foretell a much bigger problem with DBE participation on the terminal project. After both Terazzo USA, the other major DBE at the airport, and Win experienced major problems with KW, the Federal Aviation Administration began making inquiries. The City of Wichita, in an effort to get ahead of a potential problem, hired a consultant on contracting and compliance monitoring to conduct a review of DBE compliance efforts on the terminal construction project.
While the consultant’s report fell short of accusing the parties of fraud, it concludes, “a likely review of the program by the FAA will show the Wichita Airport Authority, KW and their subcontractors EII and WIN, failed to establish a contract and working relationship that met the Department of Transportation’s DBE guidelines.”
“None of these parties (WAA, KW, Win and EII) appear to have acted in bad faith, but their relationships appear not to have been structured with the requirements of the DOT DBE regulation sufficiently in mind,” wrote the consultant Robert C. Ashby, in his Feb. 11,2015 concluding report to the city.
According to Ashby, the terms of KW’s “purchase and Install” subcontract with Win failed to meet many of the Department of Transportation’s minimum standards. To count materials used in a furnish and install contract for DBE credit, the DBE “must be responsible for 1. negotiating the price, 2) determining quality and quantity, 3) ordering the material, and [4) installing and paying for the material itself.
After careful review, Ashby concluded Win’s contract with KW clearly failed to meet three of the requirements and possibly the fourth. From the very beginning the Airport Authority should have questioned Win’s “furnish and install” contract Ashby writes.
Under his contract, Win was required to buy architectural products he was to install from EII, a company that had a previous relationship with KW. EII set the price for the products, determined the quality and quantity, and ordered the material. While most of the installation work was done by Eubanks and his crew, KW signed — without Win’s knowledge — a separate contract with EII giving EII supervisory authority over Win’s work on the project. While Ashby says it remains unclear how much control EII had over Win’s installation work, the fact that the contract existed, makes one question the amount of control Win actually had.
Finally, KW set up a payment plan that required checks for Win’s work to be jointly written to Win and EII. The Department of Transportation has extensive guidelines for the issuance of joint checks, since they often indicate the DBE doesn’t have full financial control over their contract. Joint checks can be approved, but they ask the grant recipient to ask for additional documentation to make sure the process is legitimate.
“It does not appear that WAA sought, received, or reviewed documentation of the kind mentioned in this guidance. Nor does it appear that W AA employed some of the safeguards recommended by the DOT guidance,” wrote Ashby.
More than just awarding the DBE contracts, Ashby says, the Wichita Airport Authority had an obligation to make sure the contracts ran smoothly. Instead, WAA took a hands off approach. While a possibility exist that WAA and KW may skirt any damages or penalties from the DOT, just avoiding regulatory violations, shouldn’t be the goal, wrote Ashby in his report.
“The objective of the DBE program is not simply to avoid regulatory violations; it is to foster significant actual participation by DBEs in DOT-assisted contracts,” Ashby writes. “To prevent such a result, it
is important for recipients to be aware of and be involved in the ongoing relationships among prime contractors, DBE subcontractors, and suppliers to prevent contractual breakdowns before they happen, even if recipients would not ordinarily do so outside the DBE program context. Just as prime contractors and subcontractors have to operate differently in the DBE program than they do in other situations, so should recipients.
On the terminal project, the two largest DBE subcontractors, Terraazzo USA and WIN, both became involved in contract disputes with the KW. Both involved disagreements between KW or a supplier and the DBE subcontractor about certain technical aspects of the job. Both involved escalating acrimony and distrust between the companies.
“Timely, proactive interventions by recipients in DBE program situations can be justified and extremely useful, even when similar interventions may not be called for in other contexts.”
At this, the DBE program at the Wichita airport FAILED!