The Philadelphia Office of Inspector General has found 11 prime contractors that used the same supply company as a "pass-through" to circumvent the city's minority-contracting rules on work done for the Philadelphia Housing Development Corp.
The contractors paid JHS & Sons Supply Co., a certified minority-owned business, merely to satisfy the requirement, while JHS provided no work on the jobs.
Inspector General Amy L. Kurland's office has found 19 PHDC contracts that included JHS as a pass-through. In most, a local heating and plumbing supply company, William Betz Jr. Inc., facilitated the arrangement and provide the supplies necessary for the work.
Through that arrangement, Betz received $640,000 worth of business intended for legitimate minority-owned businesses, Kurland said, while JHS was paid $70,000 to serve as the pass-through.
The arrangement was uncovered previously, in a PHDC weatherization contract with UGI HVAC Inc. as the prime contractor. In 2012, UGI and Betz both signed no-fault settlements with the Inspector General's Office, with UGI agreeing to pay $100,000 and Betz $128,000.
JHS also was removed from the city's registry of certified minority-owned businesses, and Betz declared itself ineligible for city contracts for two years.
Since then, the inspector general has continued to investigate contracts involving Betz and JHS.
Kurland's office found JHS used as a pass-through on 18 additional contracts, worth $4.2 million, with 10 additional contractors. All of those contracts were signed before JHS was removed from the registry.
Compliance agreements have been reached with eight of the 10 prime contractors involved. Most of those contractors were small businesses "that did not fully understand the city's antidiscrimination requirements," Kurland's office said in a statement. The compliance agreements are "general in scope," and do not include payments to the city.
Kurland said "it was clear from the beginning that this problem was widespread" but she said her office sought to bring companies into compliance "not to put them out of business."