An investigation into the largest minority contract awarded by Denver found that communication errors led to a massive accounting gap that threatened to undermine the integrity of the city’s disadvantaged-business program.
Denver’s Office of Economic Development released to The Denver Post an overview of its study outlining key findings of a soon-to-be-released report, suggesting specific reforms to the Minority/Women Business Enterprise program that are designed to prevent a similar lapse in the future. The Post revealed the accounting discrepancy in May.
“The upcoming report will articulate recommendations that, if implemented, will work to ensure this type of situation never happens again,” Office of Economic Development executive director Paul Washington said in a statement.
The controversy centers on a $39.6 million contract awarded to Burgess Services for the mechanical work on Denver International Airport’s showcase hotel and transit center project. The city had set a goal that 30 percent of the project’s $365 million general contract — about $109 million — be set aside for minority- or women-owned businesses.
When announced in January, the Burgess deal was touted as the largest minority contract ever awarded by the city and was treated that way — despite the fact that only a fraction of the work actually was being performed by Burgess, which is owned by a black woman.
Mayor Michael Hancock, who received the maximum $3,000 donation to his re-election campaign from Burgess Services after the contract was given, opened the investigation in May.
Denver Auditor Dennis Gallagher also is investigating the city’s entire M/WBE program.
According to the document received Wednesday, there is disagreement about how to quantify what portion of the work is being completed by a minority- or women-owned firm.
Both Burgess and general contractor Mortenson Hunt & Saunders, referred to as the tri-venture, say the city’s ordinance allows for the entire contract to count toward the project’s minority-participation goal, including $23.3 million of work performed by one majority-owned firm.
The two entities argue that Burgess is managing the entire scope of mechanical work and is providing bonding capacity for the whole contract, and, therefore, has assumed 100 percent of the risk for getting the job done.
But the city now disagrees.
According to e-mail correspondence obtained by The Post through the Colorado Open Records Act and now acknowledged by the city, Denver officials told Burgess and the tri-venture that the entire contract would count toward the goal.
But, “in late fall of 2012, the Division of Small Business Opportunity realized there had been a miscommunication by staff members to Burgess, and in November 2012 advised (Burgess and the tri-venture) by e-mail … that 100 percent of the Burgess contract would not be counted toward the participation goal,” the report overview states.
The tri-venture disputes receiving this e-mail, the overview says.
Burgess’ contract swallows up more than a third of the participation goal for the DIA hotel and transit project.
Because the project already has been fully contracted, minority- and women-owned firm participation numbers will be inflated as a result of this communication lapse.
The company is owned by Denise Burgess, a black businesswoman who lacks the capabilities and certifications to perform the actual mechanical work. Her company was not certified in mechanical work from 2011 through 2014 but was certified in construction management, which is how she received the contract.
After taking a 2 percent management fee, Burgess awarded a majority of the construction work to RK Mechanical Inc., a large company that does not qualify for Denver’s M/WBE program.
Denise Burgess did not return requests for comment.
Although already several months late, the full report is expected to be available to the public in September.
Staff writer David Olinger contributed to this report.
Kristen Leigh Painter: 303-954-1638, kpainter@denverpost.com or twitter.com/kristenpainter
