By Gregory Korte
The Cincinnati Enquirer

The city has bypassed the low bidder on six contracts to expand the Albert B. Sabin Cincinnati Convention Center, costing taxpayers more than $2.1 million, city records show.

The bid awards are the result of a 2002 ordinance that gives a preference to small businesses. The ordinance replaced the city's race-based program, which was ruled unconstitutional.

But in some cases, the city circumvented that same ordinance by awarding contracts that exceeded the low bid by more than $50,000.

City Manager Valerie Lemmie said she's working to meet City Council's goal of 30 percent small business participation in an effort to provide "economic inclusion" to segments of the community that usually don't get city contracts.

And she's been successful: The small business participation at the convention center is now 32 percent, while still keeping the project on time and $9 million under budget.

Yet the practice already has resulted in a lawsuit from a plumbing contractor who underbid a competitor by $332,398 and still didn't get the contract.

With bidding two-thirds completed, six of the 37 contracts have been awarded to bidders other than the low bidder.

But the city's purchasing ordinance doesn't say contracts should go to the lowest bidder. It says, "lowest and best."

City ordinances allow the purchasing manager to consider the Small Business Enterprise qualifications in determining the best bid. But when considering the SBE program, "the bid may not exceed an otherwise qualified bid by 10 percent or $50,000, whichever is lower."

Testifying before City Council in 2002, Assistant City Manager Rashad Young said there was no specific reason for the $50,000 or 10 percent limit, but that it seemed a "reasonable number" that would promote small businesses while protecting taxpayers.

But the city's purchasing manager, Bernadine Franklin, testified in a deposition that she's never invoked the $50,000 limit.

City Solicitor J. Rita McNeil said the language is ambiguous. And she said the city made that clear to bidders up front.

"The important thing is that they have to first meet the SBE requirement," she said. "In all the bidders meetings and information, it was clear that there was an SBE requirement they had to deal with."

Still, she said, the program is not inflexible. The 30 percent threshold is a "goal," she said.

"You're supposed to make your best efforts, and if you don't make your best efforts, you have to articulate why."

A shortage of eligible subcontractors may not be a good enough excuse. With major projects like the National Underground Railroad Freedom Center and the Ohio Schools Facilities Commission's rebuilding projects putting contractors in high demand, the city manager pushed through an ordinance last December to allow the city to accept small-business certifications from other cities.

In the lawsuit against the city, Thomas J. Dyer Co. accuses competitor Nelson Stark of illegally using "pass-throughs" - small business subcontractors who sign a bid but do little work - to get its small-business portion above 30 percent.

Dyer said Nelson Stark's subcontractors aren't even certified to do the work it has asked them to do. Nelson Stark denies the allegation in court documents, saying small contractors should be allowed to expand into other lines of work.

Dyer also claims that the city's ordinance "is a thinly veiled disguise used by the city to implement its preferential race quota system."

The city's affirmative action program was overturned in 1998 after a lawsuit by the Ohio Contractors Association, which said race-based preferences were unconstitutional under the U.S. Supreme Court's 1989 decision City of Richmond v. J.A. Croson Co.

So in 2002, City Council replaced its old race-based program with one that sets quotas for small businesses. The theory: African-Americans are more likely to own small businesses than larger ones, so incentives that benefit small businesses will indirectly benefit black-owned businesses.

Even if the ordinance is constitutional, Dyer argues, it's being applied in an arbitrary way - and that's costing taxpayers millions.

"They have a bureaucrat that certifies that this bid meets the SBE requirements. Then they'll pretend like the others don't exist," lawyer Robert Manley said.

The lawsuit was filed Feb. 20, and has already generated thousands of pages of court documents. Judge Thomas Crush is in the middle of a multiday hearing on a preliminary injunction that could stall the $145 million convention center expansion project.

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E-mail gkorte@enquirer.com