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A Letter To North Carolina Department Of Transportation And FAA

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A Pattern Of Violations And Noncompliances With State And Federal Regulations Results In Abuse Of Small And Disadvanteged Businesses

A Pattern Of Violations And Noncompliances With State And Federal Regulations Results In Abuse Of Small And Disadvanteged Businesses


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  • 1. NORTH CAROLINA DEPT. OF TRANSPORTATION AND FAA A PATTERN OF VIOLATIONS AND NONCOMPLIANCES WITH STATE AND FEDERAL REGULATIONS RESULTS IN ABUSE OF SMALL AND DISADVANTAGED BUSINESSES Smith-Reynolds Airport and City of Winston-Salem West Clemmenonsville Ext. RE: Project Number – 36237.26.5.2 & 7.2/Smith-Reynolds Airport My company, R.A.L. Grading and Demolition, a disadvantaged business enterprise (DBE) certified in the state of North Carolina, executed a contract with Mainline Contracting, the prime contractor for a Airport Improvement Project located at the Smith- Reynolds Airport in Winston Salem, North Carolina. Our company, R.A.L. Grading and Demolition, initiated contract responsibilities with Mainline Contracting on October 19, 2008 although the actual contractual agreement was not executed until November, 2008. My contract responsibilities for this federally-assisted project, specifically limited to hauling stone and dirt, included well-defined state and federal pertinences affecting “disadvantaged business enterprises” and “Assurances for Airport Sponsors”. Notably, we have experienced compliance failures stemming from negligence, possible fraud, collusion and coercive practices engaged by both public officials and the prime contractor. Failure to comply with regulations outlined by the Office of Federal Contract Compliance, Federal Acquisition Regulations, US Department of Transportation [49 CFR Par 26], North Carolina Department of Transportation and US Department of Transportation “Prompt Pay” stipulations, have resulted in grave damages to my company and many small hauling firms subcontracted by my firm. Moreover, federally supported transportation and aviation projects reportedly follow the approach of providing opportunities for inclusion while reducing barriers for disadvantaged business enterprises. We have found however, there are substantial differences in compliance and enforcement of federal and state regulations under North Carolina’s Airport Improvement Program, specifically the “block grant program” for aviation-related projects. North Carolina’s Department of Transportation relegates compliance and enforcement of civil rights and DBE programming (Disadvantaged Business Enterprise programs) to local airports, some of which lack staffing or requisite DBE mandates. The state, in effect, acknowledges no procedure or requirement to address noncompliance or violations of federal and state regulations without Federal Aviation Administration guidance. Unfortunately, Federal Aviation Administration chooses not to take advantage of its power to condition aviation-related spending to control abuses of civil rights, fair trade practices and disadvantaged business program regulations - often referring compliance and enforcement responsibilities back to the state. Licentious compliance and enforcement practices by small airports, the State of North Carolina and the Federal Aviation Administration have given rise to abuses of disadvantaged business enterprises. Consequently, R.A.L. Grading and Demolition has suffered losses related to nonpayment for work accepted and in place. Financial losses for work performed and accepted
  • 2. NCDOT/FAA (Pattern of Violations) RAL Grading and Demolition Page 2 currently total $657,000.00. Losses resulting from unsubstantiated termination approximate 1.6 million dollars. As a small disadvantaged business, I cannot sustain my business nor a livelihood battling abuses perpetrated by public officials and large construction companies. To that end, your assistance is requested. To summarize, the Federal Aviation Administration, Mainline Contracting, AVCON, North Carolina Dept. of Transportation and Smith-Reynolds Airport continue to permit prevailing practices that marginalize and destroy small businesses. Because public agencies have not taken measures to address noncompliance of federal and state laws, small and disadvantaged firms are forced out of business. To the extent that practices permitted under federal and state regulations allow differential treatment of subcontractors and disadvantaged businesses through nonpayment for approved work, coercion, unfair trade practices, collusion, fraud…, an implicit message is sent that resonates a fundamental inequity in the significance of small, disadvantaged businesses and subcontractors. The act of privileging prime contractors and local airports by issuing a legal carte blanche for abuses of regulations should be understood against the attached outline of evidence highlighting blatant violations of the following regulations: Noncompliance with 49 CFR Part 31/ Evidence of “fraud” as mandated under 49CFR Part 31 . Mainline processes documents substantiating payment to R.A.L. Grading and Demolition for a change order in the amount of $51,536.25. However, payment of $51,536.25 was never issued to R.A.L. Grading and Demolition (See Attachment A); . Misrepresents/Fraudulently reports cumulative earnings and payouts to R.A.L. Grading and Demolition on DBE Reports for the periods 10/19/08 – 11/25/08 and 11/26 – 12/25/08 (See Attachment B); . Misrepresents/Fraudulently reports payouts for the period 12/26 – 01/25/09. Actual payout amount was $189,864.98. Discrepancies in reports discussed via e-mail correspondence (See Attachment C – Discrepancies outlined in e-mail correspondence between Mainline Contracting, Mark D’Angelo [consulting engineer], and Smith- Reynolds Airport); . Mainline alleges R.A.L. does not provide lien waivers for work performed by subcontractors. Mainline contract stipulations mandate submission of lien waivers prior to issuance of payouts. R.A.L. received several contract payments from Mainline. Prerequisite for release of payments included submission of lien waivers; (See Contract
  • 3. NCDOT/FAA (Pattern of Violations) RAL Grading and Demolition Page 3 Document/Attachment J) .Mainline submits invoices for A Precast Company, as a supplier of materials. However, A Precast Company, primarily owned by the principal of Mainline, is documented at two separate addresses on four invoice submittals to Smith-Reynolds Airport for approval (See Attachment F). Practices of Coercion/Retaliation . R.A.L. Grading and Demolition was forced to request intervention from Smith- Reynolds Airport and the North Carolina Department of Transportation in order to receive payment for work satisfactorily performed and accepted; . R.A.L. was directed to sign lien waivers denoting conflicting payout amounts as a requisite for receipt of payments. R.A.L. executed pay application in the amount of $190,153,25 for the period 12/26/08 – 01/25/09 using invoice estimates. Mainline directed R.A.L. to sign a pay application in the amount of $199,467.53 per engineer’s approved measurements. Lien waiver was altered and actual payout amount to R.A.L. was $189,864.67 (See Attachment H); * Actual measurements/quantities reported by the project engineer were never made available to R.A.L.. Consequently, R.A.L. submitted pay invoices based on truck sizes per agreement with Mainline Contracting. The actual engineer’s measurements were never made available to R.A.L. Grading during performance of contract responsibilities. Mainline’s billing for quantities were not aligned with engineer’s measurements but engineer approved Mainline billing. This practice suggests noncompliance with Assurances (Airport Sponsor) consummated by NCDOT and Smith-Reynolds Airport/ Assurances (Airport Sponsors) Federal Regulation (C) No. 17. (See Attachments D, F, and H) . R.A.L. Grading and Demolition requested intervention from the North Carolina Department of Transportation ( Rick Barkes, Project Manager; Gene Conti, Secretary of the Dept. of Transportation, Jim Trogdon, Chief of Staff for the North Carolina Dept. of Transportation; Roberto Connales, Deputy Secretary of the North Carolina Dept. of Transportation/Transit and Aviation; Jim Westmoreland, Deputy Secretary of the Dept. of Transportation/Transit and Aviation; North Carolina Airports Director; and, Zack Ambrose, Chief of Staff/ Office of the Governor) in an effort to secure payment for work satisfactorily performed. Mainline altered billing structure through change order to justify nonpayment [while submitting DBE Reports indicating payment issued consistent with change order, however no payment was actually issued to R.A.L.]
  • 4. (findings indicate evidence of fraud thereby violating 49CFRPart 31 NCDOT/FAA (Pattern of Violations) RAL Grading and Demolition Page 4 [Program Fraud and Civil Remedies]). Mainline intentionally withheld R.A.L. payments in retaliation for R.A.L. complaints to NCDOT administrators and complaint issued with the Office of the Governor. . Mainline engaged practice of canceling work day and later issuing a “Contract Default Notice” to R.A.L. Grading and Demolition for failure to perform contract responsibilities; . Mainline began practice of canceling work day, calling R.A.L. during early morning hours [6:00 a.m.] to pretentiously discuss Mainline’s intentions to pay R.A.L. for outstanding delinquent payments but avoids discussing payments and inquires about R.A.L.’s plans to assign trucks to the job site. R.A.L. began contacting the project engineer to verify work cancellations once R.A.L. realized that Mainline was attempting to default R.A.L. and not pay for work performed. However, although the project engineer confirmed work days per information provided by Mainline (prime contractor), Mainline would cancel work day after R.A.L. trucks arrived and refuse to provide a written cancellation. R.A.L. trucks remained on job site awaiting written cancellation order. Mainline informed R.A.L. that written work cancellation was forthcoming but refused to issue written work cancellation order. Smith-Reynolds Airport engineer released R.A.L. trucks after several hours on site. * The aforementioned practice represents harassment and retaliation and violates: 49CFR Part 26.47 supporting failures to administer DBE Program in good faith, 49CFR Part 26.37 [Recipients’ failure to monitor the performance of program participants]; 41 CFR Part 60 Office of Federal Contract Compliance Programs, Equal Employment Opportunity; Assurances/Airport Sponsors/Federal Regulations (Nos. (C).34/Policies, Standards, and Specifications; and, (C) 35/Disadvantaged Business Enterprise; Executive Order 11246 – Equal Employment Opportunity; Collusion . Smith-Reynolds, AVCON Engineering and NC Dept. of Transportation accept and approve pay invoices submitted by Mainline Contracting that represents inflated quantities and inconsistent measurements as outlined by the project engineer. (See Attachment F, footnote 2). . Mainline issues statement verifying that payments were issued per engineer’s quantities. NCDOT and Smith-Reynolds Airport were aware payments were not issued consistent with the engineer’s quantities (See Attachment H).
  • 5. NCDOT/FAA (Pattern of Violations) RAL Grading and Demolition Page 5 Contract Breaches . Mainline Contracting initially breached contract stipulations by failing to pay R.A.L. in accordance with “Prompt Pay” regulations outlined in 49 CFR Part 26.29; NCGS 22C-3; NCDOT DBE Program Regulations (DBE Program regulations specify payment to subcontractors within seven days of payment to prime/general contractor. Breaches were incurred for pay applications submitted for the period October through November, 2008 and January 25, 2009 thru February, 2009 (See Attachment B); . Mainline Contracting refuses to submit DBE Participation Reports and accurate DBE/MBE/WBE (Disadvantaged Business Enterprise/Minority Business Enterprise/Women Business Enterprise) report as required. However, NCDOT and Smith-Reynolds Airport continue to issue payments to Mainline Contracting. . Smith-Reynolds Airport, NC Dept. of Transportation, North Carolina’s Governor, North Carolina legislators, NC Attorney General and US Dept of Transportation FAA had knowledge that federal and state regulations/statutes were being violated, and, were negligent in acting to address noncompliance, civil and criminal violations. All public entities continue a practice of failing to enforce both state and federal laws . Mainline Contracting failed to reduce retainage withholding based on contract stipulations. Smith-Reynolds Airport attorney arguably presents a rationale to reduce retainage withholding on the prime contractor [Mainline Contracting] using state statute, 143-134.1(b1) which does not permit the owner to “retain more than 5% of any periodic payment due a prime contractor”.] on public contracts, to substantiate reduction of retainage (See Attachment G). However, Smith-Reynolds Airport, FAA nor NC DOT required Mainline (prime contractor) to comply with all provisions outlined in 143-134.1, specifically , 143-134.1 (b); 143-131.1 (b(3); 143-134.1 (b6) and (e). (See Attachment J). Again, NCDOT, FAA and Smith-Reynolds Airport failed to comply with the obligations outlined in 49CFR Part 26.37 (Recipient’s responsibility for monitoring); and 49CFR Part 26.47 (Failure to administer DBE Program in good faith). All responsible public entities failed to apply uniformity in the application and enforcement of federal and state laws, therefore permitting abuses and losses to the subcontractor. Moreover, NC Dept. of Transportation has a zero retainage policy on Federal Aid projects which was instituted solely due to DBE regulation changes. NCDOT regulations limit retainage withholding against subcontractors to not more than 3%. Smith-Reynolds Airport exercised discretion to not apply NCDOT Retainage Policy for Federal Aid projects to this contract, exercising powers outlined in NC General Statute 63-54 Federal Aid.
  • 6. Mainline withheld 10% retainage or (per contract stipulation - no greater amount NCDOT/FAA (Pattern of Violations) RAL Grading and Demolition Page 6 than the owner [Smith Reynolds Airport] withheld against Mainline). Mainline breached contractual agreement by failing to pass retainage reduction of 5% to R.A.L.. Smith-Reynolds Airport, NCDOT and FAA failed to enforce state and federal regulations by approving invoices and issuing payments with knowledge of state and federal violations/noncompliance. . NC General Statute 143.131.1 was selectively enforced to benefit the prime contractor while no efforts were made to address the legal rights of the subcontractor pursuant to 143.131.1(3), (b6) or (e). Reference to 49CFR Part 18.36 is made to substantiate applicability of North Carolina General Statute in lieu of federal regulations pertaining to retainage. (See Attachment G [e-mails germane to retainage reduction]). Ten pages of e-mail correspondence between Smith Reynolds Airport attorney and FAA District Assistant Manager (Larry Clark). . Retainage withholding was reduced by Smith-Reynolds Airport. Withholding was reduced to 5%. Mainline continued to withhold 10% retainage against R.A.L. in violation of contractual agreement (See Attachment G); . Mainline Contracting failed to reconcile billing and payments per contract specification. Contract specifications indicate billing procedures must be consistent with “engineer’s measurements”. A arbitrary and capricious process was established by Mainline to determine quantities of materials hauled (See Attachment B,C,D and H); . NC Dept. of Transportation executed a “Memorandum of Agreement with Smith- Reynolds Airport” relinquishing responsibilities for “Civil Rights and Disadvantaged Business Program obligations to Smith-Reynolds Airport with knowledge that Smith-Reynolds Airport did not have the requisite DBE Liaison staff per contract requirements nor a DBE Program. Failure to comply with federal regulations and contract Assurance Agreement has substantially contributed to damage and losses to R.A.L. Noncompliance with the following regulations: 49CFR Part 18/Uniform administrative requirements for grants and cooperative agreements to state and local governments; 49CFR Part 26/ Participation by Disadvantage Business Enterprise in Department of Transportation Programs; Assurance Airport Sponsors (No. 5a/Preserving Rights and Powers; No. 30/Civil Rights; 29CFR Part 3 – Contractors and subcontractors on public building or public work financed in whole or part by loans or grants from the United States; 41 CFR Part 60/Office of Federal Contract Compliance Programs, Equal Employment Opportunity, Department of Labor (Federal and federally assisted contracting requirements).
  • 7. NCDOT/FAA (Pattern of Violations) RAL Grading and Demolition Page 7 . North Carolina Department of Transportation serves as one of ten “block grant states”, receiving grant funds from FAA on behalf of small airports. NCDOT’s contractual agreement with FAA mandates development of a DBE Program for all airports for which NCDOT receives “block grant” funds. NCDOT failed to ensure development and implementation of a DBE Program for this project. NCDOT also failed to comply with requirements to assign a DBE Liaison to address DBE compliances. Such failures and negligence resulted in harm to R.A.L. (including, but not limited to: nonpayment for work performed and accepted; unsubstantiated termination of contract; loss of personal, commercial and financial sustainability; injury to R.A.L. subcontractors – including loss/dissolution of businesses); . North Carolina Dept. of Transportation and Smith-Reynolds Airport were aware that Mainline Contracting had subcontracted R.A.L. Grading and Demolition under a separate contract within the geographical area located in the “covered area” affecting DBE goals on the Smith-Reynolds Airport Project. NCDOT and Smith-Reynolds Airport were aware and continue to have awareness that Mainline Contracting fraudulently submitted documents regarding DBE Participation for the second project, and Mainline failed to pay R.A.L. and all vendors and subcontractors for the second project. NCDOT and Smith-Reynolds Airport failed to enforce “Requirement Affirmative Action” under 41 CFR Part 60-2. Accordingly, losses and damages to R.A.L. Grading and Demolition have been aggravated as R.A.L. Grading is unable to secure payment on two separate projects (See Attachment K). At present, R.A.L. Grading and Demolition believes the aforementioned acts entail willful and intentional violations/non-compliances with federal and state laws resulting in damages to R.A.L. We believe the State of North Carolina, the North Carolina Dept. of Transportation, Smith-Reynolds Airport, AVCON Engineering and Mainline Contracting have subverted laws in order to protect and benefit Mainline Contracting. The overwhelming majority of evidence compiled by R.A.L. Grading and Demolition suggests NC DOT, Smith-Reynolds Airport and AVCON Engineering did not impose substantive requirements or limits on Mainline Contracting. Hence the following additional violations ensued. NCGS-54(c) Federal Aid. NCGS 63-66. Administration of Article; powers of Department of Transportation NCGS 63-70. Acceptance, receipt, accounting, and expenditure of State and federal funds NCGS 63-71(b) Receipt of federal grant
  • 8. 29 CFR Part 3 29 CFR Part 5; 5.5(a) NCDOT/FAA (Pattern of Violations) RAL Grading and Demolition Page 8 41 CFR Part 60 41 CFR Part 21 49 CFR Part 26 49 CFR Part 29 14 CFR Part 13 14 CFR Part 16 49 CFR Part 21 49 CFR Part 26 Subpart F Section 26.105 Executive Order 11246 Title VI 49 U.S.C. 47106(d) 49 U.S.C. 47111 (d) 49 U.S.C. 47122 49 CFR 26.103(b) Pub.L. 97-248 96 Stat. 324, USC 519 (b) I believe laws help form prevailing values and practices. Therefore, to the extent that public entities and large private companies are allowed to violate laws and serve as predators on small businesses and working poor citizens - this nation and the State of North Carolina play a complicit and sometimes overt role in perpetuating practices of inequity and application of a separate standard of justice. Submitted by: Nathaniel Davis, President R.A.L. Grading & Demolition 4406 Old Wake Forest Road Suite 205 Raleigh, NC 27609 (919) 524-6475