Owners of small construction companies and subcontractors who worked on a federally funded project at Smith Reynolds Airport in Winston-Salem are still looking for their money.  

The project, administered by the North Carolina Department of Transportation, began in 2008. As time for the first paycheck rolled around, no subcontractors were paid.

 
“We let that one go. The second one comes by and we didn’t get paid,” said one of several contractors who wish to remain anonymous for fear of retaliation.  

By April 2009, all subcontractors’ contracts were terminated and many were thrown off the job.  

“On federally funded jobs, when the federal government lends you money, the company that borrows that money is supposed to have a DBE program – that’s to ensure that minority people, (and) small businesses are paid properly,” a contractor said. “Because there’s so much thievery that they put this stuff in place so that they (minority businesses) are ensured to get their money.”  

The source said Smith Reynolds never even had a Disadvantaged Business Enterprise program for starters.  

“There are rules and regulations that you have to go by to make sure everybody gets paid,” the source said.  

According to dot.gov: “DOT DBE regulations require state and local transportation agencies that receive DOT financial assistance to establish goals for the participation of DBEs. Each DOT-assisted state and local transportation agency is required to establish annual DBE goals, and review the scopes of anticipated large prime contracts throughout the year and establish contract-specific DBE subcontracting goals.”  

When inquiries were made about why subcontractors weren’t compensated for months of work, NCDOT phoned Smith Reynolds Airport and requested information on the issue. Mainline Contracting, the primary contractor, said the reason was because subcontractors did not have their paperwork in order. The sources said larger companies frequently use that excuse.  Sources also said that according to federal rules and guidelines it was unlawful for subcontractors and other companies to be fired.  

“NCDOT can’t throw us off the job. The FAA can’t throw us off the job. What they would have to do (to make the firing legal) is they would all have to get together and see if his reasoning for throwing us off the job was legitimate and all would have to sign off on it,” the contractors said.  

While subcontractors calculated what they believed they were owed, the amount did not coincide with what NCDOT thought they were owed or with what the bonding company thought they were owed. There were discrepancies between each group’s figures.  

In an initial document signed by Mainline Contracting Inc. in December 2008, a few months after construction on the project began, the document agreement read as follows:  “The undersigned certifies that to the best of the Contractor’s knowledge the work covered by this Application for Payment has been completed in accordance with the Contract Documents, that all amounts have been paid by the Contractor for the work for which previous Certificates for Payment were issued and payments received from the Owner, and that the current payment shown herein is now due.”

A rewritten Application for Payment was signed in August 2009:  “The undersigned certifies that to the best of the Contractor’s knowledge the work covered by this Application for Payment has been completed in accordance with the Contract Documents, that all amounts have been or will be paid by the Contractor for the work for which pervious Certificates…”  

All legal documents were obtained through the Freedom of Information Act. Emails were exchanged between members of NCDOT, AVCON Inc. (an engineering and planning firm for the project and the airport’s consultant) and the FAA.  

In an email from Mike Darcangelo, regional manager of AVCON Inc. to Frank Newton, an attorney for Smith Reynolds Airport and the Airport Commission, he wrote:  “Frank (and all)- on page C-3 of the Contract between Mainline and the (company), paragraph 6.1.2 it says: ‘With each application (excluding the first pay application for payment, Contractor shall submit a certified report stating that each Subcontractor has been paid for 90 percent of the bid item quantities and/or any stored materials…’ The term ‘lien waiver’ has been used since January, but the reference paragraph uses the term ‘certified report.’”  

Newton asked Darcangelo if they should modify the requirement to comply with the strict language of the contract and asked if the Commission should “accept Mainline’s ‘certification’ given that it might be inaccurate.”  

Darcangelo said he didn’t think so but “whatever makes sense from the legal side of the house is OK” with him.  

Not only was the documents’ wording altered but also before this some of the Payment for Applications were also incorrect, stating that subcontractors had been paid when they hadn’t.  

Newton responded that the plain words of the contract did not give Smith Reynolds Airport the right to impose the conditions they had imposed on Mainline (the requirement of supplying lien waivers as a condition of payment) “for work that plainly has been performed.”  

“Under one view, we should pay Mainline for all the work it has performed and let the subs work it out with Mainline or its surety. That is what I think the plain text of the contract requires,” Newton writes. “On the other hand, I am concerned over the inference that Federal and State law overrides the plain words of the contract and if we pay Mainline, the Airport will be at risk of losing its grant. I am also concerned that if we pay Mainline and they do not pay the subs that the surety may claim that the Airport had a duty to ensure the money got to where it belonged- the subcontractors- and failing that, the Airport is liable to the surety for any amounts it winds up having to pay.”  

In reality, the project’s contract did not say that Mainline is supposed to get paid while subcontractors work out their payment with the insurance company. If Mainline gets paid (by NCDOT, FAA, etc.) then so should subcontracting companies. Here Newton basically suggests a breach of contract.  

Richard Walls, director of aviation for NCDOT, sent Smith Reynolds Airport Director Larry Scantlin a letter deeming “that all amounts have been paid by the Contractor for work for which previous certificates were issued” inaccurate. He also said that the Department noted that the Application for Payment forms were altered to state, “have been or will be paid.”  

“In the Department’s opinion, this is an attempt to circumvent the requirement that prompt payment be made to subcontractors and is a material violation of (requirements) as it relates to DBE subcontractors,” he writes.  
Walls said that depending on the timeliness of resolution DOT would take legal action against Smith Reynolds as required.  
That never happened.  

Scantlin responded by saying that the modifications were made by Mainline without any knowledge of the airport, as they went unnoticed. He said had they noticed the changes they would not have accepted the certifications.  NCDOT met with the FAA, the Department of Aviation, Mainline Inc., the Airport Commission of Forsyth County, and engineers and their lawyers in May 2009. The meeting was to determine if they could go forward with the job without violating the rules and regulations of the federal contract. They decided that they would continue the project knowing that they were going forward illegally.

 
Sources said that after they were thrown off the job, NCDOT got other companies to replace them and didn’t pay them either. Sources said all subsequent subcontractors and companies were small businesses and minority owned.

 
“This stuff goes on all over the United States,” a source said. “It’s just devastating to small businesses, not just locally but nationwide.”

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