Labor union, congresswoman allege abuse of Navy laundry contract

A labor union and a California congresswoman have asked the Navy's inspector general to investigate allegations that a small business has skirted regulations on a Navy laundry contract.

In late October, Democratic Rep. Loretta Sanchez wrote to Vice Adm. Ronald Route requesting an inquiry into a $2.17 million contract award last September to EBS Supply, a small janitorial supply company in San Diego. The contract, tailored exclusively for companies under the Small Business Administration's HUBZone program , was for the laundering and delivery of shop towels for the Navy in California, Arizona and Nevada. The contract has one base year, with four one-year options.

According to an October Dun & Bradstreet report -- supplied to the Office of the Naval Inspector General along with Sanchez's letter -- EBS has only three employees, relatively few assets and no facility in Northern California, Arizona or Nevada.

The Dun & Bradstreet report, Sanchez said, suggests that EBS is unlikely to fulfill the requirements of a multistate laundry contract in which no less than 50 percent of the work must be carried out by EBS or another HUBZone firm.

"EBS Supply appears to be an unlikely choice for such a contract," Sanchez wrote. "EBS is a HUBZone qualified small business that primarily provides janitorial supplies … such as paper towels, lockers."

Route's office has yet to respond to Sanchez's letter and the IG's office did not return a call from Government Executive.

EBS officials also declined repeated attempts to discuss their laundry contract.

Complicating matters, employees for the former contract holder, Prudential Overall Supply, have alleged to their union, UNITE HERE, that their employer is still intimately involved in the contract. Prudential, based in Irvine, Calif., held the contract for five years, but elected not to bid on it again. It is not a HUBZone small business.

Spokesman Jerry Martin said Prudential was approached by EBS in September about subcontracting some of its work. Prudential, he said, agreed to take on the laundry services for San Diego and Nevada, as well as the delivery of the towels in the latter location. The company, he said, is not involved in the Northern California or Arizona portions of the contract.

It is unclear if Prudential, or any other subcontractor, is performing more than 50 percent of the work on the contract. "I really don't know," Martin said. "We're just the subcontractor in this arrangement."

In an e-mailed statement, the Navy said it was aware of the subcontracting arrangement and was monitoring the contract.

"While EBS Supply has subcontracted part of this effort, Small Business Administration regulations permit HUBZone contractors to subcontract provided it uses its own employees for 50 percent of the cost of the contract effort inclusive of options," said Heather Paynter, spokeswoman for the Navy's Fleet and Industrial Supply Center in San Diego. "Accordingly, the Navy will monitor performance for regulatory compliance throughout the life of the contract."

UNITE HERE also has raised questions about the Navy's bid award process.

Jason Oringer, a research coordinator with the labor group, noted that the solicitation for the contract originally was released as "unrestricted." In early September, however, the Navy reclassified the contract as a HUBZone set aside and the contract was quickly awarded to EBS Supply.

"The bid process here seems really strange," Oringer said.

The dispute over the laundry contract appears to be an extension of a long-running feud between UNITE HERE and Prudential.

In July, the labor union, which represents 50,000 workers in the laundry industry, including nearly 300 at Prudential, filed a complaint with the Labor Department alleging violations of wage, benefit, holidays and paid time off under the federal Service Contract Act at seven Prudential facilities in California and Arizona.

Prudential has denied the claims and said it meets all state and federal standards. The Labor Department is investigating the allegations.