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

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

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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

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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
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[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).

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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
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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).

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. 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)
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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