Halting of P.R. Contracts Allows Many Exceptions

By PAT MAIO
Staff Reporter

L.A. Mayor James Hahn's recent directive that key departments review and cancel outside public relations work does not include certain key P.R. functions that will require the city to continue contracting out work.

Hahn's directive last week to phase out P.R. contracts, which counters the long-standing practices of his administration and others, appears to be narrower in scope than first implied and does not cover contracts to buy or place advertising in newspapers, radio or television.

Nor does it include outreach to residents and neighborhood groups about a city department's programs.

"The mayor's memo doesn't mean to cancel marketing and advertising or community relations contracts," said Yusef Robb, Hahn's press deputy.

In the April 26 memo, Hahn wrote: "In light of the city's financial condition, the practice of contracting with firms which provide public relations services should be reconsidered. It is a much better practice that, whenever possible, these services are provided by city staff."

The mayor's letter followed questions raised by City Controller Laura Chick about the necessity of the outside P.R. contracts and came in the wake of Fleishman-Hillard Inc.'s decision to withdraw from its city contracts. The announcement by the St. Louis-based firm came after it had been drawn into the wider county and federal investigations of city contracting practices.

For several P.R. agencies, there is the feeling that the mayoral order does not apply.

"I don't want to be perceived for something we're not. We are not a P.R. firm," said Donna Lee Andrews, president of the Lee Andrews Group. "We do economic development programs and environmental compliance. I don't see us being part of the mayor's announcement."

On its Web site, the firm says it provides "technology/project controls, environmental compliance and public affairs consulting services." Public affairs work is generally regarded as a practice of public relations and marketing firms.

Lee Andrews was a Fleishman-Hillard subcontractor from 1998 to 2002, after which it became a prime contractor working directly with the Department of Water and Power under a $2.3 million annual contract running the "Green Power" program.

Since 1998, Lee Andrews Group has received $13.8 million in contracts, according to DWP records. Andrews said some of the money was funneled through her firm to others, but she would not say how much.

The firm was one of those mentioned by Chick in August 2002 when she criticized the DWP for wasting millions of dollars on failed renewable energy programs, including the "Green Power" program.

Among the items Chick cited were invoices for a $27,000 party at the Music Center to promote green power, and for other DWP-sponsored galas and events.

DWP's acting general manager, Frank Salas, said he is looking into whether Lee Andrews Group would be impacted by the Hahn restriction. "I have directed DWP staff to review all active and proposed contracts," he wrote in a faxed letter responding to a query.

In the April 26 letters sent to the commission presidents, general managers and department heads at the water and power, airport and port departments, Hahn also said that "such discretionary spending should be eliminated to the greatest extent possible." He requested the "immediate" supply of a list of all such contracts.

Robb said last week that only the airport, water and power and port departments had completed those reviews. He declined to give details.

Industry protest

"What this directive is geared toward are those accounts whose primary purpose is unpaid radio, television and newspaper coverage," he said. "We think the existing city staff can earn that media coverage, but there may be exceptions that we'll review on a case-by-case basis."

Rob Wilcox, a spokesman for Chick, whose office is auditing a number of these contractors doing business with the city, declined comment. "This is the mayor's directive and it's up to him to define it."

Beyond the DWP controversy, P.R. firms large and small have routinely done business with the city of L.A. for everything from the Ontario International Airport redesign to promoting use of the 911 emergency number. Total billings for such work easily runs into the millions of dollars an estimated $25 million from Fleishman-Hillard alone. In a city with limited amounts of corporate work, city billings were considered a godsend for many of these firms.

The president of the Public Relations Society of America, Del Galloway, called on Hahn to reconsider. "Suddenly stopping agency-developed and executed communications programs that help educate, inform and assist citizens seems no more sensible than suddenly ending all city contracts with advertising, law or accounting firms," Galloway said in a statement last week.

'Not clear to us'

Ron Rogers, chief executive of Rogers & Associates, the largest independent public relations firm in Los Angeles, said he hasn't received a clear message on the future of his firm's $622,000 contract with Los Angeles World Airports for an "integrated marketing campaign" to boost passenger traffic out of Ontario Airport.

Rogers described the LAWA contract as "very insignificant" financially to the firm.

Still, he said, "I haven't heard anything on ending the contract. It may or may not be ended. I think the airport is evaluating all the things laid out in the mayor's letter. It is not clear to us." (Rogers & Associates has represented the Business Journal.)

Even if some agencies see their contracts terminated or not renewed, there is wide expectation that the prohibition will be short-lived.

"These contracts will be put in suspense, but they will be back because government needs help," said Hal Dash, president of Cerrell Associates Inc., a political consulting and public relations firm.

Cerrell has contracts with the city's Community Redevelopment Agency to review communications products and services and has received about $78,000 on contracts with the city over the past two years, he said.

Meantime, firms that appear to be bearing the brunt of the mayor's order are smaller, mostly minority-owned firms that acted as subcontractors to Fleishman-Hillard.

"There's no more (city) work for us," said Patricia Suarez, president of Pasadena-based Suarez-Frommer & Associates Inc.

The firm, which acted as a Fleishman-Hillard subcontractor since August 2003 as part of the DWP's effort to urge Spanish-speaking customers to convert to low-flush toilets and raise other water quality issues, generated roughly $25,400 from the DWP account, according to department records.

She said the account represented about 5 percent of her firm's overall billings. "I didn't like the way it ended, but the winners were the Hispanics who heard about water conservation," Suarez said.

Apparently suffering less is IW Group, a Los Angeles-based firm focusing on the region's Asian communities. It has collected more than $203,500 from Fleishman since 2002, according to DWP records.

"It won't hurt our business," said Bill Imada, chairman and chief executive of IW Group. "In the scheme of things, our piece of the business was very small."

Even Fleishman-Hillard, a unit of Omnicom Group Inc. and recipient of the most city money for P.R. services, brushed off the loss of city business as having minimal impact on its overall business.

The agency will not disclose local revenue figures, but Chick has said it has won more than $25 million worth of city contracts since 1998.

Chick pushed for the DWP audit after refusing its request to pay the December and January invoices for Fleishman-Hillard's services. She explained that billings for those months didn't detail what services had been provided, while others listed charges of $50 to $100 for quarter-hour periods in which Fleishman employees said they had left phone messages or sent e-mails.

"We are not planning any layoffs," said Richard Kline, the firm's Western regional partner and general manager of the L.A. office. "In fact, we are recruiting for key strategic hires."

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