City allowing prime contractors to violate contract terms

City allowing prime contractors to violate contract terms

Published on October 23, 2025

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DENVER - The city's Division of Small Business Opportunity's inconsistent contract oversight and lack of sanctioning is allowing prime contractors to violate contract terms with the city, according to a new audit from Denver Auditor Timothy M. O'Brien, CPA. The audit found the division needs stronger city contract monitoring and improved prime contractor oversight for contract compliance.

"Disadvantaged businesses are negatively impacted when prime contractors are not held accountable and are allowed to breach contract terms with the city," said Auditor O'Brien. "The division's responsibility to Denver's equitable economy is in prime contractor oversight and ensuring small business subcontractors are supported. Part of that is levying penalties when appropriate."

The Division of Small Business Opportunity connects small, minority, and women-owned businesses with contracting opportunities with the city. It certifies businesses, sets the city's goals to use certified businesses, establishes certified business participation requirements, and monitors and enforces city contracts with those businesses. As of July 2025, the division was overseeing 3,149 contracts.

We found the division is not ensuring prime contractors are making prompt payments to subcontractors, not holding businesses accountable for noncompliance, not visiting project sites to confirm certified business are performing work, and is limiting opportunities for small or disadvantaged businesses to participate in available city contracts.

Contract compliance

We found issues involving prime contractors not reporting payments to subcontractors in the required software system for monitoring and processing payments, overdue payment reports, and missing documentation needed to provide adequate oversight for payments made to certified businesses.

Because the division is not sanctioning any prime contractor for these issues, financially or otherwise, businesses are not incentivized to comply with program or contract requirements.

The division said staff limitations prevent them from reviewing all contracts every month. Instead, staff focus on priority contracts with high community visibility and mayoral directives - relying on subcontractors to report delayed payments. These issues hinder the division's ability to accurately calculate the city's progress toward meeting certified business use goals.

"Not having enough staff for timely payment-report review is problematic for the division. It's troubling that that prime contractors can, without penalty, pay subcontractors late," Auditor O'Brien said. "Subcontractors shouldn't have to ask the city to enforce contract terms. The city needs to be proactive, not reactive."

Monitoring contracts

Adequate contract monitoring means contracts are closed with the information necessary to ensure compliance with program and city requirements. We found contracts with the city may be closed without resolving discrepancies - increasing the risk that certified business goals are not met.

We also found prime contractors often waited until division compliance managers requested information during the contract closeout process before submitting documentation. Incomplete or untimely documentation prevents the division from ensuring contract compliance with small business program requirements.

For five of 13 contracts we reviewed, we found prime contractors increased the contract value without immediately notifying the division, despite requirements to do so by city ordinance. We also found some projects were fully paid but still open in the software system. Notification delays may result in contracts closing without confirmation of compliance with program and city ordinance requirements. This creates a risk of prime contractors taking advantage of smaller diversly-owned businesses in city contracts through discrimination, late or reduced payments, or unfair termination.

"Allowing prime contractors to violate contract terms undermines the program's goals and stops the division from fulfilling its purpose of helping certified businesses compete for government contracts," Auditor O'Brien said.

Site visits

Although the division's policies and procedures say teams should conduct site visits for certified businesses to determine whether work is being performed, we found the division is not doing this for every project. We found five closed contracts where 23 certified Disadvantaged Business Enterprise businesses did not have a required site visit performed, yet their participation for the project was counted.

By not completing a site visit, the division cannot confirm a certified small business is completing the work they were contracted to perform.

Procurement process

The division is not always included during the procurement process for city contracts despite division review requirements. Division leaders said agencies must tell them about upcoming contract opportunities instead of the division identifying contracts they were not informed about. Inconsistent notification practices have led to missed contract reviews, resulting in small or disadvantaged businesses being excluded from city procurement efforts and other missed opportunities.

"A lack of communication and poor procedures are getting in the way of the city fostering small-business growth and financial success," said Auditor O'Brien.

Missing contracts

The city's main contract database, Jaggar; the division's system for monitoring contracts with program requirements, B2Gnow; and the city's official system of record, Workday, are three separate software programs.

Out of the 250 contracts we reviewed in Jaggaer, six were missing in B2Gnow. According to division managers, contracts are missing from B2Gnow because of problems with importing information from Workday. Procedures require staff to verify contracts are imported weekly and to manually enter missing contracts, but there is no supervisory review to ensure all contracts are entered from Workday.

Incomplete and missing contract records have further potential consequences. The division submits quarterly reports to department heads, the Denver City Council, and the mayor. These reports outline the division's progress toward meeting its annual goals for small and disadvantaged business participation. Without complete contract data, these reports may be inaccurate and the city may not know whether it is truly meeting its annual goals or what needs to be fixed.

Unfortunately, the division disagreed with our recommendation to regularly reconcile contracts within Jaggaer or with city agencies to ensure the division is reviewing all contracts for small business program requirements, citing a review process it began in 2024. Since the division disagreed, we are unable to follow up on it, but we will be keeping it on our risk tracker for future audit consideration.

"I am disappointed by the division's decision. Without meaningful oversight, late payment reports and contract noncompliance may persist," Auditor O'Brien said.

AUDITOR TIMOTHY O'BRIEN, CPA
Denver Auditor

Denver Auditor's Office

201 W. Colfax Ave. #705 Denver, CO 80202 Email: [email protected] Call: 720-913-5000 Follow us on Facebook Connect with us on Twitter

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