DIA has backlog of expired concessionaire contracts, inequitable contracting process – What We Know!

DENVER — The contracts of some concessionaires on the Denver Worldwide Airport have expired and been in a holdover state for a number of years, permitting them to bypass the airport’s aggressive choice course of and leading to fewer alternatives for different companies, in response to an audit launched Thursday.

Denver Auditor Timothy M. O’Brien stated he examined how administration on the airport selects and contracts with concessionaires, and located that airport officers permit a few of them to keep away from the aggressive choice course of. O’Brien stated he additionally discovered that a number of contracts expired years in the past, however the companies have been nonetheless working within the airport.

In line with the 42-page audit, airport officers are supposed to make use of a variety course of referred to as “request for proposals” to approve concessionaires to do enterprise within the airport. This is applicable to meals and beverage areas in addition to retail retailers, duty-free shops, and passenger companies.

Nonetheless, DIA allowed some concessionaires to get across the aggressive course of as a advantage of the Premium Worth Concessions program. This system permits some, however not all, firms to barter their upcoming contracts immediately with the airport, and in flip bypassing the choice course of. O’Brien stated this prevents different companies from having the ability to compete for any worthwhile contracts, which is each unfair and inequitable.

“They need to have grabbed maintain of this a very long time in the past,” O’Brien stated. “By leaning into the established order, the airport is violating an government order and presumably blocking alternatives for brand spanking new distributors.”

In line with the audit, the airport could also be lacking out on income by not utilizing aggressive bidding for all contracts. As well as, the motivation program violates Govt Order 8, which requires a aggressive course of for all metropolis contracts besides in particular cases, O’Brien stated. Airport officers stated they imagine this system fell beneath particular circumstances within the government order and was permitted by DIA’s CEO, Denver Metropolis Council, and Denver Mayor Michael Hancock.

“Denver’s airport is without doubt one of the busiest within the nation,” O’Brien stated. “With tens of millions of individuals touring by means of, these concessions contracts are extremely profitable. Companies don’t want further incentives to need to function there.”

O’Brien stated the principles that decide which distributors get the best rankings are complicated, which makes it tough to equitably apply rankings throughout all of the concession companies on the airport. This system prices the airport about $500,000 a yr, however doesn’t seem to have any confirmed profit, O’Brien stated.

The Denver’s Auditor Workplace audited the concessions program in 2014 and advisable the airport assess the motivation program, however that analysis by no means occurred, O’Brien stated. Due to this fact, he’s now recommending the airport discontinue this system.

One other foremost situation O’Brien discovered was the backlog of expired contracts for present concessionaires.

Administration permits these companies to proceed working as in the event that they’re nonetheless beneath a contract even once they’re not. In some circumstances, this was taking place indefinitely. O’Brien additionally discovered that some companies are allowed to “maintain over” on the finish of their contracts. Contracts have clauses permitting this for particular circumstances, and airport officers permitted a three-year holdover for all contracts that have been going to run out throughout the pandemic.

Nonetheless, O’Brien stated his workplace discovered that this was taking place years earlier than the pandemic and with out restrictions on how lengthy the holdovers would final. In line with figures from the auditor’s workplace, 40% of the contracts that have been energetic in August 2021 had been in holdover standing since earlier than Dec. 31, 2019.

The typical size of time these contracts had been expired was greater than 5 and a half years. The longest holdover intervals have been greater than 12 years lengthy, in response to the audit.

Concessionaires that stayed within the holdover course of have been capable of circumvent the bidding course of, leading to much less income for the airport and fewer alternatives for different companies, O’Brien stated.

“It’s unfair to require some companies to undergo the aggressive course of whereas others can keep their preliminary contract phrases for years previous their expiration,” he stated. “The airport had poor excuses for a number of the unreasonably lengthy holdovers. It was profiting from exceptions meant just for emergencies and particular circumstances. Then, when an actual emergency hit, it fell even additional behind within the procurement course of.”

The auditor’s workplace advisable the next actions:

  • Discontinue the Premium Worth Concessions Program
  • Carry out a cost-benefit evaluation of the airport’s strategy to concessionaire contracting
  • Replace the concessions grasp plan
  • Overview held-over contracts
  • Set up and implement coverage for held-over contracts
  • Revise airport procedures for information retention

The airport has agreed with all these suggestions.

“I’m involved with how these issues have been allowed to go on for therefore lengthy,” O’Brien stated. “However I do imagine airport officers are receptive to creating the mandatory modifications going ahead.”