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Los Angeles city controller criticizes bidding process in airport contracts worth $593 million

Though city policy calls for three bidders per competitive contract, the Los Angeles airport department has been awarding hundreds of millions of dollars in work to companies based on only one or two bids, according to a new audit released Monday.

The report by the city controller's office questions the effectiveness of competitive bidding practices at Los Angeles World Airports, the operator of Los Angeles International Airport, and calls for an overhaul of the agency’s contracting procedures.

“LAWA must scrutinize and reform its bidding processes,” Controller Ron Galperin said. “Otherwise we have no way of knowing whether we are getting the best value for our money, which is what the competitive-bidding process was created to ensure.”

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Auditors did not conclude that the lack of bids is evidence of a rigged contracting process but said the findings merit much closer examination.

The review, conducted by KH Consulting Group for the controller, found that in fiscal year 2014-15, the airport department awarded $593 million in contracts for goods and services.

About 28% of the solicitations received only two bids and 30% had only one. The audit stated the contracts were worth about $356 million.

Construction contracts awarded during the multibillion-dollar modernization of LAX, the nation's third-busiest airport, were not scrutinized.

The report noted that in some instances, the airport department was limited in its ability to obtain at least three bids per contract because the Federal Aviation Administration approves only one vendor for specific airport services or aviation products.

Nevertheless, auditors said there was room for improvement. They recommended that Los Angeles World Airports makes sure contract specifications were biddable, that there are enough qualified companies to bid on contracts and that the bids received are responsible as well as responsive to contract requirements.

Galperin said Monday that his office will review contracting and bidding procedures in other city departments.

“When we saw these numbers, we thought that this is something we should look into across the board,” Galperin said. “The city’s procurement processes might be unnecessarily complicated. Some people whose companies have done business with the city say they don’t want to do it again.”

Airport officials declined to comment in detail about the audit.

In a prepared statement, Deborah Flint, executive director of Los Angeles World Airports, said the review’s findings provide “a blueprint” to help move the agency forward. Some of the recommendations, she added, have already been implemented.

At an event last month, airport officials met with almost 900 representatives from local, national and international companies and addressed future projects to improve ground transportation at LAX.

Potential business opportunities and contracting procedures were discussed. Airport officials said they hope the event will help attract a significant number of bidders.

In addition to the problems with competitive bidding, the controller concluded that the airport department is not prepared to handle increasing traffic congestion during the ongoing modernization of LAX.

Researchers noted that LAX handled a record 74.9 million passengers in 2015 and that an average of 75,690 vehicles per day entered the central terminal area, causing gridlock in and around the airport during peak travel times.

To accommodate the growth, the airport is planning $5 billion in projects to improve ground transportation, including an automated people mover to the terminal area and a consolidated car rental facility.

Also proposed are roadway improvements and an intermodal transportation center that will link to the people mover and Metro’s Crenshaw light-rail line, now being built.

The audit warned, however, that such large projects will greatly increase traffic and reduce parking in the terminal area during construction. Researchers concluded that the airport department has not adequately assessed the effects or how to mitigate them.

During the modernization, motorists at the airport will probably experience delays as parking structures are shut down, traffic lanes are closed and cars compete with construction vehicles for space.

Auditors said the department is not prepared to handle these problems and no one unit or official is responsible for coordinating the systems needed to keep traffic flowing.

The controller also concluded that LAX does not have enough staff to deal with increasing congestion, lacks resources dedicated to traffic engineering and might experience breakdowns in key services, such as assisting people with disabilities.

“Traffic will get worse before it gets better,” Galperin said. “And any goodwill we’ve engendered with passengers will quickly go away if Los Angeles World Airports doesn’t adequately address the traffic and parking problems.”

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UPDATE

6:30 p.m., March 7: This article was updated with additional information.

This article was originally posted at 3:15 p.m., March 7.

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