LAX Contract Prompts Questions

For more than a quarter century, when the city of Los Angeles needed advice on how to run its airports, officials turned to John F. Brown Co. The Cincinnati-based consulting firm has helped redesign passenger lounges and develop cargo hangars, negotiated with airlines on the airport’s behalf, even helped decide whether the city should sell LAX.

Then, on Jan. 6, 2003, Brown was cut off. Moving toward giving the company a new $1.5-million contract without competitive bidding, airport officials abruptly decided another consultant should do the work.

As local and federal prosecutors probe contracting at Los Angeles World Airports, the Port of Los Angeles and the city’s Department of Water and Power, the story of how Brown almost won and then lost its management contract helps explain why questions linger about business practices at the world’s fifth-busiest airport.

Memos and e-mails obtained through the California Public Records Act show that officials involved in awarding the contract ignored competitive bidding guidelines, rushed through approvals and made million-dollar decisions with scarcely any record of their reasoning. After replacing Brown, they awarded the contract to another well-known firm, again without competitive bidding or formal explanation, the records show.

City Controller Laura Chick has identified the Brown contract as one of two she flagged for local prosecutors as possibly involving criminal wrongdoing, forwarding contract documents to Dist. Atty. Steve Cooley. Her move added impetus to Cooley’s investigation and helped trigger a parallel probe by federal authorities.

“When bureaucracies do not abide by their own rules, when protocols are not followed, that is fertile ground for someone to make mischief,” said Charles La Bella, the former U.S. attorney in San Diego who earlier headed the Justice Department’s public corruption unit in Manhattan.

City Councilwoman Cindy Miscikowski, a vocal airport critic whose district includes LAX, said what happened to Brown was a clear sign that airport contracting was badly broken. “Rules are not followed. Policies are not being followed,” she said. “It seems like the message has been lost somewhere that we need transparency, that we need procedures.”

Local and federal prosecutors are trying to determine whether firms must “pay to play” at the airport by making political donations to win contracts. Neither Brown nor the company picked to replace it regularly donates to local political campaigns.

Airport officials have vigorously contested Chick’s allegation that criminal wrongdoing may have been involved. At a City Council committee meeting in February, airport Commissioner Peter Weil called her audit “an incomplete and unbalanced analysis.” He and other airport officials have said Brown was replaced to diversify the airport’s contractor base, not for political reasons.

But in a more recent interview, Kim Day -- the airport agency’s interim executive director, appointed after the contract was awarded -- said she had “no idea” how or why some decisions had been made.

“We’re hiring a consultant to come in and help us,” Day said, describing efforts by the airport agency to correct any flaws in its procedures. “We do want to clear our record publicly.”

She and other airport officials have expressed the fear that Los Angeles World Airports’ high bond rating and national reputation for strong management are being imperiled by the continuing criticism.

Emphasizing the need for reform, Paul Green, the airport’s chief operating officer, recently told City Council members that, when he began working at LAX in 2000, he “never saw anything in writing.... It was pervasive throughout the organization.”

Like most airport operators nationwide, Los Angeles World Airports, the city agency that runs LAX and three regional airports, relies heavily on consultants to research issues such as passenger habits, leases with airlines and planning for airport expansions or renovations.

Last year, the agency awarded more than $85 million in contracts to professional service companies, which include consultants, law firms and advertising agencies.

Unlike contracts for goods or materials, so-called professional service contracts need not be awarded to the lowest bidder; rather, airport officials can award a deal to the firm they deem most qualified.

But federal guidelines that govern airport contracting nonetheless direct officials to seek proposals from “an adequate number of qualified sources” to ensure competition whenever possible.

Benefits in Bidding

“There may be some cases where competition is not desirable, but in most cases you want three dealers trying to sell you that car,” said Richard Marchi, senior vice president of Airport Councils International, a Washington, D.C.-based industry trade group. Marchi worked almost two decades at Logan International Airport in Boston.

Federal regulations require airport officials to keep detailed contracting records that outline how contracts have been developed, how competing firms have been evaluated and why a vendor has been chosen.

Airport records show that Los Angeles officials followed none of these directives from the time they tried to award the contract to Brown until they ultimately gave it more than a year later to Ricondo, another nationally known consultant with experience working at Los Angeles World Airports.

When Brown’s contract first came up for discussion in early 2002, the company had been at work for more than three years on a deal worth $2 million to help the airport, among other things, collect more rent from airlines using terminals at LAX.

In March and April 2002, senior airport staff members tried to simply extend Brown’s 1998 contract and win approval from the Board of Airport Commissioners for an additional two years at $750,000, without seeking proposals from other companies, airport records show. They then upped the offer for the two-year extension to $1 million.

Finally, in May 2002, the board approved a more modest, 10-month, $275,000 extension, but directed that additional consulting services “be contracted through a competitive bidding process.”

That never happened, documents show.

In July, after the airport commission told officials to begin selecting a new consultant, 14 consulting firms submitted their qualifications in response to a solicitation from airport officials. By the fall, airport officials had concluded that six of those firms, including Brown, were qualified to do the work the airport needed. But the documents indicate that officials favored one company: Brown.

Rather than seek proposals from at least some of the other companies they deemed qualified, the airport officials asked only Brown to submit a proposal. And even before Brown did so, officials were preparing to give the company the deal, according to memos and e-mails.

On Dec. 10, 2002 -- four weeks before the airport received Brown’s proposal -- agency Deputy Executive Director Rick Janisse, who was directing the awarding of the contract, sent a memo to the city attorney’s office, asking the office to prepare a draft agreement.

Later that month, on the morning of Dec. 30, Estelle Stevens, Janisse’s deputy, e-mailed representatives from the airport’s budget, environmental and procurement divisions, seeking their approval of a report recommending the awarding of a $1.5-million contract to Brown.

“Although the proposal is not due until 1/6, the report is due immediately for consideration” by the commissioners, Stevens wrote.

By 4:33 p.m. that afternoon, all three divisions had approved the report, according to internal e-mails. Then, inexplicably, the contracting process was halted.

On Jan. 6, 2003 -- the same day that Brown finally submitted its proposal -- the airport commission’s secretary e-mailed senior airport officials that the Brown contract was being removed from the commission’s Jan. 21, 2003 agenda.

City Controller Chick has seized on that decision to raise questions about whether airport commissioners had improperly meddled in the awarding of the contract. Chick and others accused airport commissioners of politicizing the contracting process by becoming too involved in the selection of contractors.

Mayor James K. Hahn has since banned commissioners, whom he appoints, from sitting on contracting panels. And airport commission President Ted Stein, who attracted the most criticism because of his dual role as a major Hahn fundraiser, resigned earlier this month.

There are no documents in the airport’s files to suggest why Brown was the only company initially asked to submit a proposal, save one official’s assertion in a draft memo that Brown had “submitted an exceptionally strong Statement of Qualifications.”

There are also no documents that compare Brown’s record and experience with those of the other qualified firms.

Nor are there documents that explain why Brown’s contract extension was abruptly pulled from the commission’s agenda. There was one draft report reviewed by the city attorney’s office Jan. 2 in which a deputy city attorney asked: “Why choose JF Brown?”

And an e-mail, written by Janisse’s deputy four months later, said: “Although we were prepared to award the contract,” the Board of Airport Commissioners “would not hear the item” and asked officials to solicit another firm “to ensure a more diverse line-up of consultants.”

Although the documents suggest that the commissioners removed Brown’s contract extension from the agenda and requested further competition, Day and other airport officials have attributed Brown’s replacement by Ricondo as a move by airport officials to diversify the airport’s stable of contractors. Giving the contract to Brown, Day wrote to the city controller in February, “would have been in direct conflict with management’s desire for open procurement....”

Day said she still did not know why airport officials had decided, tentatively, to give Brown the two-year contract extension without competition.

An Issue of Comfort

Green, the airport’s chief operating officer, suggested at a recent hearing that “staff, as staff is prone to do, goes back to who they feel comfortable with.”

Janisse, who left the airport last year and has been subpoenaed to appear before a criminal grand jury investigating airport contracting, declined to comment about the contract through his attorney.

Janisse’s deputy, Stevens, who still works at Los Angeles World Airports, did not return repeated calls seeking comment.

Whatever the exact reason for Brown’s replacement, the airport’s decision to seek another contractor did not open the field up to more competition or improve record-keeping.

Four months after Brown was removed as a bidder, airport officials in April 2003 selected Ricondo. Ricondo was asked to submit a proposal on April 25. By the end of May, Janisse and his deputy were again seeking quick approval of the deal from other airport officials.

Within 24 hours of their request, representatives of the airport’s budget, environmental and procurement divisions had again signed off on the contract, according to e-mails. “Another rush,” commented one representative in an e-mail forwarding the request to a colleague.

The airport commission awarded the contract to Ricondo in June, this time for $930,000.

Once again, no other firms were asked to submit proposals.

And once again, the airport files include no documents indicating why Ricondo had been chosen to submit a proposal, rather than other firms that had been identified earlier as qualified to do the work.

Airport officials said they also had no records of any decision-making between the time that Brown was dumped and Ricondo was asked to submit its proposal. That, say experts on airport contracting, should never happen.

“If I’m running a public agency, I can’t just say I want Harry or Frank ... even if I think I know that they are the most qualified people to do the job,” said Oris Dunham, a veteran airport consultant who ran the airports in Dallas/Fort Worth and Seattle before going into private practice. “You have got to keep records. It’s a slippery slope if you don’t.”

Brown, meanwhile, is back at LAX. Last month, the firm was awarded a $750,000 deal to perform the job of the recently departed deputy executive director, Janisse, the man who tried to give Brown the contract in 2002. Though the airport asked two other firms to submit proposals for the job, neither did. Brown did not have to compete for the contract.