Longtime LAX concessionaires protest contract-bidding process
Three major companies that have long provided places to eat, drink and shop at Los Angeles International Airport say city officials have unfairly evaluated a series of bids from firms now seeking to replace them.
Late last Friday, HMS Host Corp., Delaware North Cos. and the Hudson Group, along with a venture called HDS Partners, filed 11 protests challenging recommendations that would award multimillion-dollar contracts to mostly newcomers.
FOR THE RECORD:
LAX bidding protest: An article in Tuesday’s LATExtra section about companies protesting the awarding of bids for projects at Los Angeles International Airport said that the parent company of SSP America Inc., a finalist for a concessions contract, had 150,000 British pounds available for business development. The amount is 150 million British pounds. —
The protests, which involve eight of the 10 contracts, contend that Los Angeles World Airports, the operator of LAX, did not properly vet competing bids and that some finalists did not comply with certain requirements or lacked the financial stability to deliver on promises to better reflect the cuisine and culture of Los Angeles.
If the protests are successful after a review by the city, the contracts could be re-bid or awarded to other companies.
The process “was so obviously flawed and so unfair that we owe it to our 900 associates, our local restaurant partners and the traveling public to take this action,” said Steve Johnson, a senior vice president at HMS Host, which has been at LAX for almost 45 years. “To be treated this way is difficult after such a long relationship with the city.”
LAX officials declined to comment. Two companies recommended for contracts and targeted in at least two protest letters defended airport officials and their proposals.
The protesters “are crying in their soup,” said Pat Murray, a senior vice president for SSP America Inc., a finalist for a food and beverage contract worth at least $54.5 million a year in revenue. “They are just clinging with their fingernails to something they don’t want to lose.”
Selected two weeks ago, the other finalists include Areas USA, the Miami-based subsidiary of a Spanish firm, which was recommended for three food and beverage contracts plus one retail contract.
A joint venture involving former Lakers star Magic Johnson was a finalist for three retail contracts, and XpresSpa was recommended for a single retail contract.
Only one of the three longtime concessionaires made it to the final cut: THS/Marbella Food Service Partnership IV, which was recommended for a food and beverage contract. THS, or Travel Hospitality Services, is a subsidiary of Delaware North.
The protests contend that some of the finalists submitted bids that did not contain critical financial information about the bidder as required by the airport’s criteria.
At least two protests specifically mentioned SSP America and Areas USA. They asserted that the ventures failed to substantiate their sales projections at the airport as required by the bid procedure. Both firms dispute the accusation.
In the case of SSP America, a division of a British firm, Delaware North’s letter claimed that its competitor greatly overstated in its bid the revenue it would generate. Meanwhile, HMS Host claimed that SSP has lost more than a billion British pounds in the past several years from other airport operations and failed to perform on contracts at other airports.
“I don’t think this is sour grapes,” said Bob Stanton, a vice president for Delaware North. “We are looking at the inconsistent evaluation of the bids. That is the basis for everyone’s discontent.”
Murray said that SSP, which operates at 140 airports in 32 countries, made more than $3 billion in revenue worldwide in 2009 and has more than 150,000 British pounds on hand for business development. He said the company’s LAX revenue projections were high because of the popularity of the brands in its proposal.
The city’s Board of Airport Commissioners and the City Council’s Board of Referred Powers are set to award the contracts in the weeks ahead. The Board of Referred Powers will vote on eight of the 10 contracts because of a conflict of interest involving the airport commission’s president.