Board Delays Decision on BWI Contract

Board Delays Decision on BWI Contract
Maryland Gazette Newspapers, MD

Feb. 13, 2004 


The Maryland Airport Authority's plans for the
concessions at Baltimore-Washington International
Airport hit some turbulence at a meeting of the
Maryland Board of Public Works Wednesday.

Gov. Robert L. Ehrlich Jr. (R) postponed until Feb. 25
the board's vote on the authority's recommendation to
award the 12-year concessions contract at BWI to a
U.S. subsidiary of BAA of West Sussex, England. 

The postponement gives authority officials time to
answer board members' questions as to why the
solicitation for the contract shut out many potential
bidders, including HMSHost of Bethesda, which now runs
the restaurants and shops at the state's biggest
airport. 

Under the authority's recommendation, BAA would
replace HMSHost, which has operated BWI concessions
for the past 31 years.

The board heard two hours of testimony, mostly from
business executives, union officials, concession
employees and minority business owners who spoke
against the contract. Airport authority and BAA
officials spoke in favor of the deal.

Under the current "prime contractor" model, HMSHost
runs all of the concessions at the airport in return
for a portion of the sales. 

The airport authority wants to switch to a "developer"
operation to run the concessions similar to a shopping
mall. The developer serves as a leasing agent for the
state, bringing in a mix of third-party national and
local tenants, collects the rent and forks over a
portion of the rent to the state.

However, Comptroller William Donald Schaefer (D) and
Treasurer Nancy K. Kopp (D), who both serve with
Ehrlich on the state board, questioned why the
authority solicited bids from only developer model
contractors, instead of structuring the request to
also allow prime contractors to bid.

Kopp questioned why the authority didn't allow both
business models to compete with similar requirements
to bring in name-brand tenants and increase spending
on capital improvements in the commons area.

"You could have put it out in such a way that BAA
could have bid and Host could have bid," Schaefer told
authority officials. "Why didn't you do that?"

Of the 17 businesses that operate concessions at major
airports in the United States, 14, including HMSHost,
operate as prime contractors while three, such as BAA,
operate as developers.

The Maryland Airport Authority, which oversees BWI,
received two bids -- even after lowering the minimum
guaranteed rent to less than what HMSHost now
generates for the state through BWI concessions.
HMSHost generated nearly $7.3 million in revenues last
year for the state.

"Why didn't we aim for a minimum of more than where we
are now?" Kopp asked.

Authority officials said concessions revenues might
fall off while BWI undergoes a transition and the
current restaurants and shops are renovated. 

BWI rated 37th in the nation in revenues generated by
concessions.

Authority officials said the new developer model could
boost that ranking and improve BWI's image.

HMSHost President and CEO John J. McCarthy told the
board that the BWI concessions revenues "are what they
are," and are affected by BWI's design. Under the
current $1.8 billion renovation project at BWI, retail
and restaurant space will nearly double.

HMSHost, owned by the Italian company AutoGrill, runs
concessions at eight of the top 10 airports in the
country.

By limiting the contract to developers, the authority
not only shut out a business headquartered in
Maryland, but also may hurt itself financially,
McCarthy said.

"With only two bidders, the state has put itself in a
weak bargaining position," he said.

Under the proposed contract, BAA, which operates
concessions at Pittsburgh International Airport, would
give Maryland 45 percent of the rents it collects from
May 1, 2004, through the spring of 2006. After that,
BAA would pay the greater of either a minimum
guarantee of $6.2 million in 2006, $6.7 million in
2007, $7.2 million in 2008, $8.2 million in 2009 and
$9.2 million in 2010, or 70 percent of the total rents
collected from the tenants.

BAA regional director Mark Knight said his company
could bring in more national, name-brand companies
that can generate more sales, which in turn would
improve the overall image and boost revenues at BWI.

However, union officials and workers say the airport
authority should have protected the jobs and benefits
of the workers currently at BWI.

Knight said he could not guarantee the jobs of the
nearly 700 workers who currently run BWI's restaurants
and retail shops, but said new tenants would also need
workers. He also said new tenants would create new
jobs and drive up wages as they compete for employees.



 Do you have an opinion about this story?
Share it with other readers in our CAA Discussion Forums

http://www.californiaaviation.org/dc/dcboard.php

*****************************************