Tuesday, February 28, 2017
Fight over John Wayne Airport contract spurs allegations of impropriety, price-fixing
By Jordan Graham
The Orange County (CA) Register
Allegations of price fixing, a bungled bidding process and impropriety have dogged a usually ignored, multimillion dollar contract to operate the private-plane terminals at John Wayne Airport. A vote is Tuesday.
Allegations of price fixing, a bungled bidding process and impropriety have dogged a usually ignored, multimillion dollar contract to operate the private-plane terminals at John Wayne Airport, stretching the process into a months-long fight that involves at least two complaints to federal agencies.
On Tuesday, the Orange County Board of Supervisors could end that process, if not the dispute, when it is set to select two operators for the contract – one old and one new.
Based on the meeting’s agenda and recent events, it seems the loser in this selection process will be Orlando-based Signature Flight Support – the world’s largest fixed-base operator, a longtime John Wayne Airport contractor and the top-ranked applicant in the recent bidding process.
But the company isn’t going down without a fight.
In January, after Signature realized it would lose the prized contract at the nation’s 12th-busiest business-aviation airport, it alleged that the county had violated federal and local procurement laws, sending complaints to the Federal Aviation Administration and the Department of Transportation. Those agencies are reviewing the assertions, which county lawyers have called “meritless.”
Recently, Signature’s COO and President Maria Sastre took the company’s allegations further by accusing county supervisors of acting on a biased predisposition to award the contract to a smaller operator such as California-based ACI Jet – which is set to win the contract to replace Signature. ACI finished second-to-last in airport staff’s assessment of bidders’ qualifications.
In support of its claim that supervisors have long known they would ignore the results of the contract bidding process, Signature has pointed to an Aug. 4 letter sent to county lawyers from an attorney for Atlantic Aviation – the airport’s other longtime fixed-base operator. That letter expressed concern over rumors circulating at the time that supervisors planned to strip Atlantic of its contract and give it to OC Jet Center, a small aviation company and an early applicant for the John Wayne lease.
Though Atlantic never lost its contract and OC Jet Center later withdrew its application, the letter alleges that unnamed supervisors had developed a close relationship with OC Jet Center CEO Joe Daichendt, who has since taken the position of interim general manager at the contract’s likely winner, ACI Jet.
In a second Aug. 4 letter from the Atlantic attorney to Daichendt, the lawyer claims Daichendt told Atlantic CEO Lou Pepper that he had secured the “4 out of 5” board votes needed to make the change. ACI was awarded the contract with four of five board votes in January before that vote was rescinded, setting the stage for Tuesday's meeting.
But what remains unclear is whether the letter actually reveals any evidence of impropriety in how the contract is being awarded, or whether it reveals only that county supervisors were unhappy with how the airport was operating and subsequently ousted a disgruntled contractor that is now eager to discredit the process that unseated it.
Supervisor Shawn Nelson denied that there was any impropriety in how the contract was awarded and framed Signature’s allegations as a last-ditch attempt to reclaim a contract it seems poised to lose.
Daichendt called Signature’s allegation false. He supplied copies of an Aug. 8 letter he sent to Atlantic’s attorney, denying that he had ever talked to Pepper about having "4 out of 5" board votes and refuting that he had ever said he had a leg up in the application process.
He said his support of ACI was part of a unified effort of airport contractors who were unhappy with John Wayne’s two national chains and pointed out that Signature had damaged its own prospects by charging sky-high fuel prices.
Those high fuel prices, and Signature’s delay in addressing supervisors’ concerns over them, may be what cost the company its contract.
Supervisors began considering a change at the airport as far back as mid-2015 but ramped up those calls in July after they became aware that Atlantic’s and Signature’s fuel prices at John Wayne Airport were frequently within pennies of each other and significantly higher than at Long Beach Airport, where Signature also operates.
Nelson has accused the companies of abusing a government-created monopoly.
When supervisors announced their intent in July to search for alternate contractors, Atlantic’s fuel price quickly dropped by 31 percent, according to Flightaware.com, which tracks information about airports. Signature waited at least three months to drop its price, eventually lowering it by 16 percent around the time applications for the contract were due.
Nelson later called the swift price drops “an admission” by the companies. Signature has pointed out that its posted fuel prices accounted for only 5 percent of the sales, but Nelson still considered it a problem.
So in January, when airport staff recommended re-awarding the contract to Atlantic and Signature, board members were angered. Supervisor Andrew Do called the results “suspicious.” Chairwoman Michelle Steel alleged the process had been biased against local applicants. And Supervisor Todd Spitzer accused airport staff of engaging in an “overt power play” to defy the board’s direction.
Nelson framed Signature’s complaints as sour grapes.
“We had a mess at the airport, and I felt a change was necessary,” Nelson said. “The airport staff’s rankings didn’t address the fuel policy. And we had (Signature) saying we never had a problem in the first place and (Atlantic) saying you’ll never have a problem again.”
“Signature is just frustrated with the outcome,” he said
Signature President Sastre disagreed that the airport staff’s application-review process had been flawed. In fact, she said, the process was notably similar to ones that the company has completed in other markets. The only difference, she said, was that the top-ranked applicant didn’t win the contract this time.
“I don’t know why (county supervisors) are saying what they’re saying, other than it’s a veiled attempt to justify the unjustifiable,” Sastre said.
When asked whether Signature would file a lawsuit against Orange County if her company isn’t selected on Tuesday, Sastre stopped short of committing, saying only: “We will defend our position.”
In recent years, Atlantic and Signature have operated on month-to-month deals that have not included rent increases. The county’s delay in securing new agreements has cost it more than $4 million in lost revenue. Spitzer has criticized airport staff for its inaction.