Friday, May 26, 2017
No-bid bidding war? Counterproposal comes in for Kansas City airport
AECOM, the largest airport design firm in the U.S., has written a letter to the Kansas City Council asking to be considered for a new airport terminal deal.
The letter came Thursday afternoon, two weeks after The Star first reported an unsolicited proposal from Kansas City-based Burns & McDonnell. Under the proposal, Burns & McDonnell would privately finance a new $1 billion single-terminal Kansas City International Airport, asking in return for exclusivity on the deal.
The city has not issued any formal requests for proposals or qualifications from businesses. AECOM’s letter of interest is the first public proposal from another company asking for a chance at the job.
The letter contained no specifics about an actual plan or financing arrangement.
“We anticipate spending the next 24 hours engaged in initial stages of due diligence to fully review the letter received late this afternoon,” Kansas City Mayor Sly James’ office said in a written statement Thursday evening.
City Manager Troy Schulte’s first reaction was: “Where were they before? If they had a solution, why didn’t they come forward?”
Still, Schulte said he would be willing to see what AECOM is really proposing. “We’ll explore it,” he said. “We’ll do some due diligence and see if there’s any there there.”
Roger Dick, a spokesman with Burns & McDonnell, said the firm declined to comment.
In the letter, AECOM senior vice president Mike Handelman says his company “presents an interested, serious competitive option.”
“KCI’s passenger terminal would benefit from a robust, transparent, competitive process, allowing domestic and international firms to offer best value solutions — whether (public-private partnerships) or other approaches — for the City, its citizens and taxpayers, airport passengers and airline partners,” he wrote.
In an interview, Handelman said a project of KCI’s scale should go through a competitive bidding process. He called the city’s acceptance of a sole source, unsolicited offer from Burns & McDonnell “really an unusual process.”
“It’s very rare that a city would accept that,” Handelman said.
He said unsolicited offers to cities are usually used as a guideline for a competitive bidding process.
He added that AECOM welcomes competition for the KCI project.
“We think it should be a robust competition, not just AECOM and Burns & McDonnell,” Handelman said. “This is a billion-dollar project.”
AECOM, based in Los Angeles, was the No. 1 airport design firm in the country in 2016, when ranked by revenue, according to Engineering News-Record, a trade magazine for engineering and construction industries since 1917. The company had $413.8 million in airport design revenues.
Burns & McDonnell was ranked third with $71.3 million. The rankings include all airport-related revenues, including runways and terminal design.
AECOM had $17.4 billion in revenue last year, according to its website.
The company was also the project manager for the Dwight D. Eisenhower National Airport in Wichita, which opened in 2015.
In the last year, firms in New York, Australia and Europe gave verbal, unsolicited proposals to the city to build, finance and then operate a new terminal.
But Schulte, the city manager, said they were dismissed out-of-hand. They were too costly, he said, and would have taken away the city’s operation of the airport.
“These concepts were rejected by us as they would have required the Airlines to increase landing fees beyond what they had already agreed to pay, generated significant local union issues with our employees, and required the City to proceed through the FAA pilot program for (public-private partnership) initiatives,” Schulte said.
“We think this portion of the concept would have added years to the terminal improvement program to gain the necessary approvals.
“Our standard practice is to request written follow up to all unsolicited proposals if we have interest in pursuing the ideas. In all of these cases we never followed up with the written request.”
Schulte pointed out that AECOM’s letter wasn’t really a proposal. His read of it was that AECOM was suggesting a privatization approach, because the letter said the company can “design, build, finance, operate and maintain” a replacement terminal at KCI. Ceding city control over the operation and maintenance of the airport terminal is not something the city is interested in, Schulte said.
Councilwoman Jolie Justus, chairwoman of the council’s Airport Committee, said she thought AECOM was proposing a privatization approach. That could involve serious concerns for the city’s labor unions at the airport and other considerations.
“That’s a huge concern I have,” she said. “Obviously, that has been something we’ve said all along we don’t want. We wouldn’t have control over the labor and all of the other things we wanted, so it’s really a nonstarter, in my opinion.”
Handelman’s letter does not specify the structure of a proposed deal.
Councilwoman Teresa Loar, who has raised a lot of questions about the Burns & McDonnell proposal, said she wasn’t surprised to see the AECOM letter.
“I think we’ll probably get several more of these,” Loar said, predicting other companies are interested in a competitive process.
Loar said she wants to make sure the city is on solid legal footing if it does a no-bid deal with Burns & McDonnell.
“I want to make sure we’re legal here. I just don’t know if somebody could come back and sue us,” she said.
Loar also said a competitive process is perhaps the best way to ensure the city gets the best price for a huge project to modernize the airport.
Councilman Quinton Lucas said that in the absence of a solid proposal from AECOM, Burns & McDonnell’s idea “remains the option to vet and that we will evaluate in the short term.
“But I will give fair review to anything sent our way that protects the interests of the flying public,” he said.
The council has already hired outside legal counsel to scrutinize Burns & McDonnell’s proposed deal and make sure it’s in the city’s best interest. Those lawyers are supposed to have a substantive discussion with the council on June 6 and June 8, prior to a possible council decision June 15 on whether to proceed with further negotiations with Burns & McDonnell.
“Whatever analysis comes back about how we approach this deal will determine whether or not we should consider anybody else or not,” Councilwoman Alissia Canady said.
Councilwoman Katheryn Shields said her preference still would be to have the city issue airport revenue bonds, which is public financing, most likely with a lower interest rate than the private financing that Burns & McDonnell is offering.
Then, if voters approve those public revenue bonds, Shields said, the city could proceed with a competitive design-build solicitation process.