Small retailers are at risk of being “frozen out” of concessions contracts at Denver International Airport in favor of a small group of vendors whose businesses account for more than half of the airport’s food and beverage revenue, according to a new audit by the city.
“When the creation of DIA was first proposed it was promised that local ‘mom and pop’ operations would have a fair shot at taking advantage of the opportunities that this amazing economic generator can provide,” city auditor Dennis Gallagher wrote in the report’s cover letter. “During my years on City Council we heard this argument over and over again. Looking at the concessions ownership percentages I worry that the small retailer is being frozen out of the process.”
The audit found problems with a unique airport program that allows existing concessionaires to bypass the competitive request-for-proposals process by competing with other existing vendors to be “top performers” in the areas of operations, customer service and financial performance. Top performers can skip the RFP process at the end of their contracts and enter directly into negotiations with the airport for new contracts.
But the calculations used to determine such top performers have often resulting in situations where as many as half the concessionaires in a terminal were rewarded under the program, leaving little chance for newcomers to get a foothold at the airport.
“Rewarding nearly half of the concessions does not align with the goal of rewarding top performers,” the audit noted.
According to the Denver Post, City Council members who reviewed the audit were concerned that the performance reward program would conflict with DIA’s goal of awarding a certain percentage of contracts under its disadvantaged-business program, under which many “mom and pop” companies would fall.
The audit was also concerned with a change last year to a 2007 rule that sought to discourage monopolization in individual categories, like food and beverage. It prevented a single concessionaire from controlling more than 20 percent of the square footage allotted for its business category. But the threshold was changed to 24 percent after one business entity — reported to be Skyport and Affiliates by the Denver Post — ran over the allotment.
Skyport runs such businesses as Caribou Coffee, Pour La France, Wolfgang Puck’s and other restaurants and cafes at the airport.
Auditors found that 73 percent of concessionaires who were surveyed at the airport — 26 responded to the survey out of 90 who were asked — thought the rule change was unfair.
“Among the concessionaires that we interviewed, many expressed concern that the policy was revised to accommodate the concessionaire who was not in compliance with the 2007 policy,” it noted.
The concession-awarding process is coming under scrutiny while the airport is building a $544 million hotel and transit center at the main terminal, which will open up more space for vendors and retailers. In 2012, airport concessions produced $237 million in gross revenue, $50 million of which went to the airport.
The audit suggested a variety of changes to the concession program to ensure fairness in awarding concessions. Airport managers agreed with all of them.
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