Airport tenders: paths or obstacles to success?
Government agencies, private companies, and even some non-profit organizations use the Request for Proposals (RFP) process to solicit bids from qualified proponents and select the most qualified entity to deliver a project or service.
Aiming to find optimal solutions, the RFP process is used for projects that have a complex scope, require comparison and analysis of hard data, and require a cost estimate from a group of qualified bidders. For example, a request for proposals may invite potential contractors to demonstrate their skills, experience and expertise in carrying out major airport capital projects, such as reconstruction of runways and taxiways.
Airport sponsors also publish tenders for long-term leases with capital investment requirements and specific aviation uses, such as operator fixed installations. In addition to making improvements to developed and undeveloped airport parcels at their own expense, selected tenants may be required to meet certain environmental sustainability targets and certifications.
Tenant improvements can include utility extensions and connections to existing services, improvements to fences and gates, improvements to landside infrastructure, and the construction of building, office and shed facilities. Airport development proposals must comply with an airport’s master plan and minimum standards, as well as all Federal Aviation Administration grant assurances and height restrictions.
According to its website (https://www.lawa.org/lawa-businesses/lawa-contracting-process), Los Angeles World Airports (LAWA) purchases more than $500 million annually in goods, materials and services to maintain the efficient operation of Los Angeles International Airport and Van Nuys Airport. From asphalt to safety equipment to legal services, many divisions rely on external contractors to provide specialized products or services to meet the needs of airports.
Although each contract solicitation presents a unique business opportunity based on specific objectives, there is a standard process by which most airports solicit and evaluate potential contractors:
- Issue a request for proposals seeking contractors for a specific project that contains details of the procurement process and selection criteria.
- Advertise in various sources to inform potential entrepreneurs of the business opportunity.
- Require potential contractors to sign and return the required administrative forms with their proposals, as set out in the RFP.
- When the required submission deadline is reached, review the compliant proposals and provide them to an evaluation committee to determine the qualifications of the proposers.
- Depending on the nature of the contract, interview proponents using a standard list of questions based on the evaluation criteria set out in the RFP.
- Select qualified contractors based on the evaluation criteria set out in the RFP.
Ideally, the bidding process allows airport sponsors to detail their specific requirements, maintain transparency in the selection process, create benchmarks to measure project success, and determine which entity will provide the optimal solution.
However, there are several reasons why tenders may not produce the desired results – costing airports and proposers valuable time, energy and money. This is especially the case when it comes to service-oriented situations, as opposed to purchasing products and supplies.
First, a request for proposals assesses the competence of a speaker, but eliminates the possibility of meaningful and productive two-way communication. Since the tendering process is essentially a maintenance process, it is not possible to determine whether a proponent is proposing innovative ways to improve the economic, sustainability or social objectives of the airport at long term.
Second, a request for proposals can potentially eliminate an airport’s ability to take advantage of new and innovative solutions. Depending on how it’s written, an RFP can prevent an organization from receiving proposals for processes, services, and products it has never considered in the past. Limiting these solutions in burdensome procurement policies and legal interpretations prevents airports from using private sector investment to improve airport conditions that can benefit both the airport and the community.
For example, an airport developer who has hired firefighting services for a long time may write an RFP in a way that leaves no room for alternatives or new ideas. Additionally, due to the restrictive language contained in the RFPs, some qualified Proponents may choose not to respond, limiting the creative and cost-effective solutions available.
Third, completing the long, detailed and arduous RFP process does not guarantee a successful outcome. In fact, a proponent who presents an impressive RFP proposal may not turn out to be the best for the position. Highly skilled contractors and tenants can be overlooked if their RFP responses are not presented as extravagantly or expensively as those submitted by their competitors.
Overall, for airports looking to find the lowest qualified bidder, an RFP may suffice. However, for airports looking for optimal solutions, a tender is not always the best method. In effect, a tender changes the focus from forming a long-term strategic partnership to implementing a simple commercial transaction.
As with many other traditional processes, tenders need to be viewed from a new perspective. While this process aims to ensure transparency and a level playing field for qualified Proponents, it often creates barriers to innovation, progress, and even profitability.
It is also important to note that the Federal Aviation Administration does not require requests for proposals, but encourages competition. This paves the way for airport developers to assess their individual needs and requirements and follow a procurement method that best suits current needs on a case-by-case or airport-by-airport basis.
Going forward, airport developers should think strategically about their goals and needs, and consider alternatives to a tender-based approach. In addition, tender requirements, especially those related to long-term leases, should leave room for creative technical and financial solutions, as well as opportunities for innovative public-private partnerships.
Curt Castagna, president and CEO of Aeroplex Group Partners, is the current chairman of the Los Angeles County Airport Commission, chairman of the Van Nuys and Long Beach airport associations, and past chairman of the board. Board of Directors of the National Air Transportation Association. A certified and instrument rated private pilot, he continues to teach aviation administration courses at Cypress Community College and Cal State Los Angeles.