Love Field Concessions Proposal Process and Recommendation
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- Marsha Clarke
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2 Love Field Concessions Proposal Process and Recommendation Economic Development City Council Committee February 21, 2012
3 Purpose Provide background on the Concessions program Describe the Council s approved plan for selection of new contracts and implementation Present results of the Request for Proposal process Make recommendation for awards of contracts Present next steps
4 Background Goal: Make Love Field the finest mid size airport in the nation Some of the efforts to achieve this goal include: investing over $1 billion in new terminal and runway improvements having concessions provide highest quality and best value products and services to the traveling public expanding services currently offered passengers generating more Airport revenues providing small and minority businesses opportunities 3
5 Background Recent challenges include accommodating significant changes: construction of new terminal occurring from 2010 to 2014 concession contracts, in place since 1994, were set to expire during this disruptive construction period Concerns existed regarding difficulty of attracting new concessionaires Incumbents provided high quality services and were in a good position to continue their service during period Considerable good will existed with the incumbent concessionaires 4
6 Background There was also the desire to: have a robust competitive process to identify concessionaires for the new terminal areas, and structure a solicitation which would promote the objectives in our Airport Concession Disadvantaged Business Enterprise (ACDBE) program 5
7 Background June 2007, Transportation and Environment committee (TEC) rejected a plan to extend existing concession contracts through period of construction and to have open bids for new terminal spaces April 2009, TEC rejected a revised plan and asked that staff negotiate with incumbent vendors February 2010, TEC unanimously approved (10 0) modified plan that included awarding contracts to incumbents for half of program and bidding the other half 6
8 Background March 2010, plan not supported at Council meeting June 2010, Mayor formed ad hoc committee compromise plan was developed to provide for an extension of existing concessions contracts through the construction period and provide a right of first refusal for 27% of concessions in the new terminal August 2010, compromise plan was briefed and approved by Council 7
9 Background As a compromise, the plan included a number of adjustments, including: A first right of refusal for incumbents on a certain value Specific criteria for match Direct Airport management control of all individual spaces necessitating inventory storage and delivery coordination Airport control of several commodities 8
10 Compromise Plan Core Element If incumbents chose to extend current contracts through construction period, they would be granted a first right of refusal for 27% of the bid space value in the new terminal Selection of the 27% value is to be random If incumbents exercised their right, they would have to match a competing high score proposal on the basis of Rent, Capital Investment, Operational Commitments, Comparable Brands and MAG Numerous other provisions as described below 9
11 Implementation Objective To implement the plan keeping to the letter an/or spirit of the Council approved process, creating the best possible outcome and keeping this process within the overall terminal construction schedule 10
12 Plan and Implementation Plan elements Evaluation process and criteria First right of refusal ACDBE General terms Ongoing Contract management Implementation Selection team and scoring process Values, percentages, lottery Vendor Recruitment Contract development Ongoing Inventory & delivery Results 11
13 Evaluation process and criteria 12
14 Evaluation process and criteria Approved criteria was included in the RFP and used for evaluation : Scoring Factors: Brands 26%* Economics/Financial return 23% Operational Plan 12% Financial Capability 12% ACDBE 15% Experience 12% * As presented to Council on December 15,
15 Evaluation process and criteria Three separate evaluation processes were used for both the Food and Beverage RFP and the Retail RFP Financial Capability & Economics were evaluated by formulas developed by Office of Financial Services and City consultant Operational Plans, Brands, & Experience were evaluated by staff committee and representative from Southwest Airlines ACDBE participation was evaluated by Office of Business Development and Procurement Services using the City s BID process and scoring No single group or individual scored all portions of any proposal Formulas were used wherever possible to maintain objectivity in the evaluation process. 14
16 Evaluation process and criteria Operational Plan, Brands, and Experience were evaluated by staff committees Mid management level, diverse F & B evaluated by Aviation, Parks, Convention Services, Library, Equipment and Building Services, and DWU Retail evaluated by Aviation, Parks, Economic Development, Housing, and Public Works Southwest Airlines, as a major stakeholder, also evaluated as one vote on each committee 15
17 Evaluation process and criteria Scoring Factors: Brands 26% Economics/Financial return 23% Operational Plan 12% Financial Capability 12% ACDBE 15% Experience 12% 16
18 Evaluation process and criteria Brands 26% Evaluation based on the following: Concept, brands (local, regional, national) and theme development Quality, variety and creativity of offerings Visual presentation of offerings Creative and innovative design, design theme, quality of finishes and graphics Compliance with the Concessions Design Guidelines 17
19 Evaluation process and criteria Economics/Financial return 23% Proposals were scored based on highest Minimum Annual Guarantee (MAG), Percentage rent and Capital investment receiving maximum points Proposals for each package were compared to the highest scoring proposal for each package and awarded a percentage of the maximum points based on the differential between their financial offers and the highest scoring proposers 18
20 Evaluation process and criteria Sales projections for each proposer were compared to the City s consultant estimates and capped at no more than 10% of that estimate Tempered the revenue projections presented in proposals Percentage rental rates applied to inflated or unreasonable sales figures would give such proposals an unfair advantage 19
21 Evaluation process and criteria Operational Plan 12% Evaluation based on the following: Experience of proposed on site management staff Staffing Plan Customer service and employee training programs Delivery and stocking logistics, inventory and cash control methods Marketing efforts Retention plan for existing employees 20
22 Evaluation process and criteria Financial Capability 12% Evaluation based on the following formulas: Investment Capacity Ratio deduction of points for lack of plan, documentation, and cash investment Ratio of capital on hand as a factor of monthly operating expense History of profitability points given for years of demonstrated profitability History of no canceled or forfeited surety 21
23 Evaluation process and criteria ACDBE 15% Evaluation based on the following: ACDBE Plan or Policy submitted by the Proposer Proposer s Historical Utilization of DBEs/ACDBEs in previous contracts Meaningful roles and participation of ACDBE/DBE firms in the operation, structure of management/ownership, joint ventures and or secured contracts for goods and/or services, both existing and proposed Acknowledgement of Federal ACDBE Requirements 22
24 Evaluation process and criteria Experience 12% Evaluation based on the following: Experience with development, operation and management of food service establishments similar to those being proposed Experience with the development, operation and management of an airport concession Quality of existing facilities operated by respondent Business references Experience of the architectural/design team in comparable facilities 23
25 Right of First Refusal (ROFR) 24
26 Right of First Refusal In order to implement this provision of the plan, it was necessary to develop: Values of spaces that would constitute a basis for establishing the 27% right of refusal A selection process for randomly allocating the 27% 25
27 Right of First Refusal The City worked with its consultant to create a formula to determine the value of each package (store location) of concessions in the terminal The formula was based on weighted factors to determine values of each package Estimates included industry averages for each retail concept for each package Estimates took into account locations and exposure to passenger traffic counts 26
28 Right of First Refusal As presented to Council on December 15 th 2010, the value of the packages were based on the following weighted criteria: Total square footage 10% Sales estimates 40% EBIT(Earnings Before Interest& Taxes) 50% This represents earnings minus operating expense and depreciation Calculated values were rounded to the nearest 3% to help achieve the 27% ROFR 27
29 Right of First Refusal Since the F&B had 15 packages and the retail had 10 packages: Packages had to be valued in a way that would allow the total for ROFR to equal 27% exactly While not all packages had equal value, by using multiples of 3, the various combinations could add to 27 exactly However, if packages were selected individually, the chances of drawing short of or drawing over the 27% were possible in many scenarios Like the game Black Jack, the incumbents could bust and be short of the full 27% 28
30 Right of First Refusal To ensure both incumbents received an opportunity for the full 27%, City engaged a mathematician to calculate all of the possible combinations of packages that totaled 27% This prevented either incumbent from drawing packages in a sequence that could leave them with less than 27% with no remaining packages small enough to get to 27% 29
31 Right of First Refusal All combinations that add up to 27% were determined mathematically The incumbents then selected a specific combination of packages See Appendix for specific methodology 30
32 Right of First Refusal All possible combinations were numbered F & B had 769 possible combinations Retail had 34 possible combinations Separate, equal sized slips for each number representing a specific combination were printed Accounting firm of Frazier and Gills was engaged to verify all slips were put into container for drawing 31
33 Right of First Refusal Lottery was held January 12, 2012 publicly and on the webcast Lottery containers were immediately taken by security to the Police Property room for protective custody Incumbents were then given the terms of the highest scoring proposal for each of the packages they selected Both were given 30 days to make their decision 32
34 Right of First Refusal Per the amendment, the incumbents must match the terms of the highest scoring proposal Minimum annual guarantee Percentage rental rate Minimum capital investment Operational commitments Comparable brands 33
35 ACDBE 34
36 ACDBE Council s approved plan repeated the City s goal for enhanced business opportunities for the community Airport Concessions Disadvantaged Business Enterprise (ACDBE) established goal 23.5% Overall participation goal for all components of terminal design & construction established goal 26% Currently exceeding goals set for terminal construction with planned participation thus far at 35% Using lessons learned from Convention Center Hotel Focus on meaningful participation by sub firms to significant work K Strategies retained to assist in identifying and recruiting M/WBE firms 35 35
37 ACDBE Major Outreach efforts were made prior to solicitation Pre solicitation outreach events; notice of events ed to entire City vendor database and additional vendors provided by Love Field, approximately 350 vendors were notified December 9, 2010 at the Dallas City Hall Auditorium L1FN, December 16, 2010 at the Dallas Executive Airport January 6, 2011 at the Frontiers of Flight Museum, January 13, 2011 at the Dallas Fire Rescue Training Note: during the outreach events, vendors were asked to register as vendors with the City and they were provided with the specific commodity codes to be used for solicitation notifications. 36
38 ACDBE Advertised in the Dallas Morning News February 17 & 24, 2011 March 8, 2011 Pre proposal Meeting 322 vendors noticed by Advantage Financial procurement system 81 vendors attended RFP was open for 17 weeks for many questions and enough time to prepare quality proposals City answered 268 vendor questions City issued 8 addenda 37
39 General Terms 38
40 Plan called for various contract terms to be included Contract Lengths General Terms Term will be 7 to 9 years, plus 2 one year extensions at the City s option for the F&B Term will be 7 years, plus 2 one year extensions at the City s option for the Retail Depends on concession start dates Products to be sold at street pricing with emphasis on brand names 39
41 General Terms Keep Wi Fi/ Broadband rights for the City of Dallas Establish procedures to ensure good customer service Secret Shopper program Establish strong customer satisfaction measurements Short cure period (time allowed to fix problem) Non alcoholic beverages can be sold at both Retail and Food and Beverage locations Evaluation of performance to include peer airport and vendor comparison to be added to other criteria 40
42 General terms Reserve rights regarding certain products to be offered in the terminal Water brand (except National franchise accounts) Pouring brand rights (except National franchise accounts) Coffee brand (except National franchise accounts) Maintain alcoholic beverage sales rights within the terminal common areas (not at the F & B locations) 41
43 General Terms Miscellaneous Cancellation for convenience/compensation terms Providing for proper transition terms at end of contract Vending rights remain with the City of Dallas Future product determination rights remain with City of Dallas 42
44 Ongoing Contract Management 43
45 Ongoing Contract Management A team has been assembled to facilitate the build out of the concession spaces City staff, Hensel Phelps, Corgan, and Project Management group will work with concessionaires to coordinate all aspects of finishing spaces All activities will be closely monitored to ensure concession spaces open and operating by Spring 2013 opening of first 11 gates in new terminal 44
46 Ongoing Contract Management Will conduct employee/contractor screening Implement secret shopper program City will finalize inventory storage and delivery coordination Centralized receiving/inspection point to be constructed as part of LFMP Ongoing audit and contract compliance 45
47 Results 46
48 Results Proposals closed July 22, proposals were received 85 F&B 25 Retail Oct. 31 Nov. 16 All vendors were given the opportunity to give a presentation to evaluation committee members Neither Incumbent, Dallas Love Field Joint Venture Ltd nor Hudson Retail Dallas Joint Venture submitted proposals 47
49 Results Per the contract amendments with each incumbent for an extension of operation into the construction period, both exercised their Right of First Refusal 48
50 Results Dallas Love Field Joint Venture Selected Food and Beverage Packages 2a, 3, 10, and 11 Offered match for all four packages Hudson Retail Dallas Joint Venture selected Retail Packages 4, 6, 7, 9, and 10 Offered match for all five packages 49
51 Results After right of first refusal decisions were made, the evaluation process was completed and the highest scoring proposals finalized Process yielded strong proposals and met financial goals City Sales Projection $57.5million Vendor Sales Projection $57.7million Proposals represent both local vendors as well as National firms 50
52 Results Minority and Women Owned businesses goals were exceeded Established Goal for Minority and DBE participation 23.5% Recommended F&B participation 64% Recommended Retail participation 31% 51
53 Recommendation Staff recommends the following awards for Food & Beverage Concessions: Concessionaire Gina Puente Ventures, Inc. 1 Package(s) Dallas Love Field Joint Venture, Ltd 2a, 3, 10, 11 Host International, Inc. 4, 6, 8, 9 Pop Four Love Field, JV 2b, HG Multiplex Regali Dallas JV 5, 7 The Grove 12, 13 Dickey s Barbecue Restaurants, Inc
54 ACDBE Participation Food and Beverage Package(s) Concessionaire ACDBE Participation 1 Gina Puente Ventures, Inc. 100% 2a, 3, 10, 11 Dallas Love Field Joint Venture, Ltd 100% 4, 6, 8, 9 Host International, Inc. 49% 2b, Pop Four Love Field, JV 23.5% 5, 7 HG Multiplex Regali Dallas JV 25% 12, 13 The Grove 100% 14 Dickey s Barbecue Restaurants, Inc. 40% 53
55 Brands/Concepts Food and Beverage Package(s) Concessionaire Brand/Concept 1 Gina Puente Ventures, Inc. Sky Ranch 2a, 3, 10, 11 Dallas Love Field Joint Venture, Ltd Chili s Too, Cantina Laredo, Campisi s Pizza and Sonic 4, 6, 8, 9 Host International, Inc. Cool River, La Madeleine, Paciugo Gelato, Starbucks and Chick Fil A 2b, Pop Four Love Field, JV Cru Wine Bar and Brueggers Bagels 5, 7 HG Multiplex Regali Dallas JV Jason s deli, Baskin Robbins, Texpress Gourmet and Dunkin Donuts 12, 13 The Grove Moe s Southwest Grill and Manchu Wok 14 Dickey s Barbecue Restaurants, Inc. Dickey s Barbecue 54
56 55
57 56
58 Recommendation Staff recommends the following awards for Retail Concessions: Concessionaire Host International, Inc. 1 Package(s) HG Multiplex Regali Dallas JV 2, 3, 8 Hudson Retail Dallas JV 4, 6, 7, 9, 10 Two Podners TPS, LLC 5 57
59 ACDBE Participation Retail Package(s) Concessionaire ACDBE Participation 1 Host International, Inc. 49% 2, 3, 8 HG Multiplex Regali Dallas JV 25% 4, 6, 7, 9, 10 Hudson Retail Dallas JV 25% 5 Two Podners TPS, LLC 51% 58
60 Brands/Concepts Retail Package(s) Concessionaire Brand/Concept 1 Host International, Inc. D Magazine News, Texas Monthly News and Creative Kidstuff 2, 3, 8 HG Multiplex Regali Dallas JV Hudson News, Fair Park Tx, Billy Bob s Texas and Fire CZ 4, 6, 7, 9, 10 Hudson Retail Dallas JV CNN Newsstand Dallas, Mallasadi Men s Boutique, Tech On The Go, Spectacles, Travel & Leisure Travel Store and The Cowboy Shop Famous Texas Boots 5 Two Podners TPS, LLC EA Sports 59
61 60
62 61
63 Next Steps After award by City Council, staff will: Issue notice to proceed to approved vendors to complete and submit design and architectural plans to City for review and approval Meet with Management team to move forward with finish out Coordinate receiving and delivery process Assist in design and construction activity 62
64 Appendix 63
65 Option 4 As briefed to City Council August
66 65
67 66
68 67
69 68
70 69
71 70
72 71
73 Member Composition of Evaluation Committees 72
74 Food and Beverage Concept Committee Member Composition Department Aviation Aviation Equipment & Building Service Park & Recreation Dallas Water Utilities Convention Center Library Southwest Airlines Position Real Estate Manager Contract Compliance Manager Assistant Director Capital Financial Manager Assistant Director Assistant Director Assistant Director Manager Properties 73
75 Retail Concept Committee Member Composition Department Aviation Aviation Economic Development Public Works & Transportation Housing Park & Recreation Southwest Airlines Position Assistant Director Facilities Superintendent Assistant Director Assistant Director Assistant Director Senior Park Manager Manager Properties 74
76 Financial Evaluation Committee Member Composition Aviation Aviation Financial Services Financial Services Department Position Budget Manager III Business Manager III Assistant City Controller Budget Manager 75
77 Lottery Combinations Calculation Help 76
78 77
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