DIA Parking Contract – Stink, Stank, Stunk

There is a tenet in public procurement–probably private procurement, as well–that the procurement authority becomes the advocate for the most responsive, responsible, qualified proposer/bidder as determined either through a bid or an RFP process. The procurement authority champions, if you will, the most responsive, responsible, qualified proposer/bidder not so much as a matter of collaboration, but, rather as a matter of affirming the integrity of the bid or RFP process itself. It cannot be otherwise. The procurement entity must be proud/satisfied that they have made every possible effort to assure the most transparent, defensible, thorough work product possible is brought to fruition in the form of a duly executed contract that, in this case, will assure the best interests of the city are served.

Having said this, it is also important to note that it is the responsibility of the procurement authority to assure the bid/RFP document provides a thorough, detailed scope of work upon which the potential bidders/proposers will base their pricing, whether that pricing is for line item goods (trucks, toilet paper, nuts and bolts), or for services either requiring, e.g. a net unit price per hour or for what is commonly referred to as a “management fee” which contains nested costs.

Enter the recent RFP for parking services at Denver International Airport. The contract for parking services at DIA encompasses the management of all facets of parking at DIA, including the toll booths where money is collected, valet services, outlying parking lots, etc. The parking services at DIA net approximately $110 million for the airport and encompass about 41,000 parking spaces. It is important to note that these funds are NOT your tax dollars. The airport operates as a “enterprise fund” which means it is a city entity that generates its own funds and, therefore, directs those funds right back to the airport. Again, it’s not your tax dollars at work here. It’s the traveling public which forks over that $110 million a year.

There were four proposers: AMPCO, the current contractor with more than ten years of experience managing parking services at DIA; Standard Parking Corporation; Five Star Parking; and New South Parking. We need only to look at the “successful” proposer, Standard Parking, and the incumbent, AMPCO.

The RFP was structured to require the proposers to provide a management fee within which non-reimbursable costs are nested. Those costs include but are not limited to insurances, bonding, cleaning of the office facility, providing vehicles, wages and benefits for employees, etc. The RFP provided that reimbursable costs would be negotiated between the vendor and the airport on a monthly basis. Problem is, the RFP was apparently not specific as to what should be included in that management fee.

AMPCO proposed a management fee within their proposal of $1.3 million. Standard proposed a management fee of $510,000.

Now, one might think slam-dunk, no problem, Standard is the one. I mean, for heaven’s sake, their management fee is less than half that proposed by AMPCO.

Red flags abound, however.

I’ll proceed with this caveat: I have not seen the entire RFP issued by the airport, nor have I seen the responses. But, nevertheless, those red flags wave and flutter which, if not seen, is witness only that you’re not looking or you’re legally blind.

If you’ve got about two hours and fifteen minutes to spare, you might want to take a look at the March 19th meeting of Denver City Council’s Economic Development Committee. The link is here. (Click on “video” for the March 19th meeting.) The discussion is revealing, to-the-point and provides a little fodder for this post.

What bothers me most about what appears to be an irregular process DIA undertook to identify a new contractor to run airport parking services, is the intrigue engendered by the “successful” proposer’s–Standard Parking–bid ($510,000 annually), that was half that of the incumbent, AMPCO, ($1.3Million). What we now know is that AMPCO’s proposal included in its management fee a bonus pay program and health care reimbursement for workers that, apparently, the folks at DIA (City employees) who put the proposal together didn’t include as a “requirement” of the RFP document. It’s significant that DIA didn’t include these costs in their RFP, because–If I’m lyin’ I’m dyin’–AMPCO, the incumbent of more than ten years, undoubtedly knows more about the parking operation at DIA than those city employees who ostensibly oversee the parking operation at airport…thus the glaring discrepancy in the proposals. Note: Methinks those city employees who actually work the trenches of the parking operation at DIA were devalued by higher authority at DIA and, most likely, their recommendations/comments/warnings were not heeded by higher authority who, apparently, put this RFP together.

Two questions come to mind: 1) Didn’t city employees at DIA who put the RFP together consider the input of the incumbent of over ten years prior to issuing the RFP; and, 2) Has higher authority at DIA determined that cost savings on this contract are to be appropriately realized on the backs of the current contract employees, many of whom have served this contract since it was first awarded to AMPCO more than ten years ago? And, yes, those employees are unionized.

Yeah, I know, we’ve all got our opinions on the relevance of unions. Times have changed. The relevance of unions has slip-slid from the essential worth they once enjoyed. But, hell, to ignore the relevance of the SEIU organization of DIA parking services employees is to ignore the dignity, the long-fought struggle of good folks who have serviced this contract for more than ten years; of folks who have come to believe that their efforts on behalf of the airport are meaningful and should–no!–demand recognition without the specter of a Hickenlooper tap dance that devalues their service and, much like the Hick’s distaste for career city employees, places the burden of the said cost savings squarely on the backs of those employees servicing the parking contract at DIA.

Read what Jack Ricchiuto, Executive Vice President of Standard Parking (the apparent “successful” proposer), had to say about this issue: “We weren’t going to dole stuff out of the cookie jar to satisfy what the union might think would be a fair reimbursement of health care or their hourly rates…” A “fair” reimbursement, you say, Mister Ricchiuto? Have you not, Mister Ricchuto taken on the Hick’s mantra, here? Parking services employees at the airport are not undocumented workers who, like those who served the back room functions of Hick’s restaurants (when he owned them), who dared not speak up about the “fairness” of the Hick’s laggesse or lack thereof because, ahem, many of them were undocumented.

Questions

1. Is it not a concern for Council members and airport personnel that the incumbent of ten years–who presumably knows what the hell the contract entails; what the real costs are–provides a proposal over twice that of the “successful” proposer, Standard Parking? Indeed, what does the incumbent know about this contract that Standard doesn’t?

2. Unbalanced bids. Usually this procurement term relates to a bidder or proposer–usually in the construction trades–who provides pricing for bid items that are obviously heavily loaded on one end and sparsely loaded on the other. In other words, the contractor may provide a price for an X widget at five times the market value of that X widget, while providing pricing for a Y Widget that is three times less than the market value of a Y widget. That, basically, constitutes what procurement folks call an “unbalanced bid.” Indulge me in extending this procurement phenomenon to the DIA parking contract. Didn’t it occur to DIA personnel and the panel who reviewed the proposals for the parking contract that there was a huge “unbalanced” discrepancy between the incumbent and other proposers? And, if they did, wouldn’t you think they–DIA personnel and the review panel–would want to dig into the obvious, glaring discrepancy to determine why the numbers were so far apart? I mean, after all, it’s the incumbent who has provided the services for more than ten years and who, one would think, knows more about the actual costs of the contract than any other proposer or, indeed, the airport itself.

I can probably count on one hand the number of times I, as a procurement professional, called in a “low” bidder or proposer to ask the relevant question: “Hey, my friend, your bid is so low that I think either you’ve set yourself up to fail miserably in taking on this contract, or you’ve misinterpreted the requirements of the RFP.” And, in asking those questions, I required the “low” bidder or “successful” proposer to explain, in detail, their costs, their nested costs and what their strategy was to assure the successful pursuit of the contract in question. As I said, it didn’t happen often. But, when it did, not only were the best interests of the city served, but those of the “questionable” contractor, as well.

That’s the job of a procurement professional. No public meeting announcement required. No need for the Denver City Council to conduct their own investigation. It is the procurement professional who is responsible to “iron out” these issues prior to the presentation of the “successful” bidder’s/proposer’s bid/proposal to the world. The procurement professional is charged with this responsibility. It’s his/her job. Period.

Oh, but we see that apparently the city employee who drove this peculiar RFP process, Patrick Heck–the Deputy Manager of Aviation for Revenue and Economic Development–kind of, oh, well, changed the rules of the RFP in mid-stream. First of all, even though the RFP declared that no parking firm who operated a competing parking business within fifteen miles of DIA would be eligible to offer a proposal, that particular requirement was cast aside when, apparently, Standard Parking (who does operate a competing parking facility within fifteen miles of the airport), asked a question during the RFP process relative to this prohibition. And, WALLAH! the prohibition was dropped.

Let’s backup a moment.

It was revealed that DIA didn’t start the RFP process for this massive contract until December, 2007. The AMPCO contract was due to expire on April 15th, 2008. That’s four months to do everything required in an RFP process, plus plan and stage a smooth transition if the incumbent was not the “successful” proposer. FOUR MONTHS! May I use the word “reprehensible” here. The RFP process should have been commenced at least six months and, even better, eight months to a year prior to the expiration of the present contract.

Patrick Heck and crew also decided that the health care contribution to employees would be 75%. Okay, that’s fine. But, hey, apparently half the current employees are receiving 86% reimbursement for single health care coverage. Why did Heck and crew specify the 75% contribution. Well, see, it just made it easier for everybody if they had a set figure. I mean, gosh, it was a little difficult to calculate these varying health care contribution numbers and so what if long-time employees were going to get screwed in the process.

Then there’s the issue of the cost of the contract from the “successful” proposer–Standard Parking–which Heck and crew calculated to be $70 million over the term of the contract. But, wait! After meeting with City Council and hearing the concerns voiced by Council members, Heck and crew went back to the drawing board and came back with a revised figure of $85 million. Gosh, where’d they go wrong? I mean, leaving $15 million on the table to begin with is a pretty hefty, um, miscalculation.

Then there’s the matter of Heck’s persistence in advising Council that they–Heck and crew–couldn’t possibly dig into the nested costs in each proposer’s management fees because, well, that’s proprietary information and no one should be privy to that information except the proposers themselves. Bullshit! As I noted before, when the discrepancy in proposals reaches the level of “unbalanced”–as I’ve described above–the procurement professional has a duty, an obligation in the best interests of the city to know what those nested costs are. It is the duty, the obligation of the procurement professional to investigate all facets–including nested costs–of any proposal that, on the face of it, appears to be just too good to be true. But, Heck and crew didn’t undertake this important step in the best interests of the city. The word “proprietary” ruled the day. Hell, given my experience, if a proposer was not willing to explain in detail how they arrived at their numbers, how they put their proposal together, I would have suggested that, in good conscience and in the best interests of the city, their proposal would be considered as “non-responsive” and that would have been that.

Well, City Council, on a seven to five vote, approved the Standard contract on first reading this past Monday night. Go figure. I heard councilmembers suggest that no RFP is perfect and, oh well, let’s just get on with it. Council also approved a six-month extension of the current contract–AMPCO–with the possibility of another six-month extension. Reasoning: Well, the airport didn’t want to change players during their busiest season. Again, bullshit. The specter of labor unrest at the airport when all the donkeys (the DNC) are coming to town in August had more to do with the extension of the current contract than anything else.

Final thoughts.

An RFP process can be pretty close to perfect. But, the work to assure an RFP process is as close to perfect as possible comes on the front end when the RFP is prepared by procurement professionals. Perfecting an RFP process also comes at the tail-end when proposals are received and evaluated. Regardless of what the “blue ribbon” review committee came up with during the evaluation process, it was incumbent upon procurement professionals to guide that process in such a manner that any and all anticipated concerns, not only from the airport but from the City Council as well, were handled responsibly and thoroughly prior to presenting the RFP for approval by City Council. “Proprietary” information from any proposer ceases to be “proprietary” when push comes to shove and the procurement professional puts their hind end on the line in the affirmation that a “successful” proposer is responsive to the requirements of the RFP.

But, then, if the RFP itself stinks then we got problems, y’all.

This, then, is where we find ourselves with the DIA parking contract. Methinks, purchasing professionals had very little to do with this whole process. Or, if they did, they failed their charge. But, then, purchasing professionals are career bureaucrats…lowly creatures, barely worth their input, much less their salaries.

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One Response to DIA Parking Contract – Stink, Stank, Stunk

  1. Fred Kaplan says:

    I was watching the Audit committee on Channel 8 today and who should appear but Patrick Heck. He now has the title of Strategic Advisor for DIA. From what I gathered he is now responsible for the concession, parking and other contract areas of DIA. It is interesting that he seemed vague when asked how many contract may be past due, or up for renewal. He is sighting a new staff of 70 (20 working on contracts) and 400 contracts to review. He Also mentioned a new software program the have to be used for tracking contracts. Anyone with his “credentials” knows that a simple program like Outlook or Excel could keep track of when contracts are due with advance ticklers and reminders. Everytime I see these career employees I relaize why quality professionals keep away from government work. I would have difficulty listening to some one like him who has been responisble for copntracts now saying that oops we don’t know occupancy rates etc. Lets give him a bigger budget, staff, more consultants, and a few years to get it under control. In the commercial world he would have been gone when he blew the parking estimates.

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