The Phoenix City Council on Wednesday unanimously voted to award a 10-year food and beverage contract at Phoenix Sky Harbor International (PHX) Terminal 4 to incumbent operator HMSHost. The 20 locations in Package 1, about half of the total spaces in the terminal, are expected to generate revenues of roughly $60 million per year.
In light of controversy surrounding the awards process, the Phoenix Aviation Department also announced adjustments to the procurement process for Package 2. Responses for Package 2 of the food and beverage concessions request for proposals (RFP) are due on August 31.
For Package 1, construction on the locations will begin in January, and the new concepts will open in phases through mid 2013. “We are so thrilled to be able to bring these excellent food and beverage choices to our customers,” said acting assistant aviation director Tamie Fisher.
Steve Johnson, senior vice president for HMSHost, says his company’s proposal encompasses the heart of the city. “We were trying to bring the best of Phoenix into the airport,” he says. “That’s not just the restaurants, it’s the local businesses,” he adds, noting that designers, suppliers, workforce development agencies and others will be sources from the Phoenix area. “There were 43 local businesses included in this RFP in some form or fashion,” he says. “We really tried to include the local community all the way through.”
Concepts in the contract are Chelsea’s Kitchen, LGO Burger, LGO Deli, LGO Pizzeria & Grateful Spoon Gelato, NYPD Pizza, Sir Veza’s Taco Garage, la Madeleine, Cartel Coffee Lab, McDonald’s, Press Express, El Bravo, Sauce, Blanco’s Tacos & Tequila, Modern Burger, Olive & Ivy Marketplace,, D’licious Dishes, Barrio Café©, Cowboy Ciao and Starbuck’s.
The vote effectively closes the door on the controversy surrounding the RFP process for Package 1. There were three bidders: HMSHost, SSP America and Areas USA. After the evaluation panel recommended HMSHost for the contract, SSP launched a protest, claiming, among other things, that renovations undertaken by HMSHost during their extended contract period were an effort to “showcase” new concepts, and that information surrounding the reasoning behind scores awarded by the evaluation process was not provided.
Patrick Murray, executive vice president, business development, SSP America, says two concept changes were undertaken by HMSHost during the evaluation process. “Good reasoning and common sense would say that perhaps there was some problem with that,” he says. On the lack of supporting information available from the airport regarding the evaluation process, Murray says the documentation that was eventually provided “led to one question after another.”
Johnson called SSP’s claims a “red herring,” noting that “It’s common practice in our industry that when you get an extension you need to reinvest.” Johnson says HMSHost spent about $2 million on renovations during the first six months of its contract extension that spans 19 months. About $250,000 of that was spent on the concept changes, which Johnson said converted two locations into “generic bars.”
Fisher says the improvements were “all within the parameters of [HMSHost’s} current contracts.” She adds that the improvements “did not factor into the evaluation process of the panel.”
SSP’s complaints did prompt some changes going forward. The Phoenix Aviation Department proposed, and the City Council approved, five adjustments to the procurement process for the second food and beverage package for Terminal 4.
The adjustments include:
– New panel. A new panel will convene consisting of members not involved in the evaluation of the first package.
– Category scores. The evaluation panel consensus scores for each of the five evaluation categories for each proposer will be preserved. The total of the category scores will determine which proposer is recommended.
– No refreshing concepts during bidding. Incumbent HMSHost agreed not to propose any changes and the Aviation Department will not approve any changes.
– The commissary. Noting that “There could be a perception that the winner of Package 1 will have an advantage in the Package 2 procurement because the winner will already have budgeted for an off-site commissary,” the Aviation Department will amend the RFP to require a minimum commissary investment of at least $1 million. If any proposer does not invest that minimum amount, the difference will be paid to the Aviation Department.
– Non-Aviation Manager. The Aviation Department will have a non-aviation manager with expertise in the procurement process observe all of the evaluation panel’s deliberations for Package 2.
Murray welcomes the changes, noting its discussions with the media and City Council members prompted discussion on the issue. The changes, he says “lends credibility that we’re not just sore losers crying about something. There were legitimate, significant problems with the process.”
