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Back Local News DFS: Lotte offered ‘extra goodies’

DFS: Lotte offered ‘extra goodies’

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LOTTE Duty Free Guam offered the Guam International Airport Authority “extra goodies” outside the scope of the request for proposal and at the expense of other bidders who followed the bidding specifications, according to William Blair, attorney for DFS Guam.

Blair said the extra package consists of several capital improvement projects worth $55 million, which were not called for in the RFP.

“They dangled a couple more carrots out there, which the airport should have just disregarded because it is not related to the RFP,” Blair said, noting the solicitation only called for improvements to the retail space.

He said the extra items include a $32 million arrival corridor improvement project, food court and bathroom improvements, children’s play area, a smoking lounge, and $2 million in additional revenue for the airport from the Downtown Duty Free Store that Lotte plans to build.

“Nobody else offered any of these because it wasn’t part of the deal,” Blair said, adding that the extra package had “clearly influenced” the bidding scores to Lotte’s advantage.

Blair said the new discoveries will be included in the amended complaint that DFS will file.

“In its initial proposal submitted on Oct. 17, Lotte said it would invest $17.6 million in airport facilities – $10.2 in the retail space and $6.7 million in the ‘airport environment,’ meaning the non-retail space,” Blair said.

“They also committed to mid-term refurbishments of $4.7 million for a total of about $23 million. There was $750,000 for retail space it will not get until 2016,” he added.

Blair said the grand total of the additional package is $55 million, including the $32 million financing commitment for the third floor arrivals corridor that was included during the Nov. 29 interview with GIAA.

Rawlen Mantanona, attorney for Lotte, declined to comment, saying the legal team will address all the issues raised by DFS in court.

Protest

Prior to the award of the contract to Lotte, DFS operated a retail shop at the airport terminal for 10 years. Its contract expired in January.

Amid the controversy surrounding the bidding process, GIAA signed a 10-year retail concessionaire contract with Lotte on May 18.

DFS shortly after filed a post-award protest with GIAA, an appeal with the Office of Public Accountability, and a complaint with the Superior Court.

The OPA has since stayed the appeal pending resolution of the case in court.

Earlier this week, Lotte denied DFS’s previous claim that the winning bidder modified its original concession fee proposal from $13 million to $15.4 million.

“Lotte submitted one timely proposal to the RFP. There was no new or altered proposal as alleged by DFS,” Lotte’s legal team said in a press statement.

Updated submission

In its bid document submitted on Oct. 17, Lotte “expressed (its) desire to go above and beyond the minimum requirements and basic criteria set out by GIAA in the RFP document.”

The bid document states, “Lotte will potentially look to build a downtown store, similar to DFS’s operation, but with one crucial difference: Lotte proposes to create a mechanism where the airport receives a percentage payment on all downtown duty free revenues.”

During a briefing with GIAA on Nov. 29, Lotte presented a new document – marked “updated from initial submission” – showing the new figure for a concession fee, which was $15.4 million, or $2.4 million above the original proposal of $13 million.

Blair believes the proposed additional revenue from the Downtown Duty Free store has been tacked onto to the new figure.

Ranking issue

Dismissing the protest as “frivolous and without merit,” Lotte’s attorneys said DFS could not claim it was the aggrieved party because it “was not even the second highest bidder for the concession contract” and it “lacked legal standing to continuously delay this process.”

Blair, however, disagreed, saying it was hard to tell if the bidders were ranked properly based on an allegedly suspicious process.

“The issue was that the whole evaluation process was compromised. How do you go by what the ranking is when you had a game played with the rules not being followed properly? How do you trust the results of that?” Blair asked.

“All the proposers – except Lotte – played by the same rules. So the question is, Who would have won if it was fair? If Lotte offered things that were not included in the RFP, that has some effect on the bidders’ ranking. So how do you know who ranked what?” he added.

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