CHICAGO (CN) - Hertz, Avis and others sued Chicago, claiming the city is forcing them to pay millions of dollars for a new car rental building at O'Hare Airport, after an illegal bidding process.
Enterprise, Avis, Hertz, and Dollar Thrifty Automotive sued Chicago, its Department of Aviation and its Aviation Commissioner Rosemarie Andolino, in Cook County Court.
"Defendants are coercing plaintiffs, four of the largest rental car companies, to choose between entering into a legally deficient public bidding process and unlawful lease and concession agreement with the City or foregoing on-airport operations at Chicago O'Hare International Airport upon penalty of severe financial and reputational hardship," the complaint states.
"The driving force behind this 'choice' is the City's plans to design, construct and fund a new rental car facility, a modernized and upgraded airport transit system and a public parking facility at O'Hare. Though plaintiffs welcome the City's effort to modernize O'Hare and its rental car facilities, the current bidding process is arbitrary, deeply flawed and violates the law. The Court should enjoin the bid process so that it
can be modified to comply with the law and serve the purpose of constructing a facility at O'Hare that benefits all constituencies.
"The process of negotiating and bidding for the right to do business in airport facilities is well established and follows a standard script. Rental car companies assess the business opportunity of being located on-site at an airport and then submit bids committing to pay the airport authority the greater of a minimum annual guarantee or a portion of the company's revenue at the location, typically 10 percent. These sorts of agreements typically last for 3 to 5 years, and then a new bidding process takes place.
"The City, however, has constructed a bidding process that departs radically from those standard practices. Under the City's process, plaintiffs must not only commit to the usual minimum guarantee and percentage of revenues, but must also agree to take on or act as a guarantor for massive and unknown construction, debt, operating and other costs, and administer a City-imposed customer fee that violates the law," the complaint states.
The car rental companies claim the city is doing it this way because its plans to upgrade O'Hare have run far over budget.
While the original cost estimate was $397 million, new documents "show that the federal government concluded that there is a 70 percent probability that project costs will reach $817 million. The costs continue to expand, with no end in sight, and the project costs have become a moving target," according to the complaint.
"The City's request for proposals (RFP) is deficient as a matter of law because it conditions participation in the bidding process on plaintiffs' willingness to accept unlimited liability for unauthorized and illegal costs, in violation of plaintiffs' rights under state law to participate in a fair bidding process and withholds the information necessary to understand the true economic cost of committing to operate in the consolidated facility. A bidder who 'wins' a spot in the consolidated facility must commit to bear millions of dollars in unknown costs for 30 years," the complaint states.
In addition, "the RFP would require plaintiffs to unwillingly collect a disproportionate and unreasonable surcharge from their customers to finance construction of the expanded ATS [airport transit system]. State law and municipal ordinances set reasonableness and proportionality limits on this 'customer facility charge,' but the City's RFP disregards them all. The result is a massive burden on rental car customers. ...
"In short, in order to submit a bid to do business at O'Hare, plaintiffs must agree, for 30 years, to take on immense unknown liabilities, to collect excessive and unreasonable CFCs [customer facility charge] for unauthorized purposes, and to pay an unlawful tax.
"The city's plans can be changed to comply with the law and to create an economic structure that benefits the City, the traveling public, and the rental car companies alike. Plaintiffs have worked with public authorities to achieve that result in airports around the country. Chicago should be no different. Unfortunately, however, the City has advised plaintiffs that the RFP process will not be changed to cure the deficiencies identified in this complaint and that the May 24, 2013 bid deadline will be enforced."
The plaintiffs sued on Wednesday, May 22, seeking an injunction forbidding the city from enforcing its May 24 deadline for bid submissions, and a declaration that the proposed contract is unlawful.
The court did not rule on the matter before the city's deadline passed.
The plaintiffs are represented by Samuel Isaacson with DLA Piper LLP and Anton Valukas with Jenner & Block.
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