CHICAGO (CN) – Chicago officials conspired with Westfield Concessions Management to rig the bidding process for a 25-year concessions contract in O’Hare International Airport’s international terminal, an ousted competitor claims in Cook County Court.
Mayor Rahm Emanuel, who has emphasized greater transparency in contract negotiation, touted the City Council’s 45-3 vote to approve the Westfield contract as “a new future for the city.”
“In past deals, nobody showed up because everybody knew before the process started what the end result would be,” Emanuel said.
But Chicago Aviation Partners, which has run concessions in Terminal Five for the past 18 years, now says the deal was anything but transparent.
Despite shortfalls after the Sept. 11 terrorist attacks, the group says it exceeded yearly projections over the last 15 years by more $11.5 million. Still, the company butted heads with Chicago over the terminal’s concession structure. Chicago Aviation Partners says the city denied its repeated requests to add storefront space beyond the security checkpoints.
Rather than renewing Chicago Aviation Partners’ contract, the city announced a request for proposals, beginning a competitive-bidding process for the new 20-year contract.
“The city represented it would engage in a transparent and competitive bidding process and award the contract to the responsible bidder offering the most favorable economic terms to the city,” according to the complaint, jointly filed with Duty Free Americas and Chicago Duty Free Shops. “Instead, after a sham evaluation process, and considerable effort to block aldermen’s access to details of the competing bids, the city awarded the contract to Westfield.”
Chicago Aviation Partners says Westfield’s was “the worst, by far, of the three bids,” guaranteeing the city $120 million less than it had. Though Westfield did offer to invest $26.2 million to upgrade shops and restaurants, an exception in the contract could leave the city to pay if terminal traffic dips more than 5 percent below 2008 levels or if available store space is reduced, according to the complaint.
Chicago Aviation Partners also says minimum guaranteed rent under its proposal was 48 percent higher than the best-case scenario rent under Westfield’s proposal.
“In short, in return for paying the city a fraction of CAP’s bid, Westfield was awarded the privilege of having its private investment in Terminal 5 guaranteed by the city’s taxpayers against Westfield’s poor performance,” the complaint states. “The entire process violated state law and the terms of the city’s own request for proposals.”
The bidding process attracted local media attention, after several council members expressed their concern over the economics of Westfield’s bid.
But worries about the cost of the bidding process itself served to stifle reservations. Mayor Emanuel reportedly argued that the city would lose almost a quarter of a million dollars per month during the process. Chicago Aviation Partners says it vainly submitted a written offer to pay the city $200,000 per month for up to a year to keep the evaluation running.
“Faced with the Aviation Committee’s unanswered questions and refusal to blindly approve the Westfield bid, the city went on the offensive,” the partnership claims.
False information disseminated to council members and the public coupled with media taint to the company’s image, Chicago Aviation Partners claims it is at a disadvantage to win future contracts.
Chicago Aviation Partners says the city changed its requirements when Westfield’s bid failed to meet original proposal guidelines. Westfield’s proposal lacked a minimum rent guarantee and the city let it add a 10-year opt-out clause after bidding had closed.
With the Aviation Committee’s recommendation, the Chicago City Council affirmed Westfield’s win of the contract.
Alleging violations of state law, Chicago Aviation Partners asked the court to set aside the Westfield contract and order the city to grant it them or rebid. Unless an injunction is granted, the partnership will have to vacate the terminal by Aug. 31.
Chicago Aviation Partners and the duty-free plaintiffs are represented by Christopher Barber with Steptoe & Johnson.