Guam Airport Authority Suspends Concession Procurement

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Conflicts of interest, ‘gifts’ to officials at center of issues

By Gaynor Dumat-ol Daleno

HAGÅTÑA, Guam (Pacific Daily News, April 26, 2013) – The Guam International Airport Authority (GIAA) suspended its plan to award the duty-free retail concession contract to newcomer Lotte Duty Free.

Executive Manager Chuck Ada announced the airport's decision at a board meeting yesterday afternoon.

He said the agency's receipt of a protest halts the procurement process until the issue is resolved.

Current concessionaire DFS Group filed a protest on April 23. The protest alleges attempts by the airport agency to "paper over" and "sanitize" what DFS characterized as ethical concerns stemming from Lotte's alleged connections with public officials and community figures on Guam. DFS also alleges in the protest that Lotte gave gifts to a Guam delegation that visited Seoul in April, and two airport board members were part of the delegation.

At stake is the exclusive right to sell luxury goods, liquor, cigarettes and other goods at the Guam international airport for five to 10 years. The minimum bid requirement was $6 million a year in lease payments to the airport agency.

DFS' contract with the Guam airport expired in January. It continues to operate on a monthly lease until a new duty-free concessionaire is selected.

Challenge to DFS

Former Guam Visitors Bureau (GVB) General Manager Monte Mesa said DFS Group should show proof of its allegation that Mesa may have helped Lotte gain an edge.

"I challenge them to produce a document showing I have a contractual service" with Lotte, Mesa said.

DFS' protest states that Mesa "was providing consulting services to Lotte or assisting it in obtaining consulting services from third parties in connection with the "Request For Proposals" (RFP).

He said as then-chairman of GVB and resident of Guam, he did encourage Lotte, as he did other potential international investors, to invest in Guam.

In addition to entering the duty-free retail business on Guam, South Korea-based Lotte Group's Lotte Hotels has entered into an agreement to renovate and manage the former Aurora Villa Resort & Spa.

DFS has stated it conducted an investigation that allegedly showed two airport board members were among Guam delegation members who received what DFS called "shopping cards" at the Lotte department store.

DFS' protest also alleges that Mesa encouraged a Guam delegation, including two airport authority board members, "to choose whatever you want" when the delegation was invited to the Lotte department store in Seoul. The trip, in September last year, was to mark Jeju Air's inaugural Seoul-Guam flight.

Mesa said his comment was taken out of context. Mesa said he remarked to other members of the delegation that the discount cards were applicable to anything in the store. The cards were not gift cards; they were simply discount cards, Mesa said.

Airport board members Frank Santos and Linda Tolan have abstained from voting on the decision to award the contract to Lotte. They received gifts from Lotte which they later returned. They found out after the fact that Lotte was a bidder for the duty free concession contract, airport management has stated.

DFS also named attorney Eduardo "Champ" Calvo, who's on the GVB board, as having a conflict because he's the brother of a Lotte consultant.

Calvo denied any conflict or participation in the procurement.

"Even though I do not believe that I have a conflict of interest, I had no involvement in the procurement process for the GIAA duty free concession.

"As for the various allegations and concerns raised in DFS' protest letter, I understand that GIAA will address those through -- and in connection with -- the formal protest process," Calvo said.

Bidders were required to have at least $25 million in gross sales every year for five years.

Mesa said the airport was expected to follow business practice "101." The bidder that may have offered the best financial benefit to the airport agency and the local economy likely was selected.

The details about how the four competitors were ranked, and how much Lotte's offer is, haven't been released pending final award of the contract.

DFS Group said in a press release the cloud over the procurement process could tarnish the island's image to international investors.

Mesa's response to that was: "Are you kidding me? That's self-serving, in my opinion."

Mesa said it was DFS that was trying to influence the process by asking Guam Delegate Madeleine Bordallo to write a letter late last year calling for fairness and transparency to the airport's procurement process.

Mesa said he does not recall Bordallo, as Guam's member of Congress, writing a similar letter related to other local government procurement issues.

"If you really value your Guam investment, you should have put more money on the table," Mesa said, referring to DFS.

Steve Park, the CEO of the Lotte Duty Free Guam, said the company "will cooperate in any way possible during this protest."

"Lotte Duty Free has no reason to believe that GIAA's original decision will change, and we look forward to working with GIAA to deliver on our ambitious plans and build a truly world-class retail facility at Guam Airport," Park said.

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