Two Protests Filed Over Guam Airport Vendor

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Pacific Islands Development Program, East-West Center With Support From Center for Pacific Islands Studies, University of Hawai‘i

DFS Group, JR Duty Free file separate petitions

By Gaynor Dumat-ol Daleno

HAGÅTÑA, Guam (Pacific Daily News, May 31, 2013) – Two international duty-free retailers filed separate protests yesterday against the Guam airport agency's recent signing of a contract for prime retail space at the airport terminal despite ethical and legal concerns.

Bid protester DFS Group, one of the world's largest duty-free retailers who held the duty-free concession contract for decades, alleges in court papers that an airport agency board member received a Coach bag for his wife and another airport board member received about $200 worth of lotions, creams and cosmetics after they visited a department store being run by Lotte Duty Free in Seoul. The airport board members later returned the gifts and abstained from voting on the Lotte contract.

Dismissing protest

The airport and Lotte signed the contract on May 18.

The A.B. Won Pat International Airport Authority Guam (GIAA) signed the contract after dismissing a procurement protest filed by bidder DFS Group, but before other bidders' deadline to appeal the airport's decision ended.

Filing a protest within an agency is the first step. Bidders can appeal a procurement decision with the Office of Public Accountability and also have the option of taking their protest to court after exhausting administrative avenues.

Hong Kong-based DFS Group, through subsidiary DFS Guam, yesterday did both. DFS filed a procurement appeal with the Office of the Public Accountability (OPA) and at the same time filed a lawsuit with the Superior Court of Guam "out of an abundance of caution."

Second company

Australia-based JR Duty Free also filed a separate notice of protest with the airport agency.

"Given the weight and volume of discrepancies continually coming to light surrounding the award of the (request for proposals), JR Duty Free believes this action is justified," the company stated in a press release. JR Duty free is a leading duty-free retailer in the Oceania/Pacific and Middle East regions, the company stated.

At stake is the exclusive contract to sell luxury goods, cigars, tobacco and alcohol at the island's only international gateway to the world.

The contract states Lotte will pay the airport a minimum of $15.4 million in rent a year, or a total of $77 million, for the exclusive use of the duty-free retail concession space for five years.

There's a renewal option in the contract for another five years. If Lotte renews the airport would collect $154 million in rent over 10 years.

Process halted?

In general, a protest halts further action in a procurement process until a protest is resolved, the Office of Public Accountability states.

In this specific case, however, OPA still is seeking clarification because the process has progressed from selection of bidders to the actual signing of a contract.

Airport Executive Manager Chuck Ada said yesterday afternoon the airport agency hasn't received formal notice of the protests, so the airport agency is not stopping the procurement process -- for now.

At close to 5 p.m. yesterday, nearly three hours after DFS and JR Duty Free announced their protests separately, the airport agency and Lotte issued a joint press release.

"The... concession agreement signed earlier this month heralds in a bright and new future for the Guam International Airport," the press release said.

DFS' lawsuit asks the Superior Court of Guam to halt the agreement, declare the contract void, order the procurement process to start over and bar Lotte from participating in a second round of bidding.

The gifts

DFS alleges in its lawsuit that the agency's conduct in connection with the procurement process "has seriously undermined the 'public trust' in the GIAA as a public corporation and autonomous instrumentality of the Government of Guam."

"Violations include, but are not necessarily limited to, GIAA board members' acceptance of gifts and gratuities offered by defendant Lotte," DFS' lawsuit contends.

DFS' lawsuit states that airport board Chairman Francisco Santos and member Rosalynda Tolan were part of a Guam tourism industry delegation that visited Lotte's downtown store in Seoul in September last year, "where they were personally greeted by the president of Lotte." The procurement process was ongoing at the time.

"(While) in the Coach section of the (Lotte Seoul store), (GIAA) Chairman Santos attempted to purchase a purse for his wife. Upon handing his credit card to the Lotte cashier, he was informed by the cashier that 'Mr. Mesa will take care of it,'" DFS' lawsuit alleges. DFS' lawsuit refers to Monte Mesa, former chairman of the Guam Visitors Bureau board, who "was assisting Lotte in obtaining consulting services from third parties in connection with this RFP."

Mesa has denied, in an earlier interview with the Pacific Daily News, having worked with or for Lotte.

"On Oct. 24, 2012, after ... being reminded about the pending RFP, Chairman Santos returned the bag with the purse to Mr. Mesa who, in turn, attempted to return the purse to Lotte for a refund," DFS' lawsuit states, quoting information from an airport investigation.

The Pacific Daily News has filed a Freedom of Information Act request for the same information, but the agency hasn't yet released the information.

The lawsuit alleges the airport released information to DFS that Tolan received "a gift bag of lotions and face creams in her hotel room."

Tolan and Santos abstained from voting on the Lotte contract.

The airport board decision to award the contract to Lotte was voted favorably by three remaining airport board members.

Airport board member Martin Gerber reportedly has a business relationship with Lotte, DFS alleges in the lawsuit. And had Gerber abstained, the airport board wouldn't have had a quorum, DFS states.

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