Airport Bidder Says Corrupt Procurement Process Isn’t Good For Guam

DFS explains why it is continuing legal battle against government

By Gaynor Dumat-ol Daleno

HAGÅTÑA, Guam (Pacific Daily News, July 20, 2016) – While Guam’s airport has dismissed duty free retailer DFS Guam’s agency-level procurement protests, DFS on Tuesday issued a statement explaining why it continues to fight court battles against the airport’s selection of another bidder for one of the agency’s largest contracts.

Three lawsuits on the issue remain pending, and the Superior Court of Guam recently consolidated them for one trial.

“Corrupt procurement procedures are never good for Guam,” according to DFS.

The A.B. Won Pat Guam International Airport Authority hasn’t responded to this latest comment from DFS as of press time, but the agency did issue a statement Tuesday that its procurement process was fair.

The issue concerns the airport agency’s 2013 award, to a Guam subsidiary of South Korea-based Lotte Duty Free, of a 10-year contract for the right to operate duty-free retail shops at the island’s international airport. In the first five years, the chosen bidder has exclusive rights to sell duty-free goods, including luxury items, tobacco, liquor and souvenirs.

In light of recently disclosed documents that Lotte had paid the airport $2.9 million in what the airport called legal fee reimbursements to defend its selection of Lotte, competitor DFS last week called for government authorities to investigate and for the public to keep a watchful eye on the issue.

“The central purpose of DFS’ procurement litigation is to bring to the public eye the need for integrity, fairness and an adherence to the rule of law in Guam,” according to DFS.

“In particular, DFS believes that it is of paramount importance to ensure that the government of Guam and its agencies abide by these principles without exception and regardless of who stands to benefit when these principles are cast aside or ignored,” DFS added.

At the heart of DFS’ dispute: At the time of the deadline to submit offers, Lotte’s original minimum annual guaranteed rent proposal was $13 million, while DFS submitted a minimum annual guaranteed rent of $15.25 million, airport procurement documents show. The deadline to submit offers was October 2012.

However, the airport sent a letter to Lotte on Feb. 26, 2013, stating in part: “Is your proposed (minimum annual guaranteed) rent still $13 million as indicated in your original proposal, or has it changed to $15.4 million as indicated in your presentation booklet?”

Two days later, on Feb. 28, 2013, Lotte responded in a letter, according to the airport, that “the minimum annual rent … proposed by Lotte Duty Free is $13 million per annum, as noted in the original proposal.” In addition, Lotte contended that certain additional rental revenue identified in Lotte’s initial proposal made Lotte’s offer top $15.4 million.

“GIAA permitted Lotte to change its bid by allowing it to raise its financial offer after the deadline for bid responses had expired, and after the sealed bids of other proposers were submitted,” according to DFS.

“This is important for two critical reasons. First, that Lotte was allowed to change what should have been its sealed bid after the deadline violates the (procurement) rules and Guam law,” according to DFS. “Second, Lotte’s changed financial offer happened to be just slightly higher than the superior offer submitted in DFS’s sealed bid.”

However, the airport contends, in a January 2015 decision denying DFS’ second protest, that Lotte “did not make late modifications to its proposal.”

What the airport did, according to the agency, was to allow Lotte to clarify, months after the deadline for submission of bids, that Lotte’s bid is $15.4 million in minimum annual guaranteed rent.

DFS is asking the court to rule on whether the airport violated procurement law. Lotte has been dismissed from most of the lawsuits DFS has filed, according to a prior statement from the company.

“Businesses that invest in Guam must have confidence that the rule of law is fairly applied and that the companies doing business in Guam will be protected from unfair treatment,” according to DFS Guam, a subsidiary of DFS Group, which was established in Hong Kong in 1960 and describes itself as the world’s leading luxury travel retailer.

While the dispute remains unresolved, DFS questioned why the airport is getting payments from Lotte, for the airport’s legals bills.

Lotte’s payment of the airport’s attorneys’ fees to Calvo Fisher & Jacobs — before the legal action is over — is wrong, according to DFS.

Eduardo “Champ” Calvo, counsel for the airport, has said previously that he made sure the airport gets indemnified with the ongoing cost of defending the Lotte agreement to save the government of Guam the cost of litigation.

Over the last three fiscal years, the airport's legal bills have added up to $5.3 million, audit reports show.

Pacific Daily News
Copyright © 2016 Guam Pacific Daily News. All Rights Reserved

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