Title
Terminal 3 Concession Program Strategy and Request to Issue Revenue Contract Solicitation (Ordinance S-43494)
Description
Request to authorize the City Manager, or his designee, to approve the specific terms associated with the issuance of the Terminal 3 Concessions Revenue Contract Solicitation (RCS) at Phoenix Sky Harbor International Airport, including contract packages, evaluation criteria, related business requirements, and airport contracting policy.
Report
Summary
With the modernization of Terminal 3, Aviation Department staff developed a Concessions Leasing Strategy in preparation for the release of a Revenue Contract Solicitation to procure new Food and Beverage and Retail concession contracts.
This strategy is the foundation for Terminal 3's concession procurement. Staff has reviewed enplanement forecast and construction schedules, determined optimal concessions square footage, programmed concession space, identified contracting opportunities, created a timeline for the solicitation and anticipated tenant construction dates to coincide with the opening of Phase 2 and the new south concourse in late 2018. This timeline includes business information discussions with the industry. All existing services in the terminal will continue during this time.
The Phoenix Sky Harbor International Airport concession program goals include creating retail and food options for passengers that reflect our local community. Terminal 3's concession procurement will continue to include local, regional, and national concepts, consistent with the Terminal 4 procurement process. In order to deliver concession services in correlation with the construction timeline, the concession contract procurements for retail and food and beverage will occur simultaneously.
Multiple packages will allow contracting opportunities for companies of all sizes, including the opportunity for subleasing, joint ventures, and licensing agreements. These opportunities provide for the potential inclusion of small businesses.
Goals of the concessions program include: encouraging competition; reflect the region and include national, regional, and local brands and concepts as well as current trends; optimize sales and revenues; increase opportunity for local and small business participation; raise quality and uniqueness of souvenir and gifts merchandise; and phase implementation to coincide with the Terminal 3 Modernization construction schedule.
The Revenue Contract Solicitation will reserve the right for potential City Council consideration of an Exclusive Beverage Pouring Rights agreement at Terminal 3, to coincide with the contractual mid-term capital investment occurring at five years into the term of the lease.
Procurement Information
Aviation recommends the following Revenue Contract Solicitation components, evaluation criteria, and related business requirements:
* One contracting phase with four contract packages (two for Food & Beverage and two for Retail) ranging in size from four units to six units
* Successful retail respondents can only be awarded one news and gift package
* Successful food & beverage respondents can only be awarded one food & beverage package
* Minimum Annual Guarantee (MAG) will be set dependent on the concession category using Phoenix Sky Harbor International Airport historical and market data
* Percentage of gross sales for Retail will range from 12 percent to 16 percent, depending on the retail category
* Percentage of gross sales for Food & Beverage will be 13 percent for food and 16 percent for alcohol
* The Airport Street Plus Ten Percent Pricing policy will be in effect throughout the duration of the agreement
The proposals will be evaluated based on the following criteria:
Proposed concepts 250
Design/quality of tenant improvements 225
Management and operations plans 225
Experience and qualifications 200
Proposed Business Plan 100
Total 1,000
In accordance with the Employee Retention Policy, the successful proposers will be required to hire current Terminal 3 Food & Beverage and Retail concession employees and retain those employees for at least 120 days in their current job classification. The successful proposers may only interview outside of this group of employees when there are no longer any current employees in the group that are available to hire. Aviation will secure a third-party facilitator to assure this process is successful.
Proposers will be asked to include the following information as part of the required proposal response to the Revenue Contract Solicitation. The information provided will not be considered as part of the panel deliberations or scoring criteria:
"Do you currently have an agreement in place that would prohibit a labor organization from engaging in a strike, picketing or conducting other economic actions at the proposed concessions operation? If yes, please list the labor organization(s) and the date the agreement was executed."
It is anticipated this solicitation will be issued in Spring of 2017, with estimated contract awards in early 2018.
The City’s Transparency Policy will be in effect with the release of the Revenue Contract Solicitation and throughout the process.
Contract Term
10-year contract term commencing when all units have been constructed and open.
Financial Impact
Estimated $400 million in gross sales resulting in $51.6 million in revenue to the City over 10 years.
Concurrence/Previous Council Action
The Downtown, Aviation, Economy and Innovation Subcommittee recommended City Council approval of this item on May 3, 2017, by a vote of 4-0.
Location
Phoenix Sky Harbor International Airport, Terminal 3, 3400 E. Sky Harbor Blvd.
Department
Responsible Department
This item is submitted by Deputy City Manager Paul Blue and the Aviation Department.