CPA opts to bid out airport concession

In a 4-2 vote, the Commonwealth Ports Authority board has decided to bid out the master concession currently being held by Duty Free Saipan/T-Galleria at the Francisco C. Ada/Saipan International Airport.

CPA board members led by chair Jose Lifoifoi, Kimberlyn King-Hinds, Roman Tudela, and Barrie Toves voted yes to put out a request for proposal on a successive master concession of up to 20 years.

CPA’s master concession agreement grants the winner of the bid the right to operate facilities at the Saipan airport that sell duty-free merchandise

Board members Pete Reyes and Thomas Villagomez both voted, saying they want CPA to negotiate with DFS, citing its loyalty to the agency.

Toves explained that putting the master concession to a bid would give way for CPA management to consider a bill that would amend the statute of operating a master concession that would involve all three islands, for all six point of entries (seaports and airports on Saipan, Tinian and Rota).

Under Public Law 4-60, CPA can only enter into three prescribed concession agreements: duty-free retail concession, a master concession, and non-duty-free concession agreement.

The duty-free retail concession agreement grants the exclusive right to operate facilities at a port of entry to deliver duty-free merchandise.

The master concession, currently in place between DFS and CPA, grants the exclusive right to operate facilities—at each and every port—for sale of duty-free merchandise or any other items.

A non-duty free concession can be used with a duty-free retail concession or separately, at a single port of entry, to sell exclusively all or specified non-duty-free merchandise.

Despite a small confusion on whether it will be for all three islands, Toves clarified that CPA was not in the position to negotiate or separate the three islands due to Public Law 4-60.

Toves made the motion to bid out the master concession as it would be the only option to sit down and negotiate the terms to separate the issues and separate the three islands.

“If we RFP that out, it will give us the opportunity to realize a heavier potential for us to gain something back,” Toves told board members.

This would inevitably allow any, including DFS, to bid for a master concession. DFS’ contract with CPA expires on Nov. 13, 2015.

Although they are not shutting its doors to DFS, the CPA board said DFS is more than welcome to submit its proposal.

Toves said that even after the expiration date, things will go on as usual with regards to DFS’ operation at the Saipan airport until such time that a selection is made.

“For the RFP package, we need a lot of time for us to work and we really need an airport consultant on board to help us out on that. It is going to take time,” he said.

Best interest

Tudela explained to board members that they do have interested companies that want to bid on the master concession, including DFS.

According to Toves, when they filed a report back in December, they were anticipating that the board had already relieved the ad hoc committee of its duties for the board to make the decision on whether to renegotiate with DFS or RFP it out.

Earlier this year CPA published a study by consultant Ricondo & Associates on the Saipan International Airport’s concession program and leasing strategies. That study recommended a choice of three options: a successor master concession agreement; a pure duty free retail concession; and a master concession on an upfront payment basis to help fund specifically identified capital needs.

While DFS has remained steadfast to continue its master concession, CPA has not ruled out dialogue with other parties.

Lotte Duty Free, for one, sent a letter in October 2014 expressing interest in entering a bid once CPA approves an RFP for the local airport concession facilities.

Lotte Duty Free challenged DFS’ bid for the Guam airport concession and won. Guam International Airport Authority announced in May 2013 that it had entered into a specialty retail concession agreement with Lotte Duty Free Guam LLC.

King-Hinds said she supports DFS but, at this point, they have to think big with regards to what it is they want to do to their facilities.

“Saipan International Airport has critical needs in regards to future expansion. I know Tinian is undergoing on finishing up the facility to accommodate direct flights and I know that Tinian simply does not have the funds to complete the project at this point, and that includes Customs and TSA [Transportation Security Administration],” she said.

Disappointment

Although Reyes said he supports his colleagues’ decision, he was disappointed at “the very least.”

“Duty Free came during a public hearing with about 440 people who testified…and after 40 years of being a good partner to the CNMI, I think they deserve an audience with the board. If we’re not satisfied with what [DFS] presents, they are willing to support the RFP,” Reyes said.

“I think it is an injustice for us to go out and RFP prematurely before we even haven’t heard what DFS has to offer. The anchor issue of master concession is the retail. When they come in they can negotiate the other portion of the master concession quite readily…After being a public figure in the CNMI, we can’t just say ‘hey we’re done with you, hit the road.’ At least give them the courtesy of allowing them to sit, listen, and ask questions.”