Judge's decision in Duty Free case puts Guam's airport at risk
The decision of Judge Arthur Barcinas of the Guam Superior Court to void the Antonio B. Won Pat International Airport Authority, Guam's specialty retail concession agreement with Lotte Duty Free Guam, LLC is in error and potentially devastating for Guam.
It is contrary to the language of the Guam Procurement Law and would prevent the Airport from using a procurement process utilized by every other modem international airport to solicit similar contracts. It could cost the Airport tens of millions of dollars - costs that will necessarily need to be passed along to travelers for GIAA to remain open. And, it has put the financial stability of the Airport and its necessary infrastructure modernization plans at risk.
GIAA has appealed the decision to the Guam Supreme Court and has asked the Superior Court to maintain the status quo until the Supreme Court has acted so as not to harm the Airport and the people of Guam.
The judge's decision makes no finding that Airport officials acted unethically or in a biased manner. Rather, the Judge threw out the best contract the Airport has ever had based on untimely protests by a losing party that have nothing to do with whether GIAA's contract with Lotte is good for the people of Guam. These protests were based on technical violations raised for the first time almost a year after GIAA issued its request for proposals and do not justify voiding of the contract.
I was appointed to the board of directors of GIAA and elected its chairman in 2016, after GIAA issued its 2012 specialty retail concession request for proposals and after GIAA entered into its existing contract with Lotte. But during my tenure as Chairman, I have seen first-hand the extraordinary impact the Lotte $154 million contract has had at GIAA.
That contract, which has been in place for almost five years, has so far paid more than $70 million in revenue to GIAA, resulted in over $20 million in airport improvements, and underpinned the $247 million bond issue that is funding the construction of the new $110 million third floor arrivals corridor.
GIAA modeled its procurement after the process used by nearly every other international airport in the world. The procurement process conducted by GIAA for the duty-free specialty retail concession in 2012-2013 was fair, open, professionally-run and comparable to similar competitions at much larger international airports. And for the first time in Guam's history there was competition for the exclusive concession, which DFS had held for over 30 years. The result was four proposals submitted by four international duty-free operators. The airport staff, management and Board have a responsibility to select the best proposal for the Airport and that is what they did. The airport ranked the Lotte proposal as the highest and best deal for the airport; DFS was ranked third.
Economic studies tell us that the Airport is responsible for more than $2.3 billion in annual economic activity on Guam. Thousands of our friends and neighbors on Guam are employed in airport-based industries and services. The impact of Airport activity on our economy and its stability and growth is immense. I can tell you from my own experience that the management, staff and Board of GIAA have worked hard with the entire Guam community to create a worldclass airport that is a proud gateway to Guam. Our Airport has received a perfect safety rating from the FAA for the last two years - the only airport in the Pacific to do so. Our audits are clean and our bond rating stable.
The airport duty free specialty retail concession procurement in 2012-2013 was a fair, transparent and competitive process. GIAA reviewed, evaluated and selected the best proposal for the airport, which has yielded tremendous benefits to the Airport and people of Guam over the past five years.
It is not an exaggeration to say that the recent court decision puts all that the Airport has accomplished at risk. Hopefully, the court will maintain the status quo until the Guam Supreme Court can review and decide the airport's appeal.
The airport is looking forward to the Supreme Court reviewing the decisions, clarifying the procurement process, and hopefully putting an end to this litigation so that the Airport can move on to doing the business of running an airport.
Ricardo C. Duenas is the chairman of the Antonio B. Won Pat International Airport Authority’s board of directors.