The bids for a lucrative media services contract at Los Angeles International Airport were thrown out Tuesday amid conflict of interest allegations involving a former airport commission president.
In a rare decision, the Board of Airport Commissioners voted unanimously to reject all proposals to handle indoor advertising, sponsorships and other media opportunities to promote LAX, the nation's third-busiest airport. The contract could provide up to $350 million in revenue for Los Angeles World Airports, the operator of LAX, by the end of 2020.
"We are stuck between a rock and a hard spot on this one," said Commissioner Valeria C. Velasco. "It's tough, a hard decision."
The need to cancel the bids and restart the procurement process stems from a formal protest filed by Clear Channel Airports, which was competing against a joint venture involving JC Decaux Airport Inc., Premier Partnerships and Time Warner. Airport staff recommended the JC Decaux group for the contract. Clear Channel was the runner-up.
The protest alleges that Alan Rothenberg, a former commission president and chairman of Premier Partnerships, has a conflict of interest under the city's government code because he participated in discussions and worked on plans related to the contract before he resigned from the board in 2010.
Due to the potential risk of a Clear Channel victory in court and potential revenue losses, airport staff concluded that rejecting all proposals was the appropriate course for the commission. Officials estimated that the lost revenue could be as high as $15 million for the city's airport department, compared to $3 million if the bidding process were restarted.
"We are really pleased that we got confirmation that the issues we raised had merit," said Fiona Hutton, a spokeswoman for Clear Channel Airports. "Clearly, the commission believed there was something wrong with the JC Decaux proposal."
Before the vote, John Moyer, a senior vice president at Clear Channel, told commissioners he was disappointed that awarding the contract to his company was not an option on the board agenda Tuesday. He urged them to discuss the idea with airport lawyers and staff.
"We can deliver a better product," Moyer said. "We don't start off in a bid with the intent to protest, but we are going to stand up for what we believe in. As more unfolded, this did not pass the smell test."
In a prepared statement, JC Decaux officials noted that airport staff designated their company a qualified bidder early in the process and did not question the involvement of Rothenberg's firm in the bid.
At the board meeting, Ellen Berkowitz, an attorney for JC Decaux, suggested that an existing airport contract with JC Decaux be revised to include some of the work outlined in the now-stalled media services contract — an option mentioned by airport staff. Premier Partnerships is not involved in the existing contract.
"I find it very troubling and it sets a disturbing precedent that these allegations can be thrown around," Berkowitz told the board. "It shows a bully can come in and up-end a very well done procurement process with these accusations."
In other action Tuesday, airport commissioners approved more than $250 million in new project and construction management contracts related to the ongoing modernization of LAX. The largest at $87.5 million each were awarded to AVB Management Partners and Parsons Transportation Group Inc.