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A.B. Won Pat International Airport Authority, Guam

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Airport Specialty Retail Concession

Friday, May 31, 2013

The A.B. Won Pat International Airport Authority, Guam, learned late yesterday that DFS Duty Free Guam has filed an appeal of the Airport’s denial of DFS’s bid protest and that DFS has filed an action in Guam Superior Court seeking to stop the Airport from proceeding to realize the significant benefits that will come from the installation of Lotte Duty Free Guam as the new duty free concessioner at the Airport. The Airport is currently reviewing DFS’s appeal and court filings and has attached the GIAA’s counsel’s reply to a letter from DFS’ off-island counsel, which was copied to several government officials.

The Airport’s award of the specialty retail concession to Lotte was lawful and fair. A neutral and independent evaluation committee, assisted by an analysis of an independent consultant, unanimously ranked Lotte as the top proposer. DFS was not even ranked second by the evaluation committee. The Airport Board unanimously awarded the specialty retail concession to Lotte and was engaged in negotiations with Lotte until DFS filed a protest. After a thorough investigation and review, the Airport denied DFS’s protest as meritless and finalized the concession agreement with Lotte, which was signed earlier this month.

DFS held the specialty retail concession on an exclusive basis for over thirty years. After the first competitive proposal process ever the Airport and Lotte entered into a concession agreement which pays the Airport more than triple the current the minimum guaranteed rent paid by DFS. Additionally, under the concession agreement Lotte is obligated to make $23 million in improvements to the Airport.

The Airport has provided DFS with a 60-day notice to vacate the specialty retail concession premises which expires this July. According to the Airport, Lotte has already started working on its transition plan, which includes construction, staffing and merchandising.

Airport Executive Manager Chuck Ada stated, “DFS’s conduct and efforts to taint public perception based on false assumptions and innuendo’s has been very disappointed to say the least. DFS has had the exclusive concession at the Airport for over the 30 years and has made a lot of money because of the Airport and Guam, and it’s extremely disheartening that the integrity of the hard working employees of this Authority is questioned in this manner. This time around we tried to create a competitive situation in an attempt to maximize the return and benefit for the Airport and the People of Guam; and we succeeded. For the first time in Airport history we had multiple proposals for the duty free concession. Lotte was ranked number one by all the neutral evaluators and unanimously approved by the Board. Lotte’s proposal was superior to the DFS proposal which wasn’t even ranked second.”

Ada went on to say “We understand DFS is disappointed with losing something it has held without competition for over 30 years, but the Airport has acted fairly and openly in accordance with all applicable laws. We are confident that DFS’s claims are without merit and the Airport will take the appropriate legal action to resolve them as quickly as possible.”

In connection with its appeal to the OPA and its Court action, DFS has offered to pay the Airport $10.4 million in additional rent while those proceedings are pending.

In response to the DFS offer Ada stated, “GIAA is grateful that DFS recognizes that for many years it has been underpaying for its duty free concession at the Airport and it shows the value of a competitive RFP process that DFS will now increase its rent by over $10.4 million per year as of July 14, 2013 but it is really too late as we already have a signed contract with Lotte who is scheduled to take over the space in July. DFS more than any party should know the value of the concession since it had exclusively for over 30 years and simply should have submitted a more competitive proposal.”

Ada added, “The current DFS concession area is understaffed, outdated and run-down and in desperate need of major renovation, which we planned to have Lotte commence immediately. Further delay is only going to cost the Airport stable and reliable revenues needed for planned Airport improvements. The Airport will direct its counsel to act as quickly as possible to dispose of DFS’s baseless action

For more information contact: Rolenda Faasuamalie 642-4645