February 5, 2018 – Hagåtña, Guam – After over 4 years of litigation, Judge Arthur Barcinas of the Superior Court of Guam granted summary judgment to plaintiff DFS in DFS Guam L.P. v. A.B. Won Pat International Airport Authority, Guam. The Court ordered that the duty free concession awarded to Lotte Duty Free Guam in 2013 is void. Today GIAA appealed Judge Barcinas’ rulings to the Guam Supreme Court.
“With all due respect, GIAA strongly disagrees with Judge Barcinas’ decision,” said GIAA Executive Manager Charles H. Ada II. “The procurement for the airport specialty retail contract was an open, transparent and fair process for all the interested parties, including and most especially DFS, which was the exclusive incumbent operator at the Airport for approximately 40 years. DFS, which came in third, was well aware of all the circumstances and terms it has complained to the Court about, but protested only after the award to Lotte.”
GIAA and Lotte Duty Free entered into the duty free concession contract on May 18, 2013. Pursuant to the contract, Lotte has paid GIAA about $70 million of the $154 million in minimum rent it is obligated to pay over the term of the contract and has made $23 million in capital improvements at the Airport. Lotte’s minimum annual guaranteed rent is more than triple the $5 million that DFS was obligated to pay under its previous contracts with GIAA. Moreover, the Lotte Duty Free contract has supported a $247 million Airport bond issue, which was used to refinance debt and fund much needed capital improvements, including the $110 million arrivals floor project, which is now under construction.
Ada continued: “GIAA’s staff, management and Board have a duty to get the best deal possible for the Airport, and that is what happened here. The Lotte Duty Free contract is the most advantageous agreement the Airport has ever had and has been the primary basis for the Airport’s financial plan. We’re thankful we were able to defeat DFS’s efforts to block the Lotte Duty Free contract over four and a half years ago. Otherwise, none of the progress we have made since that time would have happened.”
“We strongly believe the Court got it wrong and all of us at GIAA stand by the integrity and fairness that was built into the specialty retail concession procurement that played out in 2012 and 2013,” said Ada. “We created a level playing field for the proposers and Lotte was awarded the contract because they submitted the best proposal.”
Ada stated, “Judge Barcinas agreed with DFS that GIAA used the wrong procurement process. Ironically, GIAA used this same process to award DFS’s last three contracts. DFS was happy with the process when they won; they only complained when they lost.”
“Once they learned that they had lost, DFS filed a series of untimely protests that were properly rejected by GIAA,” stated Genevieve Rapadas, GIAA legal counsel. “We are surprised that the Court chose to accept DFS’s excuses for not following the rules for protests in the Guam procurement law. The law imposes a strict deadline for protests so that agencies like GIAA can make a business decision in a timely manner. DFS strategically chose to ignore the law’s deadlines until they learned they had lost.”
Rapadas added, “The cloud of DFS’s frivolous protests has hung over the Airport for close to 5 years now. Finally, the Supreme Court can bring an end to an action which we believe was aimed at devaluing the Airport’s duty free concession and scaring off competition.”
“I can say without hesitation that the Lotte contract is the best one the Airport has ever had. It’s no accident that GIAA is in such a strong financial position today,” said Ada. “The Airport is responsible for more than $2.3 billion in economic activity on Guam. If the Court’s decision were to hold, the consequences for the Airport and Guam could be severe.”
The Guam International Airport is a world class facility and received a perfect score from the FAA in its last two reviews – the only airport in the Pacific Region to receive such an honor. In January of 2017 GIAA once again received a clean bill of health from its auditors, and in July 2017 Standard & Poors (S&P) affirmed its “BBB” long term rating of the Airport’s 2013 General Revenue Bonds, with a stable outlook.
“All of us at GIAA are proud of the agency and what we’ve been able to accomplish working together with the business and traveling community here on Guam,” concluded Ada. “It would be tragic to have the Airport’s financial integrity threatened based on an incorrect court decision for a disgruntled former vendor motivated by greed and self-interest.”
For any questions, please contact Genevieve Rapadas at 646-9355 or [email protected]