Miamitexas Dogfight For Air Lounge Deal
Written by Lou Ortiz on September 20, 2012
By Lou Ortiz
The firm that helped to start and has operated the Club America private lounges at Miami International Airport for the past 25 years will keep doing so — at least for now.
The County Aviation Department on Tuesday was anticipating a change in management of the lounges — from a Miami-based to a Texas-based firm — when the absence of employee health care in the proposed contract led to other questions and ultimately resulted in the commission rejecting all bids.
The debate among commissioners on the lounge contract, which lasted more than two hours and then was interrupted by a non-airport issue for another two hours, led to visible and vocal frustration for Aviation Department Director Jose Abreu.
"We don’t need to be here for five hours," Mr. Abreu told commissioners. "The incumbent who has been there for  years doesn’t want to let go."
"I don’t have a dog in this fight," he said. But "this is a pandora’s box. It is a slippery road and it will have unintended consequences."
The Aviation Department sought to award the new seven-year management contract to Gideon Toal Management Services LLC of Fort Worth.
Gideon proposed an annual management fee of $219,600, while incumbent International Airport Management Inc.’s (IAM) proposal was $614,875.
But the issue turned to health care. In the original bid, Gideon proposed subsidizing health care for four management workers at the cost of $300 each per month. But there was no provision for non-management employees, whose health care is part of the current agreement with International Airport Management.
Some commissioners — including Audrey Edmonson, Jose "Pepe" Diaz, Sally Heyman and Barbara Jordan — railed against the possibility of employees being left to fend for themselves for health insurance, or employees possibly having to impose on Jackson Memorial Hospital for treatment in the event of illness.
"I have a serious problem with this," Ms. Edmonson said. "This looks like an underbid."
Ms. Jordan agreed. "To me it’s not fair and not consistent with how the county is moving," she said. "I have a problem with the employees not getting insurance. I can see a shared package. I can understand that."
Miguel Southwell, deputy director for business retention and development for the Aviation Department, told commissioners the county annually reimburses IAM $80,000 for employee health insurance.
"The value of the difference is about $75,000" in the management fee, he said. "We struggle with the reimbursement of insurance premiums."
But Mr. Diaz said he did not like other things in the contract, including whether the new firm was going to generate the same annual revenues as IAM.
Mr. Diaz then suggested that the commission reject all the bids, submit a new request for proposals — with all commissioner concerns addressed, including health care — and that the Aviation Department continue to employ IAM month to month until a new award is made.
"There are a lot of things," Ms. Diaz said. "The key thing is health insurance. We are responsible to our residents, and our residents are the ones who are going to work there."
But Mr. Southwell told commissioners they could not impose that requirement on firms doing business at the airport under Federal Aviation Administration regulations. The commission instructed the assistant county attorneys to research the matter.
At that point, the commission put the issue on hold and came back to it more than two hours later. The commission was told is has the authority to impose salary, health care and other requirements upon concessions and other similar businesses at the airport.
During the delay, Mr. Southwell told commissioners that Gideon had agreed to increase its management fee to include health care, with a $300 monthly subsidy to all employees.
But Mayor Carlos Gimenez, who had initially signed off on the new contract, said he was now uncomfortable with the issue.
He said he wanted to make sure the county was treating all companies equally at the airport — including defining the difference between concessions and management contracts — and what the cost of business benefits would do to airport landing fees and other airline charges, among other things.
"They’re going to have to explain it to me," Mr. Gimenez said. "If you want to provide insurance, what’s going to be the cost here? All the concessions and management agreements need to have all information. It [the contract] may come back in a completely different form."
The commission voted to reject the bids and keep IAM on a monthly basis. The commission is to also review and approve the new request for proposals before the Aviation Department issues it.
The contract the commission rejected Tuesday would have generated an estimated "$4.6 million in annual gross revenues with a net annual return to Miami-Dade Aviation Department of approximately $1 million, or 22% after payment of management fees and operating expenses," Deputy Mayor Jack Osterholt wrote in a memo to commissioners."
"This is based on gross revenues for the seven-year term of the agreement plus three one-year renewal options estimated at $46 million, with management fees and operational expense totals of $36 million," he said. "The annual management fee to be paid to Gideon is $219,600 and is included within the $36 million."
"Gideon does not have any prior experience working with Miami-Dade County; however, Gideon has years of experience in numerous airport lounge operations and services," Mr. Osterholt said.
"This experience includes managing the clubs for United Airlines at Dallas Fort Worth, Atlanta, Austin, Cleveland, Las Vegas, San Antonio and Fort Lauderdale airports," he said. "Staff at United and at McCarran International Airport report they are pleased with Gideon’s services and that they have been very responsive to their requests."
"A request for proposals was advertised on Sept. 16, 2011, for qualified firms to propose on the opportunity to operate, manage and maintain first-class Club America private lounges at MIA 365 days a year," county documents show.
"The clubs, located in Concourses F and J, are private, independent, nonaligned airport lounges which offer passengers a full complimentary bar, as well as sandwiches, snacks, local phone service, flight monitors, newspapers, fax, copier, scanner and a business center with private work station desks, and free wireless Internet access," according to county documents.
Gideon manages United’s lounge at Fort Lauderdale International Airport.
"The county subjectively ranked the proposals on technical criteria and their experience, proposed services, proposed budget — to operate cost-effectively and generate sales — and ability to maintain clubs," county documents show. Compared to International Airport Management, Gideon "has more and varied experience at multiple airports and described in better detail their cost-control procedures."To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.