Bids? We Don't Need No Stinkin' Bids!
When Pan American World Airways slid into bankruptcy in December 1991, the Dade County Aviation Department inherited the airline's sprawling network of underground tanks and pipes that supplies jet fuel to hundreds of passenger and cargo planes at Miami International Airport.
The department also inherited a critical problem: the need to provide uninterrupted fuel service. As an emergency measure, then-aviation director Rick Elder handed responsibility for the "fuel farm," as the facility is known, to a newly formed company called Air Terminaling, Inc.
County commissioners ratified the no-bid contract with the understanding that it would run from month to month, only as long as it took airport officials to put together a "request for proposals" (RFP) and seek bids from companies interested in operating the fuel farm on a long-term basis.
More than two years later, Air Terminaling continues to operate the fuel farm on a "temporary" basis, and competitors and airline executives are fuming. Recently submitted documents suggest that, under the terms of its agreement with the county, Air Terminaling has made (and continues to make) astounding profits A at least $250,000 per month. Critics of the extremely lucrative contract also point out that competitors say they can do the same job for far less money (a savings that would accrue to the airlines), and they remain suspicious of the circumstances that have allowed the company to reap such a windfall for such an extended time.
New Times first outlined the peculiarities surrounding Air Terminaling's fuel-farm contract last year ("Is This Any Way To Run an Airport?" April 28, 1993). Even then, airport officials working under Elder complained that the effort to find a permanent replacement was taking too long. Elder, they said, kept finding excuses to modify the RFP. In response, Elder claimed that the complex nature of the proposed contract forced him to proceed cautiously.
The process received heightened scrutiny after it was reported that Elder maintained a friendship with Phillip Bradley, an officer of the corporation that owns Air Terminaling. Both men denied that their friendship in any way affected Elder's decisions regarding Air Terminaling or the delays in issuing an RFP, delays that greatly benefited the company. Nonetheless, in early 1993 federal agents subpoenaed all county records pertaining to the fuel-farm contract. Investigators also demanded records from Air Terminaling and its parent company. (The status of the ensuing federal investigation is unknown.)
Eventually an RFP was prepared and advertised. Bids from five firms were opened just three weeks ago, and the results were startling. A selection committee had used various criteria to rank the companies; only the top three would be considered. In that ranking, Aircraft Service International, Inc. placed first, followed by Ogden Aviation Fueling. Air Terminaling barely edged into third place.
Unlike the temporary arrangement Rick Elder designed for Air Terminaling, the new contract contains clear controls. The old agreement called for Air Terminaling to pay the county a flat fee of two million dollars per year. The company could keep all remaining revenues as profits above its costs. Air Terminaling, however, was not required to reveal to county officials any details regarding its actual costs or profits. (Last month aviation department director Gary Dellapa asked the company to open its books to an independent auditor. Air Terminaling initially refused but relented a week later, though it has sought to delay the audit.)
Under the new contract, all bidders were asked to estimate their yearly operating costs and also to propose a flat "management fee," which would represent profits. They also had to agree to audits of their books.
Air Terminaling, with more than two years' experience at the fuel farm, estimated it would cost $3.1 million annually to operate the facility. That figure was nearly three times higher than the average estimates of the other four bidders, which ranged from a low of $700,000 to a high of $1.6 million. Air Terminaling's estimate also provided a clue as to the contents of its closed financial records.
Approximately 800 million gallons of fuel pass through the fuel farm each year. The widely held belief among county staff and airline executives is that Air Terminaling has been extracting for itself an average of a penny per gallon, a fee passed on to airline companies, which have protested the expense. (A spokesman for Air Terminaling says the penny figure is not correct, though he refuses to release any information, and under the terms of the existing contract, he is not required to.) A penny per gallon would mean the firm has been receiving at least eight million dollars yearly as revenue.
If Air Terminaling's current cost estimate of $3.1 million is accurate (and aviation department officials suspect it is exaggerated), the firm has been making at least $3 million in annual profit after paying its fee to the county. (By way of comparison, Aircraft Service International's bid asks for only $210,000 in yearly profit.) Every month the RFP process drags on, Air Terminaling rakes in profits estimated to be at least $250,000, a fact not likely lost on the company or its lobbyist.
Air Terminaling president Ray Rossman and his influential lobbyist, Chris Korge, have raised objections throughout the bidding process. In recent months, they filed protests as to the makeup of the selection committee reviewing the bids. Then, when it became clear that Aircraft Service International, Inc. (ASII) was going to be the top-rated firm, Korge demanded a new hearing, arguing that ASII's environmental record at the airport was dismal and that the committee didn't properly consider those concerns.
In a letter last month to aviation department officials, ASII vice president John Gassett, in defending his company, stated that "it is painfully clear that [Air Terminaling] has systematically attempted to delay Dade County Aviation Department's fuel-farm bid process. We hope it has not gone unrecognized that ATI's efforts have been to discredit everyone involved rather than win this competition by promoting its performance since taking over the management of the fuel facility."
Neither Rossman nor Korge returned calls seeking comment for this story. The company's spokesman offered this written response: "Since the public bidding process for the...management contract is underway, it is inappropriate to discuss the particulars of that process until its completion. Air Terminaling, Inc. has acted in full, complete, and timely accordance with the requirements of this process as established by Dade County authorities, and the company continues to provide excellent fueling services to the many carriers that use Miami International Airport."
Two weeks ago Dade County Manager Joaquin Avi*o agreed to recommend to commissioners that they accept ASII as the new manager of the fuel farm. A decision by the full commission could come early next month. Unless, of course, Air Terminaling succeeds in its latest attempts to delay the process. "We've been trying to move this matter along for years now without success," notes Frank Erickson, a senior vice president with American Airlines and the chairman of a liaison committee between the airport and the airline industry. "There have been a lot of roadblocks. I don't want to speculate on why. All I know is that it has been a cumbersome process. And it's not over yet.
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