Burns & McDonnell irks KCI competitors with exclusive contractor deals

Burns & McDonnell is playing strongly off its hometown credentials and is using a shrewd tactic in its campaign to win a $1 billion contract for a new Kansas City International Airport terminal.

The Kansas City engineering company confirmed that it has signed minority- and women-owned contractors to exclusive arrangements that keep those companies from working with other teams that may put forth a proposal.

In doing so, Burns & McDonnell can gain an upper hand on competitors ahead of Thursday’s first deadline for KCI proposals. Kansas City requires teams putting up proposals to demonstrate their ties to local women- and minority-owned contractors.

City Hall doesn’t forbid exclusive arrangements with such contractors. At the same time, it wants them to have every chance to participate in the contract, so much so that its solicitation encourages the companies to work with multiple teams.

Other potential bidders have said they are not pursuing these exclusive deals, but Burns & McDonnell thumped its chest about the arrangements.

“While we appreciate the out of town teams from the coasts are trying to look ‘local,’ the fact is that Burns & McDonnell’s HOMETOWN Team has always been and will always be ‘local,’ ” it said in a statement to The Star.

“These are Kansas City teams we partner with all of the time. And while some companies may fly into town and hire law firms and consultants to introduce them to KC, and list team members to check a box or meet a goal, our team members have meaningful roles in developing the proposal and executing the project. Given their vital role in this effort, we ask them to be exclusive through the proposal pursuit phase.”

The first deadline for proposed contracts is 4 p.m. Thursday, and Burns & McDonnell’s exclusivity deals could whittle away at the list of minority- and women-owned contractors available to work with other teams. It underscores the intense competition among the three consortiums looking to submit a proposal.

One company, AECOM, said it has not bound any women- or minority-owned businesses to its team.

“We would never require exclusivity,” said Karl Reichelt, senior managing director of AECOM Capital, a subsidiary of Los Angeles-based AECOM.

“We are encouraging them to be on our team and other teams,” said Darcy Wilson, vice president of Oaktree Capital Management, an AECOM partner.

Burns & McDonnell’s statement is in keeping with its public campaign that emphasizes that it is teaming up with local companies to win the roughly $1 billion design, build and private finance contract for a single terminal at KCI.

Last week, the firm held a rally at the headquarters of Mark One Electric, a woman-owned electrical contractor, to announce that several other companies had agreed to join up with Burns & McDonnell. Repeated references were made to the predominantly local nature of the firm’s growing KCI team.

The exclusivity deals reinforce Burns & McDonnell’s position of strength on KCI. It was the first company to propose the private financing idea, which some city leaders welcomed because they believe a such a proposal will resonate better among voters.

The Burns & McDonnell plan was initially presented by city leaders as a sole-source contract before lawyers advised City Hall to put the project out for competitive proposals.

The Kansas City firm also has close ties with local policymakers and business leaders.

A copy of the Burns & McDonnell exclusivity contract obtained by The Star indicates that women- and minority-owned enterprises will act as independent contractors to Burns & McDonnell through the proposal phase and cannot “directly or indirectly” contribute to potential competitors.

The exclusive deal lasts only as long as the Kansas City Council is mulling over its options. Once a proposal is picked, contractors become free agents.

Public projects usually require contractors to assign a certain percentage of its subcontracted work to such businesses — often referred to as MBEs or WBEs.

The KCI project does not yet have such participation goals assigned and won’t until a winning proposal is selected.

The KCI solicitation was designed to prod aspirants for the contract to demonstrate that a proposal could meet workforce goals.

The city’s procurement office keeps a running total of questions asked by potential proposers to clarify the terms of the KCI solicitation.

One question about the exclusivity contracts appeared in a June 26 addendum to the solicitation.

A potential bidder — the city won’t disclose which — asked about the city’s position “on the fact that numerous MBE/WBEs have been made to enter into exclusive contracts that will negatively impact their ability to ultimately participate in this project?”

The city’s response restated its encouragement for MBEs and WBEs to work with multiple teams if they want.

Procurement experts reached by The Star offered mixed opinions on the idea of exclusivity contracts. Some said it was business as usual, while others raised concerns about limiting competition.

“It happens in the ordinary course of business sometimes,” said Kelvin Perry of the Black Chamber of Commerce of Greater Kansas City. “In this particular case, it could be problematic given the current procurement that’s out for the airport modernization project. ...

“If, in fact, one of the local proposers who could possibly have a dominant position in the local market were to use such an instrument and you had outside proposers, people wishing to offer proposals coming in from the outside, attempting to assemble MBE participants, would they not have some kind of a difficult time doing so?”

This story was originally published July 23, 2017 at 7:00 AM with the headline "Burns & McDonnell irks KCI competitors with exclusive contractor deals."