One of the companies vying for the Kansas City International Airport contract complained Tuesday that the selection committee was “moving the goalposts” by asking additional questions after all four proposers had made their presentations.
Karl Reichelt, senior managing director with AECOM, told reporters outside a city council meeting that he believed the new questions — asked Tuesday after Monday’s presentations —“create a lot of suspicion” and were “quite unusual, to say the least.”
In essence, AECOM, the lead firm in KCI Partnership bidding for the $1 billion KCI project, believes that it beat other proposers on price. It believes that the new questions will allow the other teams, particularly Burns & McDonnell, to adjust the financial components of their plans.
“We don’t appreciate when you ask us to bid a process ... that you find a way for other people to level up,” Reichelt said Tuesday.
Reichelt said he believed the questions posed to KCI Partnership were an attempt to “re-litigate” its financial proposal.
“The way it was put forward is we are re-bidding our financials,” he said.
KCI Partnership bases its cost savings on a $85.2 million maximum annual payment for new terminal financing that was included in Burns & McDonnell’s original memorandum of understanding with City Hall. That was back when the city was considering a sole source contract with the Kansas City engineering firm.
KCI Partnership said Monday it can build the airport with $69.8 million annual financing payments, which compared to $85.2 million over 30 years works out to nearly half a billion dollars in savings.
In a statement Tuesday, Burns & McDonnell said: “We understand that one of the out of town firms is claiming that their proposal is less expensive than ours. We respectfully disagree. By our calculations, the KCI HOMETOWN Team’s proposal is actually $84 million dollars less expensive than the Los Angeles firm’s proposal.”
Burns & McDonnell’s basis for its claim is an annual airline commitment of $67 million a year. The firm’s proposal included a range of costs for an airport with annual commitments ranging from $58 million to $85 million.
All the proposers — KCI Partnership, Burns & McDonnell, Jones Lang LaSalle and Edgemoor Infrastructure & Real Estate — received new questions from the selection committee Tuesday.
“It is typical in the procurement process to receive follow-up questions, particularly for a project this big and complex,” said Geoffrey Stricker, managing director for Edgemoor.
“I would guess that all proposers have received the same questions, which do include additional financing questions. We are working hard to respond to the City, and want to support them by providing timely information in the procurement process.”
Jones Lang LaSalle also fielded the questions.
“They look forward to continuing this process and providing the committee with their response,” a JLL spokesman said in an email.
Several city officials said Tuesday it was entirely appropriate for the selection committee to ask additional questions, for clarification and to make sure they fairly assess all proposals.
“It’s completely appropriate for them to ask questions,” said attorney Charles Renner, who is advising the city council and the selection committee as they try to make a crucial decision for the airport and for what could be one of the most expensive public projects in city history.
Renner said the city’s process specifically allows for followup questions. The selection committee is considering the merits of each proposal based on qualifications and experience, terminal design approach, and financing.
“I would say it’s less typical to consider a project of this magnitude, with this many in-depth proposals, and to walk away with no questions,” Renner said.
City Manager Troy Schulte, a member of the selection committee, said the new questions focused on the complex conduit financing approach to building a new single terminal and were meant to assure that the committee understands how each proposal would work financially.
“The biggest issue really is financing and making sure we understand what we’re buying and how much it’s going to cost,” he said. “If I’m going to be spending $1 billion on somebody over the next five years I want somebody that I know, that I can trust and work with.”
The KCI selection committee met all day Monday and heard in-depth presentations from the proposers. Tuesday morning the committee sent the questions to the proposers and asked for responses by noon Thursday. The committee plans to continue its deliberations Friday afternoon.
KCI Partnership has emphasized the value of its proposal over that from Burns & McDonnell.
“We’re concerned because we believe we fully complied with the (city’s solicitation) both on technical and financial and nailed a home run during the presentation,” Reichelt said.
Because there was such a huge difference in the financial components, he said, “it seems the city is trying to find a way to get answers on the financial side that are more to their liking.”
When pressed for specifics, Reichelt would not provide more detail about the questions asked.
Several city council members said they had no problem with the committee asking additional questions. But council members Quinton Lucas and Teresa Loar, who are not on the committee and did not hear Monday’s presentations, said they were concerned that it could erode trust in the selection process.
“I think the questions were preposterous,” Lucas said. “I don’t think this is a good sign for the process. We’ve made a lot of good moves recently, and I think these are steps back.”
Burns & McDonnell said it welcomed the questions.
“This is an important and complex project that will have a major impact on our City, so we are more than happy to answer any additional questions to enable the City to select the best proposal for KCI,” Burns & McDonnell said in a statement.
“It is completely fair. In fact, it is standard in the AEC industry for clients to follow-up with additional questions during the procurement process. It’s their way to develop a fair comparison between competing firms.”
The committee apparently asked Burns & McDonnell whether its financial proposal would make existing airport debt lower priority than the new debt incurred by the single terminal project.
Greg Hamilton, director of investments at Americo Life Inc., Burns & McDonnell’s financial partner in the KCI proposal, said Tuesday that it would not subordinate the city’s airport debt to Burns & McDonnell’s private financing debt.
In finance terms, subordinated debt essentially means lower priority debt. In KCI’s current financial structure, operations and maintenance is the highest priority, which means those costs get paid out of available revenues first, followed by an airline operation and maintenance reserve account.
Further down is the city’s outstanding debt, incurred when it last renovated KCI.
The selection committee’s concern with Burns & McDonnell’s proposal was whether the new private financing debt would go higher on the list of priorities than the city’s outstanding debt.
“It is the intent of our structure to be on par with the city’s existing debt or slightly subordinate with the city’s existing debt. In no way are we looking to try and create a structure that gives us any kind of priority” to the city’s airport debt, said Hamilton of Americo.
Schulte said that was an important point to clarify with the proposers.
“We want them to affirm the existing master bond ordinance because it relates to existing debt,” he said, adding that one proposer — he didn’t say which one — “wasn’t clear or gave an imprecise definition of what that means. So in the interest of full disclosure we want everyone to reaffirm.”
Schulte said the biggest issue was that the proposals made different assumptions about interest rates and financial approaches. The city wants to make sure it compares apples to apples.
Schulte said the city was trying to create a level model, asking each proposer to assume the same specified interest rate and plug other assumptions into the model to make a fair comparison.
He said that doesn’t give one proposer an unfair advantage over another, because if any team dramatically changes what it has already submitted, it will be readily apparent.