Denver International Airport Awarding "Highly Lucrative" Contracts Without Competitive Bid, City Auditor Finds

Feb. 18, 2022

Feb. 17—Denver International Airport's process for selecting operators for its restaurant, bar, retail and passenger service locations isn't fair and the incentive program the airport offers concessionaires should be ended, the city auditor says.

In a report released Thursday, Denver's elected auditor Tim O'Brien said DIA's process of awarding concession contracts may be in violation of an executive order mandating most city contracts be subject to a competitive bidding process. The airport could be missing out on revenue by failing to select the best contractors for its opportunities, the audit found.

"They should have grabbed hold of this a long time ago," O'Brien said in a news release accompanying the report. "Denver's airport is one of the busiest in the country. With millions of people traveling through, these concessions contracts are highly lucrative. Businesses don't need additional incentives to want to operate there."

O'Brien and his staff found that the airport allows some concessionaires to bypass competitive bid processes. DIA's "Premium Concessions Program" was designed to provide incentives to concessionaires airport officials believe provide value to the airport, per the audit report. But the airport pays an outside firm $500,000 a year to run the incentive program and has never evaluated if it is truly beneficial.

There are also multiple elements of the airport's contracting operation that are unfair including allowing concessionaries on expired contracts to "hold over" and maintain their spaces. As of August, 40% of active concessions contracts at DIA were holdovers dating back to at least the end of 2019, according to Thursday's news release. The average length of time the contracts had been expired was more than 5 and a half years with some going back a dozen years.

The airport's practice of destroying score sheets that measure competitive bidders' fits for concession opportunities also makes the process opaque and raises further questions about fairness, the auditor's report says. The process was also audited in 2014 and it was recommended at that time that airport officials stop destroying the sheets.

The airport's concessions bidding process was at the center of a lawsuit in 2018. That suit alleged, in part, that DIA officials destroyed scoring sheets that showed a contract for four food and beverage locations was given to a lower scoring bidder. The case was dismissed but refiled in 2019 with additional allegations that the FBI was investigating the bid-rigging allegations. That case is still pending in Denver District Court, according to attorney Stephen Long.

The auditor's office has provided a list of recommendations for DIA to address the problems it found with the concession contracting process. Ending the incentive program tops the list. The other recommendations include performing a cost-benefit analysis, updating the airport's concessions master plan, reviewing holdover contracts and updating policies around record keeping. Specifically, the airport should keep scorecards from concessionaires bidding for competitive contracts for seven years, the auditor's office recommends.

"I am concerned with how these problems were allowed to go on for so long," O'Brien said in his news release. "But I do believe airport officials are receptive to making the necessary changes going forward. I look forward to seeing their progress when we follow up."

DIA officials did not immediately respond to a request for comment on Thursday afternoon.


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