Airport Dining & Retail Lease Group 3 Results and Insights from the Solicitation Process as well as Lease Group 4 - Proposed Opportunities June 13, 2017 ITEM NO: _7a_Supp___ MEETING DATE: June 13, 2017 Agenda Commission Guidance and Goals for the ADR Program ADR Performance Metrics Outreach Update Employment Continuity Pool Update Lease Group 3 Results and Insights from the Solicitation Process Lease Group 3 Issues and Policy Recommendations Lease Group 4 Opportunities Evaluation Criteria Schedule for Next Steps Commission Guidance for the ADR Master Plan 3 Encourage broad business participation; Use flexible competitive leasing processes to accommodate all types of business; Create new opportunities for small, disadvantaged and local businesses; Maximize employment continuity for qualified employees; Continue ‘street pricing’ of products and services; Improve efficiency and affordability in the unit build out process; Establish job quality expectations in competitive processes; Strengthen the local Pacific Northwest sense of place. Support a mix of businesses that create quality jobs Commission Goals for the ADR Master Plan ADR opportunities grow with the Airport 4 Grow sales per enplanement by at least 40 percent; Reach and remain within the top 10 North American airports as ranked by sales per enplanement; Grow gross revenues to the Port by 50 percent; Grow employment by 40 percent; Grow the share of sales generated by small, disadvantaged, and/or local businesses to 40 percent; Create an aspirational objective of increasing ACDBE gross sales to 25 percent of total sales. Airport Dining & Retail Performance Metrics 5 11.78 33.1 1640 45.4% 22.6% 12.07 41.1 1997 47.5% 21.6% 16.49 49.7 2296 40% 25% SPE ($) Gross Revenue to the Port ($m) Employment (Full-time and Part-time) % Total Gross Sales from Small, Local and Disadvantaged Businesses % ACDBE Gross Sales 2014 Baseline 2016 Results 2025 Goals 6% of Goal Completed 48% of Goal Completed 54% of Goal Completed 119% of Goal Completed 0% of Goal Completed Strong ADR performance Outreach Update Hosted SeaTac Airport Business Opportunity Summit on 1/13/2017 to encourage small, local and disadvantaged business participation in the ADR Program - 168 attendees. 5-week training session started in May 2017 to educate small, local, disadvantaged businesses regarding opportunities in the ADR Program as well as how to become certified as an Airport Concessions Disadvantaged Business Enterprise (ACDBE). Over 40 firms participating. 694 firms registered on the ADR leasing website as of 5/10/2017. Outreach efforts have increased awareness, understanding and participation 6 Employment Continuity Pool Update Employment Continuity Pool is well underway 7 Port contracted with Airport Jobs in July 2016 to: create an employee database assist in evaluation of needs and match qualified candidates facilitate interviews and track outcomes ADR and Airport Jobs have conducted first intake meetings with tenants including: Ken’s Baggage Great American Bagel Bakery Butter London HMS Host Lease Group 3 Update Lease Group 3: Commission authorized Lease Group 3 (12 opportunities encompassing 24 units) on June 14 Two opportunities are suspended, pending the rebid of the Central Terminal elevator and HVAC projects; one opportunity was given an extended deadline for proposal submittals (Nov 18, 2016) to incorporate 3 South Satellite units. 50 bids from 26 firms were received. Strong participation from small, local, disadvantaged businesses. 8 Lease Group 3 - Insights Significant progress in receiving better information about the quality of jobs. Proposers are sourcing more from local and small companies. Input from key stakeholders is improving outreach and capacity development efforts. Ongoing outreach efforts played a role in more competition and increased participation by small, local and disadvantaged businesses. The scoring for joint ventures/meaningful partnerships was improved, but there is more work to do. The external observers of the evaluation process provided valuable input. 9 ADR Program is improving due to policy input and program refinements Issues and Policy Recommendations Proposition 1 Back Wages and Benefits Compliance: Issue: There is an opportunity to refine the scoring of firms that were not fully compliant with Prop 1 back wages and benefits. Recommendation: Firms who are not fully compliant with Prop 1 back wages and benefits should be disqualified from participation. Compliance with Proposition 1 is important II. Scoring the Quality Jobs Criterion Issue: The scoring mechanism used for the Quality Jobs Criterion in LG 3 could be improved by weighting wages and medical/retirement benefits higher relative to other benefits offered by employers. Recommendation: Place greater emphasis on proposed wages and medical/retirement benefits and utilize a quantitative-formula-based methodology for evaluating wages and medical/retirement benefits. Scoring the Small Business Participation Criterion: Issue: The scoring mechanism for small business participation can be strengthened to better recognize and weight the many ways for small businesses to gain entry to the ADR Program. Recommendation: Revise the scoring system that was used in LG 3 as follows: Small businesses that propose directly will still automatically receive 10 points. Prime operators that propose a joint venture with a small business and that agreement meets the FAA guidelines for joint ventures and includes a minimum of 20% share of capital investment will automatically receive 5 points. Small businesses that operate franchises of national brands will receive 5 points. Increase opportunities for small business participation IV. Preference for Local Concepts/Ownership: Issue: The scoring criteria can be strengthened to more fully accomplish the Commission’s goal of creating a Northwest Sense of Place. Recommendation : Allocate 10 points of the Concept Development criterion (25 points total) to the evaluation of the concept as it pertains to creating a Northwest Sense of Place within the Airport. Emphasize the Northwest Sense of Place V. Non-competitive selection of ADR tenants: Issue: The competitive process may produce results that fall short in achieving key policy objectives for this program, such as creating a Northwest Sense of Place, due to the combined criteria used in the scoring process. Recommendation: While non-competitive (direct) leasing a select number of units could ensure specific policy objectives are met; this approach also introduces other complexities. Staff recommends retaining competition for all ADR opportunities. The competitive process doesn’t always accomplish Commission objectives VI. Labor Peace Agreements Issue: There is need to protect the Port’s proprietary interest in the Airport and its ADR Program from disruptions due to labor disputes. Recommendation: Implement a labor peace requirement as follows: All non-exempt respondents must submit a labor peace agreement with their proposal. The Port would have no role in reviewing or establishing the terms of these agreements. Small businesses which have 35 or fewer badged airport employees, would be exempted. Small businesses that operate franchises of national brands would not be exempted. Protect the Port’s proprietary interest Draft Lease Group 4 Opportunities New slate of opportunities is ready for the marketplace Category Package # # of Locations (Unit #) Approximate sf Food &Beverage LG4 CEP F-1 (NS- 1,400 LG4 CEP F-2 (NS- 1,300 LG4 CEP F-3 (CT- 1,600 LG4 CEP F-4 (CC- ) 2,800 LG4 CEP F-5 (NE-3, CB-3A) 3,000 LG4 CEP F-6 (NE-4, CC- 1,450 LG4 RFP F-7 (CA-13, BC-2, NS-2, CD- 5,800 Retail LG4 CEP R-1 (CT- 1,500 LG4 CEP R-2 (CB-3B) 1,100 LG4 CEP R-3 (CT- 2,100 LG4 CEP R-4 (CT- 2,400 LG4 RFP R-5 (CB-1, CC-4, CC-9, HS-2, CT- 3,200 Draft Lease Group 4 Opportunities Lease Group 4 opportunities are spread throughout the terminal Legend: Established Evaluation Criteria Company Experience, Financial Capability: 20 points (13%) Concept Development: 25 points (17%) Unit Design, Materials and Capital Investment: 25 points (17%) Financial Projections and Rent Proposal: 20 points (13%) Management, Staffing and Environmental: 20 points (13%) Job Quality, Employment and Service Continuity: 20 points (13%) Small Business Participation: 20 points (13%) TOTAL POINTS 150 points (100%) Evaluation criteria support Commission priorities Lease Group 4 Schedule Lease Group 4 is ready for release Projected Date Action June 13 , 2017 Brief Commission on Lease Group 3 results, Insights from the LG 3 solicitation process and proposed leasing opportunities in Lease Group 4 June 27 , 2017 Request Commission authorization to solicit proposals for Lease Group opportunities June 30, 2017 Advertise opportunities (leasing website and through various local and national media) July 2017 Tours and training sessions for interested businesses July through September 90 days for proposal preparation End of September, 2017 Responses due Early December, 2017 Port Late December 2017/Early January 2018 Notification to preferred respondents Update Commission on Lease Group results January/February 2018 Lease negotiations and executions APPENDIX ADR Program Support for the Century Agenda ADR advances the Century Agenda The redevelopment of the ADR Program supports the Port’s Century Agenda to create 100,000 new jobs. These opportunities also support a number of the Century Agenda strategies and objectives: Advance this region as a leading tourism and business gateway; Promote small business growth and workforce development; Be the greenest and most energy efficient port in North America. ADR Evaluation Processes Competitive Evaluation Process (CEP) Simplified process for 1-3 unit opportunities Intended to reduce barriers to direct participation by small businesses Request for Proposal (RFP) Use for packages with 4 or more units or single units requiring large investments Geared toward large companies with small business participation Requires companies to submit more information and demonstrate greater financial capability New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace New slate of opportunities is ready for the marketplace