Static in phone deal
DIA concession pact 'troublesome,' city's auditor says
By John Accola, Rocky Mountain News
Friday, September 9, 2005
A pay-phone concessions rift at Denver International Airport has the city auditor questioning a newly awarded contract estimated to ring up half the income promised by a rejected bidder.
City Auditor Dennis Gallagher, calling the procurement process "troublesome," says there are too many unanswered questions to allow the city's deal with RMES Communications Inc. to go forward, despite the City Council's final approval Aug. 29.
He's threatening to withhold his signature from the agreement, which promises the city a 16 percent cut of all airport public pay phone revenues.
RMES, which previously ran the airport phone business in a co-venture with Qwest Communications, is owned by Denver businessman Herman Malone, a former chairman of the National Black Chamber of Commerce.
Auditor spokesman Denis Berckefeldt said it appears that tiny RMES, among other things, was able to skirt the minimum financial qualifications to run the DIA concession as a stand-alone company.
Reports that RMES is already unable to keep a minimum of 200 public pay phones up and running throughout the airport terminal and its three concourses has become a looming concern, Berckefeldt said.
An informal Rocky Mountain News survey last week at DIA's terminal showed that a third of 60 pay phones on the ticketing and baggage floors were either out of service or not accepting coins for payment.
"Certainly, he is troubled by what he has heard," Berckefeldt said. "If there were peculiarities in awarding this contract, the auditor wants to make sure it was done in a straightforward manner that was fair to everyone."
Meanwhile, losing bidder FSH Communications, which dangled a 30 percent pay phone commission that was projected to provide $1.5 million more than RMES' five-year contract, is threatening to sue the city for failing to "fairly manage" the procurement process.
"DIA's decision to issue the award to RMES . . . was incorrect, arbitrary and an abuse of discretion," FSH attorney Larry Hudson stated in an Aug. 22 letter to airport officials.
Hudson said the number of days pay phone businesses were given to submit their detailed bids last April was cut to two weeks - half the time provided for other airport concessions contracts.
Despite a sweeter contract for the city, Denver's Division of Small Business Opportunity rejected FSH's proposal, saying the minority- owned company didn't adequately explain how it would meet the airport's rules for 40 percent participation of a "disadvantaged business" partner.
Chicago-based FSH, which purchased Qwest's pay phone business last year and operates airport pay phones in Phoenix, Seattle, Portland,Ore., and Salt Lake City, is too large to qualify as a so-called DBE, or disadvantaged business enterprise.
"We thought we responded to the amount of detail they wanted and the criteria they set forth," Hudson said Thursday. "They found us 'nonresponsive' and said we hadn't shown good-faith efforts to meet that goal to select a certified DBE contractor."
FSH also alleges that Tamela Lee, who heads the city's small-business opportunity office, personally intervened in the selection process, favoring RMES because she has known Herman Malone for years.
Lee referred a reporter Thursday to City Attorney Cole Finegan, who maintained that the procurement process that eliminated FSH was proper.
Finegan said Lee took the unusual step of serving on the selection committee because another member was absent. The request for proposal process was shortened because of a change in federal rules, he said.
At FSH's request, a hearing officer reviewed the committee's decision.
Following three days of testimony, he concluded the small-business opportunity office had ruled correctly in determining FSH had not made a "good faith" effort to commit to a disadvantaged business partner.
Malone accuses FSH of "mudslinging" and besmirching his reputation. While he acknowledged some service problems with DIA's pay phones, Malone said they aren't abnormal during a transition period in which RMES is replacing and relocating its lines and equipment.
Malone says FSH is lobbying city officials to throw out his contract and start the process over "to leverage themselves into a contract they didn't win."
"We are a legitimate DBE firm and they are not," Malone said. "This is sour grapes. How else would you explain it?"
accolaj@RockyMountainNews.com or 303-892-2666