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City Delays Lucrative Airport Concession Contracts

Sets deadline for contracts after the next mayoral election in February, 2015.

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City Delays Lucrative Airport Concession Contracts

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Crain’s Chicago Business is reporting the Emanuel administration has decided to hold off on awarding lucrative contracts for concession services at O’Hare Airport until after the next mayoral election in February, 2015.

The contracts, worth an estimated $300 million a year in food and beverage sales, have already been on hold for 18 months. Crain’s reports that the delay may end up costing the city higher revenues. Currently, the previous concession operator, HMSHost, is running restaurants and shops on a month-to-month basis. The city is expected to win a more generous share from new bidders as well as promises of greater overall sales.

In 2012, O'Hare's three domestic terminals generated $235 million in food and beverage sales with the city collecting 18 percent, or $42 million.

The challenge for the city is to figure out how to structure the contracts: 

The Emanuel administration still is debating whether it should divide O'Hare's domestic terminals into several contracts or award the property to a single concessionaire as it historically has done. Breaking it into pieces would follow an industrywide trend and, based on results elsewhere, generate more bidding. That, in turn, would yield more money for the city. But it might mean taking business away from HMSHost ... [and] also would mean more work for the city, from assembling the various packages to evaluating bidders in multiple auctions and then policing them.

In 2011, the city awarded Westfield Concession Management LLC a 25-year contract to operate concessions in O’Hare’s international terminal. The City Council voted 45-3 to approve the deal, despite misgivings by some aldermen that they were only given a week to review the contracts.

The company that lost the Terminal 5 contract, Chicago Aviation Partners, later sued the city, claiming a “sham evaluation process” that cost the city between $75 million and $120 million over the life of the deal.

The city says it’s expected to release request for proposals for the new O’Hare contracts by the middle of next year.
 

[Editor's note: A previous version of this story said HMSHost was "a firm known for it's well-connected lobbyists", which may have a part of the city's decision. However, the company is not believed to have lobbyists working in Chicago. 

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