Airport Operator Options for Delivery of FBO Services (2018)

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22 CHAPTER THREE FBO OR CONTRACT MANAGER PROCUREMENT PROCESS If the fixed base operator decision team chooses to pursue a third-party FBO or contract manager, the procurement process will involve multiple steps prior to the expiration of an FBO lease or existing management contract. The timing of the pro- curement process is wholly dependent on available airport and consultant resources, municipal procurement requirements, and the level of complexity of the offering. A start date of 1 to 2 years in advance is common, depending on available resources and on how much background preparation is required. Some airport sponsors may have more expedited procurement processes. In general, an FBO procurement process includes the following steps: • Form the FBO procurement team. • Specify the FBO (or contract manager) required services and investment. • Review and revise minimum standards, leasing policies, and rates and charges. • Prepare site surveys and property appraisals • Complete environmental baseline studies. • Issue a request for information (RFI). • Prepare the bid documents, solicitation process, and evaluation criteria for a request for proposal. • Draft the FBO lease or contract manager agreement. • Solicit, select, and approve. Airport sponsors regularly amend and extend existing FBO leases beyond the original lease term. In some instances, a lease may be conveyed or assigned several times over its term. Because of lease extensions and assignments, airport staff are infrequently engaged in an FBO selection process. This chapter will describe the steps taken to prepare and initiate an FBO or FBO management procurement process. CHECKLIST FOR FBO OR CONTRACT MANAGER SELECTION Table 11 presents a five-stage checklist for airport sponsors that seek to solicit a private FBO or contract manager to provide FBO services. The five stages are 1. Planning 2. Request for information 3. Procurement preparations 4. Solicitation 5. Evaluation, selection, and approval Whether the goal is to secure a private FBO or a contract manager, the checklist will serve as a starting point to prepare an action plan (who, what, where, how, and when) that addresses an airport’s specific circumstances. Procurement Process • Planning • Request for information • Procurement preparations • Solicitation • Evaluation, selection, and approval

23 TABLE 11 CHECKLIST FOR FBO OR CONTRACT MANAGER PROCUREMENT Planning Convene the FBO procurement team. Specify the FBO/contract manager scope of responsibilities. Develop the FBO/contract manager required qualifications. Review and update minimum standards. Review and update leasing policies. Review and update rates and charges. Plan the procurement process and schedule. Request for Information (RFI) Prepare and issue the RFI. Respond to RFI questions and issue an addendum to the RFI. Review letters of interest. Team decides next steps (proceed, adjust requirements, or reconsider business model). Procurement Preparations Refine scope of FBO/contract manager services. Determine required FBO improvements and investment. Prepare a site survey and appraisal. Specify terms, financial considerations, and incentives. Prepare an environmental baseline study. Identify types and levels of insurance needed. Determine the amount and form of bond requirement. Coordinate with environmental experts to determine terms and conditions for the lease. Establish evaluation criteria. Prepare a draft lease/management agreement. Prepare a request for proposal (RFP). Solicitation, Selection, and Approval Issue an RFP. Conduct preproposal conference and site inspection. Establish a deadline to submit questions. Post RFP addenda/final answers. Establish a proposal deadline. Complete the proposal review. Interview selected proposers. Procurement Team selects successful bidder. Negotiate and finalize lease documents. Airport governing body approves lease. Sources: Prepared by Michael G. Moroney & Associates and KRAMER aerotek inc. PLANNING FOR THE RFI, RFP, AND SOLICITATION Convene the FBO Procurement Team The FBO decision team is an excellent starting point to identify individuals who can contribute expertise, time, and solutions for the requirements, solicitation, review, and selection process. Each airport sponsor will have a different combination of in-house and outside talent to invite. In many instances, the FBO decision team can continue through the procurement process.

24 Specify the Scope of FBO/Contract Manager Services The statement of FBO or contract management respon- sibilities is one of the key documents that will become part of the RFI and the RFP. In the days of 10,000 FBOs, a single location could support a substantial venue of ser- vices; not so today. Market size, business opportunities, and expectations about level of services and investment will shape the degree of responses from FBO providers or contract managers. The work completed during the evaluation of options for the delivery of FBO services (chapter 2) will inform a realistic set of activities that will define the scope of responsibilities. The FBO procurement team would identify a mix of services that appear viable from an FBO’s standpoint and include these as requirements in both the RFI and the RFP. Reaching out to the FBO industry and gathering feedback during development of the scope may help to focus its offering and, at the same time, publicize the upcoming opportunity. FBO Services Required for Both a Private FBO or Contract Manager The scope of required FBO services is likely to include provision of the following types of services: • Aircraft fueling [Avgas (aviation gasoline) and Jet-A] • Aircraft maintenance and repair – Airframe and power plant repairs – Avionics repair and services • Aircraft towing, marshalling, parking, and tie downs • Aircraft ground power • Baggage handling • Emergency services to disabled GA aircraft • Lavatory and potable water services • Management and subleasing of tie-down spaces, hangars, and office space • Operation of existing fuel farm for storage, handling, and delivery of aviation fuel products • Oxygen, nitrogen, and compressed air services • Daily operations by certified personnel for a specified set of hours and days of the week Additionally, an airport sponsor may require the private FBO or contract manager to offer the following: • Customer service desk • Food vending, restaurant facilities, or both • Ground transportation (courtesy car, rental cars, taxi or limousine, shuttle van) • Flight planning and weather information areas • Rest lounges and showers • Aviation supplies shop (navigation charts, in-flight items) • In-flight catering • Proposals for new development of or improvements to facilities (private FBOs only) Contract Management Scope of Services The scope of services for a contract manager is somewhat different because a private FBO has an interest in real property that is being conveyed and is responsible for the profitability of the operation. With contract management, experts are hired to manage an operation that belongs to the airport sponsor. The contract manager is the agent of the airport sponsor. The airport sponsor is responsible for determining the level of service to the GA community and the profitability of the operation. The airport sponsor would specify the responsibilities of the contract manager and describe them in an RFP. The contract manager’s responsibilities might include the following: Planning • Convene the FBO procurement team. • Specify the FBO’s scope of responsibilities. • Develop the required qualifications and evaluation criteria. • Review and update minimum standards. • Review and update leasing policies. • Review and update rates and charges

25 • Preparing an annual operating budget (approved by the airport) • Preparing an annual marketing plan and annual progress report • Hiring, supervising, and training all FBO personnel in accordance with applicable laws and regulations • Implementing a staff training program • Executing the FBO brand, including advertising, signs, and uniforms • Communicating expectations for a professional level of customer service • Collecting fees and charges from customers • Handling revenue and processing requirements • Safekeeping records and reports • Attending to other duties as required by the airport sponsor: – Audit and detailed financial transaction and operational reports as approved by the airport – Environmental requirements – Waste management and recycling requirements – Periodic facility inspections by airport sponsor and by contractor – Maintenance and repair responsibilities – Emergency response requirements Establish FBO or Contract Management Qualifications As part of the initial planning, the procurement team may make a preliminary list of required FBO qualifications. Typical qualifications for both FBOs and contract managers include the following: • Experience successfully operating or managing FBOs • Ability to offer professional, courteous, and attentive customer service in all phases of FBO transactions • Practical vision for the FBO site that will enhance the airport’s appeal to aeronautical users For private FBOs only: • Development plan that outlines a description of facility improvements proposed, approximate cost, and timeline to construct • Sound financial business basis and a commitment to provide the airport sponsor with the expected financial return • Well-managed transition program at the commencement of the lease Establish Evaluation Criteria At this point, the procurement team may consider criteria to be used for evaluating proposals, such as— • Operating qualifications and experience • Financial return to the airport sponsor • Proposed capital investment • Business and operations plan • Types and number of services to be provided • Responsiveness to local conditions • Financial capability and financial commitment • Economic development benefits to the region • References • Interview results Often, evaluation criteria are weighted using a points-based system that relates the importance of each of the criteria to the airport sponsor. Review and Update Minimum Standards Many airport sponsors adopt minimum standards for enterprises engaging in commercial aeronautical activities. These stan- dards establish required levels of service and evaluation criteria for applicants and provide a basis to turn away unqualified FBOs, specialized aviation service operators, and specialty operators. Minimum standards can help airport sponsors avoid accusations that the airport is arbitrary and discriminatory in not permitting an unqualified individual, firm, or corporation

26 from leasing land and setting up an operation. For qualified new entrants, minimum standards also provide a justification to allow market access and increase competition at the airport. Because of changing activity levels at GA airports in the United States, minimum standards should be reviewed at least every 5 years so that the standards reflect current levels of demand at the airport. At nonhub, small hub, and GA airports, specialty operators are providing more of the aeronautical services that were historically associated with services provided by an FBO. Owing to the decoupling of specialty services, many FBOs today focus on selling fuel and leasing hangars and office space. Before an FBO procurement or management process begins, the procurement team would review minimum standards to ensure that they are consistent with the proposed statement of FBO requirements. FAA AC 150/5190–7, “Minimum Standards for Aeronautical Activities,” provides guidance on reviewing and updating minimum standards. Update Other Primary Documents Primary documents include not only minimum standards but also rules and regulations, leasing policies, and current rates and charges. These documents typically are appended to a solicitation. The primary documents (and subsequent amendments) would be referenced in a lease or management agreement. REQUESTS FOR INFORMATION (RFIs) Prepare and Issue an RFI An RFI is a useful tool to gauge interest and gather information from prospective bidders. It is also a way to refine the RFP based on RFI responses and, in the end, may save a lot of the airport sponsor’s time. RFIs are quick turnaround requests. Some airport sponsors will issue an RFI with a response deadline of 4 to 6 weeks. RFIs typically include the following information: • Response details – Issue date – Due date – Submittal mailing address – Contact information – Website registration of interested parties • Statement of purpose – Intention to solicit proposals for FBO services (or contract management) – Statement of FBO services desired – Disclaimer that an RFI is not an RFP • Background about the airport – Location – Runways, navigation, Air Traffic Control – Based aircraft by type – Number of T-hangars and box hangars – Occupancy rate of hangars – Flight training on the airport – Current FBO and services offered – Estimated operations (past 3 years) – Gallons of Avgas and Jet-A fuel delivered (past 3 years) • Facilities to lease or manage – Terminal – Hangars Request for Information • Prepare and issue the RFI. • Respond to RFI questions and issue an addendum to the RFI. • Review letters of interest. • Decides next step (proceed, adjust requirements or business model).

27 – Fuel farm – Current development plans • Required FBO or management services • Submittal Information – Letter of interest (LOI) – Respondent recommendations for ° Operations plan ° New construction ° Suggested term and language for the lease ° Additional services proposed ° Hangar management options ° Performance goals – Demonstration of relevant experience and qualifications to develop and/or operate FBO facilities Respond to RFI Questions and Issue Addendums Given a fast turnaround for RFIs, airport sponsors can set a deadline for interested groups to submit questions in writing within 10 to 14 days after an RFI is issued. Typically, sponsors will post and circulate written responses to questions as adden- dums shortly thereafter. Review LOIs and Decide Next Steps Early work by the FBO procurement team has already established evaluation criteria for the review of LOIs. The procurement team will meet and discuss the LOIs received, identify the strongest candidates, and make any needed adjustments to the plan for the delivery of FBO services. PROCUREMENT PREPARATIONS If the procurement team decides to move forward with an RFP, the procurement process requires additional prepara- tion, including a site survey and appraisal, an environmental baseline study, determination of insurance requirements and a proposal bond, a refined statement of requested FBO services and potential investment in facilities, lease terms, and response requirements for bidders. Refine the Scope of FBO or Contract Manager Services The results of the RFI process will help to identify levels of interest in providing FBO or contract management services and respondent recommendations for an operations and devel- opment plan. Based on this additional information, an airport sponsor can refine the statement of required FBO services. Determine Required FBO Improvements and Investment (Private FBO Only) Some airport sponsors seek to lease existing FBO facilities, including GA terminals, office space, hangars, repair shops, and tie-down areas. Others expect that bidders would identify physical facilities they plan to construct or improve. The procure- ment team will identify whether a construction plan is desired and feasible as part of the RFP. If so, the team will set minimum requirements for the FBO to provide, if granted a lease, including the following: • Specific new facilities or improvements to existing facilities • Minimum required investment • A timeline for development and improvements • Clarity about ownership of improvements during and at the end of the FBO lease term Procurement Preparations • Refine the scope of FBO/contract manager services. • Determine required private FBO improvements and investment. • Prepare an FBO site survey and appraisal. • Prepare an environmental baseline study. • Specify terms, financial considerations, and incentives. • Identify the FBO insurance requirement. • Determine the proposal bond. • Draft the lease or management agreement. • Prepare the RFP. • Prepare response requirements for bidders.

28 Prepare an FBO Site Survey and Appraisal (Private FBO Only) A site survey and appraisal are also part of the procurement process. Site Survey Typically, a licensed independent surveyor prepares the site survey. The survey will provide an accurate description of the site, the size of the site, and exhibits as well as other information that will be necessary for the appraisal process. The site survey and a legal description will be included as an exhibit in the RFP and, ultimately, in the FBO lease. Appraisal Determination of the fair market value (FMV) for a ground lease and the FMV rent of any buildings and hangars is an impor- tant step in the leasing process. For the initial period of the FBO lease, the airport sponsor may decide to engage an appraiser to determine the FMV of properties to be leased. A qualified Member of the Appraisal Institute with relevant qualifications and experience with the appraisal of airport landside and airside land and facilities is a good candidate to complete the appraisal. Prepare an Environmental Baseline Study (Private FBO Only) Airport sponsors typically have an environmental baseline study prepared by an independent professional who specializes in environmental studies. The baseline environmental study describes environmental conditions at the proposed FBO lease premises prior to finalizing the proposed FBO lease. This study provides a basis for determining if the proposed FBO lease premises are suitable for conveying in a lease. The environmental baseline study would be included in the FBO lease as an exhibit. The study will identify, characterize, and document the presence or likely presence of a past site contamination (e.g., hazardous substances, petroleum products, and derivatives), and identify potential vulnerabilities (to include occupational and environmental health risks). The environmental baseline study also establishes the benchmark condition from which the airport sponsor can monitor and manage any future adverse environmental impacts resulting from operation of an FBO. Further, it provides a commer- cially acceptable level of environmental information necessary to facilitate site cleanup at the end of the FBO lease term. The environmental baseline study protects both the FBO and the airport sponsor by identifying environmental liabilities associated with a property prior to the conveyance. The airport sponsor and past lessees can be held financially responsible for site contamination prior to the effective date of the new FBO lease. After the date of the new FBO lease, the new FBO will be jointly and severally responsible for site contamination in accordance with the terms of the Resource Conservation and Recovery Act. An airport sponsor can check environmental conditions against baseline results at regular intervals throughout the lease term to ensure that the lessee is maintaining sound environmental practices. If the lease has a long term, this practice will ensure that environmental situations are managed throughout the term and few surprises are found at the end of the lease. Specify Terms, Financial Considerations, and Incentives The procurement team will set the terms, financial considerations, and incentives for the offering. For a traditional lease, these may include the following: • Ground rent (annual per square foot) • Rent for FBO facilities, including the terminal, fuel farm, tie-down areas, and equipment • Management fee or rental share for airport-owned hangars • Concession fees for gross receipts generated from ancillary services, as provided in the lease • Utility payments and operator maintenance responsibilities • Fuel flowage rates and, if certain large aircraft use the FBO, collection of passenger facility charges and landing fees (subject to an FBO handling fee) • Provisions for annual rate changes according to a specified method

29 For a management contract, these may include the following: • Monthly fee for managing and operating airport sponsor-owned facilities • Bonus schedule for meeting certain revenue targets Identify the FBO Insurance Requirement In preparing for the FBO procurement, the airport sponsor would consult with its risk manager or insurance to determine required insurance and coverage levels and to spell out provisions for adjustments to insurance and coverage during the lease term. Determine the Proposal Bond The procurement team will determine the amount and the nature of the proposal bond that will accompany proposals. In some city and county organizations, established policies are used to determine the amount and form of proposal bonds. Some jurisdictions refer to this payment as a proposal deposit. Draft the Lease or Management Agreement A sample lease or management agreement usually is attached to the RFP, and for this reason the terms of these documents must be developed during the procurement process. Chapter 4 highlights the most important elements of a lease or manage- ment agreement. Prepare the RFP In connection with the contents of an RFP and actual solicitation, each airport sponsor must follow local ordinances or rules for procurement of FBO services. This section focuses on the basic elements of an RFP. The building blocks for the RFP are in the previous sections of this chapter and chapter 2. Furthermore, if the sponsor issued an RFI, some of the RFP sections are drafted already. In general, an RFP to solicit FBO services would contain the following information: • Introduction – Statement of purpose for the RFP – Description of the aeronautical services desired – Statement that gives the sponsor the right to reject any and all proposals and claims ownership of all proposals and supplementary documents and materials • Background of the airport (similar to the RFI) – Location – Runways, navigation, air traffic control – Based aircraft by type – Number of T-hangars and box hangars – Occupancy rate of hangars – Flight training on the airport – Current FBO and services offered – Estimated operations (past 3 years) – Gallons of Avgas and Jet-A fuel delivered (past 3 years) • Description of the FBO property – Site map, property description, and appraisal – Current land use and development considerations – Utilities available on site – Current roads, ramp area, storm water solutions, and utility corridors • Facilities to lease or manage – Terminal – Hangars – Fuel farm • Current development plans, timelines, and airport capital investment commitments

30 • Statement of compliance with minimum standards, any development standards for the airport, and FAA regulations • Proposal requirements for FBO or management services – Aeronautical services ○ Provided by proposer ○ Provided by third parties – Proposed development plan (if required) ○ Facilities (hangars, repair shops, tie-down areas, terminal and office space, fuel farm) ○ Schematic plan and timeline – Demonstration of qualifications and experience – Demonstration of financial capability and resources (if required) • Term, financial considerations, and incentives – Proposed term of lease or agreement – Schedule of rents and fees, incentives (if any) • Response requirements for bidders – Cover letter – Executive summary – Business organization of proposer ○ Description of the team ○ Role of each team member ○ Contact information – Statement of qualifications and experience (direct and third party) ○ Description of similar relevant experience in the past 5 years ○ References – Proposed aeronautical services (direct and third party) – Financial capability and resources (if FBO investment is included) ○ Proposer’s current portfolio of FBOs and other aeronautical service facilities ○ Financing commitments in the past 3 years ○ Pending projects ○ Proposed sources of capital for this FBO development plan – Disclosure of any legal or adverse actions – Financial statements for the past 3 fiscal years – Pro forma income and operating statements for proposed FBO services – Statement of any objections or exceptions to the terms and conditions of the RFP • Proposal evaluation criteria (refined by the procurement team) – Operating and development qualifications and experience – Financial return to the airport sponsor – Proposed capital investment – Business and operations plan – Types and number of services to be provided – Responsiveness to local conditions – Financial capability and financial commitment – Economic development benefits to the region – References – Interview results • Submission instructions, proposal bond, and schedule • List of exhibits (site map, property appraisal, minimum standards, draft lease or agreement, federal and local certifications) SOLICITATION, SELECTION, AND APPROVAL The solicitation process is straightforward and similar to the RFI process. The major differences include a longer timeline for response, a preproposal conference and site inspection tour, and interviews with selected proposers.

31 Estimated Timeline Figure 8 describes an estimated timeline of 6 months from the day the airport sponsor issues the RFP to the day the governing body approves the lease or management contract. FIGURE 8 Estimated timeline for FBO/contract manager solicitation, selection, and approval. Sources: Prepared by Michael G. Moroney & Associates and KRAMER aerotek inc. Preproposal Conference Discussion Materials and Site Inspection Tour As part of the procurement process, airport sponsors may hold a preproposal conference. The conference will present the RFP and lease requirements. The following is a possible agenda for the preproposal conference: • Solicitation background and purpose • Airport information – Description of airport facilities ○ Land and buildings ○ Runway lengths and strengths ○ Airfield instrument approaches – Air traffic activities statistics for the past 3 years ○ Historical air traffic ○ Based aircraft ○ Aircraft operations ○ Fuel deliveries • History of this FBO opportunity • Discussion of the site and facilities • Discussion of desired services to be provided • Discussion of salient elements and organization of the RFP, including – Table of contents – Transmittal letter – Executive summary – Response requirements ○ Operating and development experience ○ Business and operations plan

32 ○ Financial capability and commitment ○ Financial return to the airport sponsor ○ Business references ○ Proposal bond – RFP schedule and award • Tour of the GA area that includes the proposed lease premises Interviews Interviews are a key aspect of the selection process. The procurement team will have reviewed proposals and decided on a group of bidders to interview. If the procurement team is large, the group may designate a subset of individuals to meet with proposers. The interviews give proposers the opportunity to make their case and the selection committee to follow-up on details of the operating plans, capital investments (if proposed), and qualifications and experience. WRAP-UP This chapter provides a close look at the planning, procurement decisions and documents, and solicitation process used to select and engage an FBO provider or FBO contract manager. Airport sponsors can use this information as a checklist and integrate the elements with local procurement practices. Many examples of FBO RFIs and RFPs for reference can be found online. However, each airport will have special local circumstances and market situations to address and customize. The next chapter discusses the key elements of an FBO lease.