National Academies Press: OpenBook

Airport Software Solutions and Services Sourcing (2022)

Chapter:Chapter 4 - Technology Procurement Vehicles

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Suggested Citation:"Chapter 4 - Technology Procurement Vehicles." National Academies of Sciences, Engineering, and Medicine. 2022. Airport Software Solutions and Services Sourcing. Washington, DC: The National Academies Press. doi: 10.17226/26735.
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Suggested Citation:"Chapter 4 - Technology Procurement Vehicles." National Academies of Sciences, Engineering, and Medicine. 2022. Airport Software Solutions and Services Sourcing. Washington, DC: The National Academies Press. doi: 10.17226/26735.
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Suggested Citation:"Chapter 4 - Technology Procurement Vehicles." National Academies of Sciences, Engineering, and Medicine. 2022. Airport Software Solutions and Services Sourcing. Washington, DC: The National Academies Press. doi: 10.17226/26735.
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Suggested Citation:"Chapter 4 - Technology Procurement Vehicles." National Academies of Sciences, Engineering, and Medicine. 2022. Airport Software Solutions and Services Sourcing. Washington, DC: The National Academies Press. doi: 10.17226/26735.
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17   C H A P T E R   4 Technology procurement vehicles are methods to buy hardware, software, and services. Vehicle management is centralized to reduce acquisition administrative costs. The following are examples of procurement vehicles: • A purchasing card, often referred to as a P-Card, is synonymous with a consumer credit card and is used by authorized individuals to make direct purchases. • A purchase order (PO) is issued to suppliers as a legally binding contract. Details include price points, delivery dates, shipping arrangements, and payment terms (Martin, n.d.). • A blanket purchase agreement (BPA), also referred to as a supplemental contract, is a method of filling repetitive needs for supplies and services with qualified sources of supply. It is an arrangement under which a supplier agrees in advance to provide goods and services when ordered over a specified period of time with pre-established prices, terms, and conditions; no quantities or dollar amounts are guaranteed. There is no contract under a BPA until a pur- chase is made. BPAs are designed to reduce administrative acquisition costs. • A request for information (RFI) is a general request to survey the market and obtain available information about products, services, and solutions. This approach allows an airport to gather information and satisfy internal requirements before publishing a more formalized request for quote, request for qualifications, or request for proposal. • A request for quote and a request for qualifications can each be referred to as an RFQ. A request for quote is a formal request for suppliers to submit a quote to provide technology hardware, software, or services. This approach allows airports to gather the financial details behind a solution before executing a purchase. • A request for qualifications is a type of solicitation generally used for services; it is evaluated based on qualifications first and then on negotiated price. A request for qualifications would be most appropriate for professional services that are not exempt from bidding requirements. • A request for proposal (RFP) is used by 95% of companies, including airports, to conduct sourcing activities (Semarchy, n.d.). An infographic from Semarchy and NowSourcing indi- cated that RFPs cost businesses $311,533 on average each year as a result of the approximately 4,800 staff hours per year it takes to respond to them. • A sole source purchase is when only one supplier possesses the ability to provide the goods or services needed. This method of procurement is the least competitive; it typically requires authorization for use. • An invitation to negotiate (ITN) process (as illustrated in Figure 4-1) requires a publicly posted, written solicitation for sealed offers (Colorado Department of Personnel & Admin- istration 2019). Nonnegotiable items can be included in the solicitation. Vendors submit responses by the deadline and are evaluated to determine whether their responses are reasonably likely to address the procurement need. Negotiations with one or more entities Technology Procurement Vehicles

18 Airport Software Solutions and Services Sourcing that present the most advantageous options based on price and evaluation criteria then com- mence, but can be discontinued at any time. An award with contractually binding documen- tation finalizes the process. Cooperative purchasing practices also include joint solicitations and piggybacking. A joint solicitation is the aggregate of two or more agencies’ needs in a single solicitation. Piggybacking is the use of another agency’s contract. Piggybacking is bound by terms, conditions, and pricing in the original contract. A requisition is an internal document capturing items an individual, department, or entity wishes to purchase. When approved, existing resources are provided or purchased externally. Emergency purchases occur when the public interest would likely suffer by delay or when emergency repairs are necessary. Documentation of emergency purchases is critical. Rules and Regulations Technology procurement rules and regulations for airports stem from their governance struc- tures. Departmental budgets require approval. Monetary thresholds and localized policies determine options for executing approved budgets. For example, some airports require that all technology purchases receive approval from IT and procurement to ensure system compatibility. Funding Sources For NPIAS airports, funding comes from a variety of federal, state, and local resources, including the FAA AIP, grants, taxes and fees, airport revenue bonds, art funds, airline–airport use and lease agreements, TSA agreements, and non-aeronautical fees. The FAA AIP provides grants to plan and develop airports. The grant funds 75% of eligible costs for large and medium primary hub airports and 90%–95% of costs for small primary, reliever, and general aviation airports. To be considered eligible for a grant, an airport must be included in the NPIAS and must be a public-use airport [publicly owned, privately owned but designated by FAA as a reliever, or privately owned but having scheduled service and at least 2,500 annual enplanements (FAA 2020c)]. U.S. DOT financial assistance and grants exist to assist in planning, designing, and construct- ing transportation improvements or research and development projects. Airport procurement Figure 4-1. High-level steps in an ITN process (Colorado Department of Personnel & Administration 2019).

Technology Procurement Vehicles 19 of goods or services must fit into specific categories, and the procurement process and proce- dures differ depending on the type of recipient (such as federal, state, or local) (U.S. DOT 2019). Taxes and fees offer varying levels of revenue for airports. Congress has authorized airports to assess passenger facility charges (PFCs) on each boarded passenger (Airlines for America, n.d.). This non-federal fee must be used to finance eligible airport-related projects, which may also include service to debt incurred to carry out projects. State and local governments issue tax- exempt bonds, primarily classified as tax-exempt private activity bonds, to be used for airport improvements according to federal rules. Landing fees are assessed to airlines as another fund- ing source for airport improvements. These approaches are more typical in larger airports, as the increase in traffic generates significant funding. Smaller airports are typically more dependent on AIP grants. These funding sources also place various legislative, regulatory, or contractual restrictions and constraints on airports. Airport revenue bonds use airport operating revenue to secure a bond. The sponsoring agency issues a revenue bond to improve, expand, or build a new airport (Chen 2021). This funding source is a common form of airport debt because the sponsoring organization is more likely to pay a lower interest rate in order to lower financing costs for airports. Art funds are included in many airport art programs as a percent-for-art fund, allocated by local or state government. This percentage allotment is typically set aside during a construction or renovation project to commission original art works for public spaces. There does not appear to be a similar program aimed at technology procurement. Airline–airport use and lease agreements include rentals, fees, and charges for rights, licenses, and privileges. Airports use calculation formulas to ensure that the appropriate share of funds from these agreements is allocated to each relevant area of the airport (Tampa International Airport 2018). The size of the plane, number of passengers, and the plane’s destination are often determinants. On average, an airport makes $9,500 for each plane that lands (Simple Flying 2018). Non-aeronautical (or landside) fees are derived from concessions, parking lease agreements, leased properties, tenant leases, and rideshares (Law Insider, Inc. 2022). Nearly half of all airport revenue comes from non-aeronautical fee collection. Portions of these revenue sources are often allocated to technology procurement budgets. The TSA and other on-site agencies (such as agriculture departments) maintain lease agree- ments at rates driven by the airport governing authority. Lease agreements cover support and administrative space such as offices, break rooms, training rooms, and storage areas. Public law requires airports to provide security checkpoint screening free of charge (U.S. GAO 2020). Public-private partnerships (P3) typically involve a government agency contracting with a private partner. A private entity often provides some or all of the up-front funding. Repayment occurs over the duration of the partnership and can stem from several revenue streams. Legisla- tion and policy, planning and evaluation, procurement, and monitoring oversight are given to P3s given the unique nature of the relationship (Ernico 2020). Internationally, many more airports are private; approximately 41% of airports in Europe are fully or partially privately owned. One common reason for this approach is its use by govern- ments as a means of raising capital. Some countries also lack public funds or tax-exempt bonds on which to rely for funding efforts. Many foreign airports rely on aeronautical revenue as their primary source for capital development. Some airports also report a reliance on debt financing for infrastructure funding. Internationally, airport revenue from airline rates and charges are not required to be used within the airport or for aeronautical-related costs or infrastructure (U.S. GAO 2020).

20 Airport Software Solutions and Services Sourcing Procurement Process by Funding Source Procurement processes adhere to agreements between the airport’s governing authority and the funding source. Each funding source typically has its own set of procurement requirements, which sometimes conflict with one another. Airport governance assembles procurement rules and regulations by contract type and terms in order to mitigate conflicts and consequences for non-compliance. In general, the procurement process includes the following steps: 1. Define the scope of the project, services to be performed, equipment requirements, and needs 2. Meet all funding source requirements, laws, and regulations 3. Determine contract type and establish contract terms 4. Identify selection method and award process 5. Perform cost analysis 6. Mitigate procurement disputes via protest procedures FAA AIP, grants, taxes and fees, and airport revenue bonds require strict adherence to fund- ing source requirements. Clauses for the use of funding for technology are addressed in the terms of the agreement. Alternate funding streams can be combined to create an airport budget. Governing authority rules and regulations determine how the budget is requested and allocated throughout the airport. Vehicles and thresholds for technology procurement are unique to each airport. At Tampa International Airport (TPA), the IT department must approve technology before procurement, and it has a proof of concept (PoC) budget for this purpose (Marcus Session, per- sonal communication, January 14, 2021). Different departments at TPA can suggest technology or piggyback on technology requests that enter a trial phase. The IT department invoices depart- ments without actual dollar figures. The documentation justifies the requesting department’s annual budget. This process allows for a lower threshold trial of potential solutions while the contracting process identifies possible procurement vehicles.

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The technology procurement process includes sourcing and acquiring software, hardware, and services. Systems and nuances of technology procurement vary within each airport, and navigating such variances at a pace that meets the airports’ needs and technology evolution can be challenging.

The TRB Airport Cooperative Research Program's ACRP Synthesis 120: Airport Software Solutions and Services Sourcing identifies the efficient and innovative technology sourcing and procurement practices developed by airports.

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