RULE 45: PREMIUM VALUE CONCESSIONS PROGRAM

Transcription

1 RULE 45: PREMIUM VALUE CONCESSIONS PROGRAM 1. INTRODUCTION. The Department of Aviation created the Premium Value Concessions Program ( PVC Program ) described in this Rule to encourage growth in concession revenues at Denver International Airport (the Airport or DIA ), and encourage Airport Concessions to comply with their Concession Agreement terms and maintain high standards for the quality of foods, beverages, and goods sold at DIA. The PVC Program is in addition to DIA s ability to offer concession opportunities via Request for Proposals ( RFP ) or direct negotiation, and provides an objective set of performance criteria through which participating Concessions, including eligible Airport Concessions Disadvantaged Business Enterprise ( ACDBE ) concessions, may obtain the right to execute a new concession agreement at the end of their term (the Program Benefit, described more completely in Section 1.01 below). It is desirable for DIA to retain its best Concessions, as these are most likely to offer the best overall performance in Concession Agreement compliance, customer service, and sales generation, the combination of which can lead to greater revenues to DIA. To ensure objectivity in awarding Program Benefits, this Rule defines specific performance criteria and methods for measuring and comparing the performance of Concessions against similar Concessions at DIA and a sampling of concessions at other airports around the United States. This Rule also defines the duties of a Third Party Administrator, who will run the day to day operations of the PVC Program on behalf of the Airport Program Benefit Program Benefit means the opportunity to execute a new concession agreement for another term at the terms (including but not limited to rental rates, minimum capital investment, length of term and surety requirements) in effect at the time of the new agreement for the minor merchandise category, subject at all times to the requirements of this Rule Applicability of Rule This Rule applies only to Concessions that have a fully executed Amendment to their Concession Agreement generally in the form attached to this Rule as Rule 45 Attachment 1 or that have a fully 1

2 executed Concession Agreement with appropriate language relating to the PVC Program and this Rule Description of the Premium Value Concessions Program The PVC Program is designed to provide an objective method of evaluating eligible Concessions to determine whether Concessions are top performers in their merchant class and whether they are eligible to receive the Program Benefit. There are three performance-criteria categories delineated in the PVC Program: (i) Operations; (ii) Financial Performance; and (iii) Customer Service Performance. Concessions that fail to meet the Operations criteria will not be eligible for the Program Benefit even if they satisfy the other two criteria. Each of these criteria, as well as the point scoring system, is defined in more detail later in this Rule. By incorporating these standards into the PVC Program, it is the intent of DIA and its Concessions to incentivize Concessions to excel at these standards. The Third Party Administrator will calculate, record, and report monthly and final scores. Final scores for a Concessionaire will be determined before the expiration of the applicable Concession Agreement. The Third Party Administrator will perform other duties outlined below. By keeping each participant apprised of its scores, the PVC Program offers feedback on performance and therefore an opportunity for improvement. As described more fully below, Concessions have opportunities to appeal the Airport s scoring in some situations Participation Thresholds Before the PVC Program can commence, at least 20 Concessions eligible for the PVC Program must agree to participate via an executed Amendment to their Concession Agreements generally in the form attached as Rule 45 Attachment 1 (the PVC Amendment ). In the event of a conflict between this Rule and a Concession Agreement, the language of the Concession Agreement shall govern A Concessionaire may withdraw from the PVC Program should its annual obligation for the PVC Program for any location exceed the amount stipulated in that Concessionaire s PVC Amendment. Inflation adjustments shall be calculated using the Consumer Price Index for all Urban Consumers (CPI-U) for the West urban region and shall be adjusted based on this index as of the Program Start Date. 2

3 2. PERFORMANCE CRITERIA 2.01 Criteria Concessions can obtain the PVC Program Benefit based on three Criteria: a) Operations; b) Financial Performance; and c) Customer Service Performance. Each of these Criteria is defined in more detail later in this Rule. 3. ELIGIBLE CONCESSIONS 3.01 Eligible Concession Categories The PVC Program and the underlying financial and customer service information used to compare Concessions shall be applicable to Concession locations on Concourse A, B, or C that meet the following criteria: a) has a concession agreement in effect whose original term was a minimum of 5 years in length; b) occupy an in-line premises that encompasses a bulkhead with signage at the front and demising walls on the sides; c) or, in lieu of 2.02 (b) above, is a free-standing non moveable concession which is (or shall be for purposes of certain scoring criteria) designated a square footage the greater of 700 sf or the actual square footage; d) the Concession Agreement is not month-to-month as of June 1, 2009; e) Concessionaire has a fully executed PVC Amendment or has a fully executed Concession Agreement with the appropriate inclusion of applicable PVC Program language and reference to this Rule; f) is a sub-lessee or sub-licensee of an entity that has entered into an agreement with the Airport to operate, merchandise, sub-license, or sub-lease certain spaces ( Developer ), and which meets the criteria in b, c, and d above, and whose sub-lease, sub-license or similar agreement is at least 5 years in length and terminates no earlier than the City s agreement with the Developer. Further, these sub-lessees and sub-licensees may not be located in the terminal or be a service concession but may qualify under those programs 3

4 once defined. This is conditioned on Developer issuing a letter to the City, in a form acceptable to the City, allowing its eligible sub-licensees and sub-lessors to participate in the PVC Program. g) Locations that are under one Concession Agreement but operating with more than one brand (a Dual Brand ) can be treated as two entities when: 1. The total space encompassing the Dual Brand is greater than 2000 sf; 2. Concessionaire agrees to pay for each brand as a separate entity in the PVC Program; 3. The two brands are perceived as occupying different spaces, in the judgment of DIA, e.g. separate design, separate seating areas, separate service counters, separate sales reporting and other criteria; 4. Currently there are two dual brand locations: Paradise Bakery/Airport Lounges on Concourse B, and Timberline/Einsteins on Concourse C 3.02 Terminal Concessions, Service Concessions and Developers not eligible. Concessions located in the Jeppesen Terminal ( Terminal ), or which are designated as Service Concessions or which are designated Developers, are not eligible to receive the Program Benefit for the PVC Program at this time. Market forces in the Terminal are not the same as those on the Concourses, and there will be changes to the Terminal over the next few years, making a PVC Program in the Terminal impracticable at this time. Similarly, Concessions offering services are a diverse group of businesses not easily comparable to each other, so it is not possible to include them in the PVC Program as it is currently structured. DIA intends to work with Terminal and Service Concessions to design a PVC Program similar to the one described in this Rule that addresses these differences and meets the needs of DIA and the Terminal and Service Concessions. 4. THIRD PARTY ADMINISTRATOR DIA will engage an independent Third Party Administrator ( TPA ) to assist with the administrative demands of the PVC Program. The TPA will implement and manage the PVC Program; perform the information gathering, data evaluation, and reporting functions of the PVC Program; hire contractors; issue progress reports based on tallying scoring results; conduct store surveys; publish findings and make determinations regarding scoring and granting of the Program Benefit. The TPA s 4

5 responsibilities include interaction with DIA information sources, systems, and concessions. The TPA will gather information including but not limited to agreements, compliance, sales, and customer service. The TPA will develop its own information management systems to support the efficient gathering and reporting of information. The TPA will be responsible for the sub-contracting of the customer service secret shopper organization. The TPA will be responsible for compiling information into evaluations of concessions and for any subjective appeal process defined below. DIA will select and coordinate the TPA. Subject to any appeal or administrative hearings, DIA will be the final authority in all scoring methodology determinations and calculation disputes. 5. SCORING PROCEDURES To be eligible to obtain the Program Benefit, the eligible Concessionaire ( PVC Candidate ) must satisfy the scoring criteria in this section. There are three categories of scoring: Operations Criteria, Financial Performance, and Customer Service Performance. Operations Criteria are measured as pass or fail. Financial Performance and Customer Service Performance are scored on a monthly basis. A PVC Candidate s Month Average Point ( MAP defined below in Section 5.09) will be ranked against the MAP of other concessions within the Candidate s Scoring Pool Scoring Pool The Candidate s Scoring Pool shall include all eligible concessions in the PVC Candidate s minor merchandise category, for all three concourses, which have been open a minimum of 12 full months during the PVC Candidate s Operating Period (defined below in Section 5.09). In calculating the number of available monthly Financial Performance points and Customer Service Performance points, as well as the number of Program Benefit recipients, instances where fractions of a whole number occur, standard rounding methodology will be applied Scoring Pool and Program Benefit Determination For PVC Candidates that have three or more concessions in their Scoring Pool: If the PVC Candidate has passed the Operations Criteria and its MAP is within the top third of its Scoring Pool (top half for Food Court Concessions), then the PVC Candidate will have met the requirements for obtaining the Program Benefit. 5

6 For PVC Candidates that have two or fewer concessions in their Scoring Pool: At a PVC Candidate s Evaluation Date, if that PVC Candidate has two or fewer concessions in its Scoring Pool then the Program Benefit cannot be obtained through the Scoring Procedures. Rather, as stated in Section B.4 and A, the PVC Candidate must submit an Appeal to be considered for the Program Benefit, and follow the process described in Section The cost of such appeals will be borne by the program Operations Criteria The period subject to Operations Criteria evaluation (hereafter Operations Evaluation Period, or OEP ) shall be determined by the Phase-In period described in Section 6. As specified in that Section, Full PVC Program Candidates Operations Criteria shall commence on the later of (i) the PVC Program Start Date ( PSD ) or (ii) the PVC Candidate s concession agreement start date and shall continue through the Evaluation Date (i.e. date 18 months before expiration of the PVC Candidate s Concession Agreement) Defaults Defaults of a Concession Agreement during the OEP shall be classified as Tier 1 or Tier 2. Defaults shall be limited to terms of the Concession Agreement and the Concession must have been formally notified of the default in writing specifically stating the nature of the default and the relevant cure period for a default to be considered under the PVC Program s Operations Criteria. Tier 1 defaults are those defaults arising from: 6 a) failure to pay rent or percentage rent on or before the due date specified in the Concession Agreement, or failure to timely submit insurance documentation or bonding in the required amounts; b) failure to complete any required remodel on or before the deadline specified in the Concession Agreement (subject to extensions granted by the City in writing); c) violating the environmental terms of the Concession Agreement; d) failure to comply with law within a reasonable time after notice of any alleged violation has been received; e) failure to comply with the brand/use term of the Concession Agreement; f) failure to transfer ownership in conformity with the Concession Agreement; or

7 g) failure to meet ACDBE requirements in the Concession Agreement. Tier 2 defaults are any other defaults to the Concession Agreement not defined as Tier 1 defaults, including but not limited to: a) failure to pay amounts when due (excluding base and percentage rent, which are Tier 1 defaults); b) failure to maintain the concession space as required; or c) failure to comply with required hours of operation and pricing provisions of the Concession Agreement Total Defaults allowed, cured and uncured When calculating total defaults cured and uncured defaults shall be counted; however, first notices of default that are within the cure period shall not be counted. Defaults allowed during the OEP shall be as follows: Tier 1: 0 Tier 2: No greater than 1 per year on average. If a Concession exceeds the total number of defaults allowed, the PVC Candidate shall not be eligible to receive the Program Benefit. Except as noted above in Section 5.04 regarding first notices of default within the cure period, a default, even if cured, shall count toward the maximum defaults allowed Financial Performance Scoring Financial performance shall be scored based upon the following: A. Top Third Monthly Sales per Premium Value Concession Square Feet ( PVCSF ) by Minor Merchandise Category by Concourse; B. Top Third Monthly Sales Per PVCSF per 1000 Allocated Enplaning Passengers by Minor Merchandise Category by Concourse; C. Top Third Monthly Sales per 1000 Allocated Enplaning Passengers by Minor Merchandise Category, by Concourse; D. Above Average Monthly Sales Trend versus Major Merchandise Category Trend by Concourse; and 7

8 E. Above Average Monthly Sales Trend versus Inflation 1 and Enplanements Trend by Concourse. All of the above criteria will be scored monthly and the PVC Candidate will be compared to the other PVC Candidates and Non-PVC Candidates. For criteria A, B, and C above, and as more completely defined below, if the Concession is in the top third of performance (top third plus 1 in the Food Court category) it shall score a point for that month. The monthly limit on points in Financial Performance is 2. The PVCSF shall be either the area in square feet stipulated in the Concession Agreement or as remeasured by the Concession s architect and approved by DIA. Concessions shall have the option before the PVC Program Start Date to engage an architect at their cost to re-measure their concession space in conformity with DIA design criteria, and submit a request to DIA to change the square feet of their space as it relates to the PVC Program only. DIA shall review any such re-measurements for conformity with the design criteria and any approval of re-measurement by DIA shall be based on those standards. Any resulting change in square footage shall be deemed applicable only to the PVC Program and shall not result in a change to any amounts due and payable under the Concession Agreement. A. Top Third Monthly Sales per PVCSF by Minor Merchandise Category by Concourse Top third monthly sales per PVCSF by Minor Merchandise Category by Concourse shall be determined by dividing monthly sales by the PVCSF of the Concession. Those Concessions scoring in the top third of the Minor Merchandise Category (top third plus 1 in the Food Court category) by Concourse shall score one point for the month. B. Top Third Monthly Sales Per PVCSF per 1000 Allocated Enplaning Passengers, by Minor Merchandise Category, by Concourse This financial performance scoring opportunity shall be determined using the formula monthly sales per PVCSF divided by the Allocated Enplaning Passengers (enplanement allocation methodology explained below) divided by If a Concession scores in the top third of its Minor Merchandise Category (top third plus 1 in the Food Court category) in its Concourse, that Concession shall receive one point for the month. 1 CPI-U, West urban region, not seasonally adjusted, all items, =100 8

9 C. Top Third Monthly Sales per 1000 Allocated Enplaning Passengers, by Minor Merchandise Category, by Concourse. The enplanement allocation methodology is the same as used in sales per PVCSF per 1000 allocated enplaned passengers above. In this performance measure, the Concession s monthly sales are divided by the quotient of allocated enplaning passengers divided by One point shall be scored by those in the top third for the month in their minor merchandise category, by Concourse. D. Above Average Monthly Sales Trend versus Major Merchandise Category Trend, by Concourse Above average monthly sales trend versus Major Merchandise Category trend by concourse compares the monthly percentage sales increase or decrease compared to same month prior year for a concessionaire against the Major Merchandise category increase or decrease (i.e. Food and Beverage, or Retail are the Major Merchandise categories) in its residing Concourse for the same period. Concessions whose percentage change in sales for the month is better than the percentage change in sales for the Major Merchandise category for that Concourse shall score one point for the month. E. Above Average Monthly Sales Trend versus Inflation and Enplanements Trend, by Concourse Above average monthly sales trend versus inflation [based on the CPI All Urban Consumers, West urban region] and enplanements trend by concourse compares a concession s percentage change in monthly sales versus same month prior year to the combined percentage change in monthly enplanements for concourse and percentage inflation over same month in the prior year. This calculation captures the estimated percentage monthly change in overall demand/pricing and compares it to the percentage change in monthly sales over the prior year. Concessions whose monthly percentage change in sales is better than the combined enplanements/inflation percentage change shall score a point for that month. 9

10 Enplanement Allocation Enplanements shall be allocated based on concession locations using the methodology stated below: A. Concourses Merchant Zones: Merchant Zones are the various concession centers on the concourses center cores, sub-cores, and regional jet facilities. Enplanements shall be allocated among the Merchant Zones based upon monthly concourse enplanements, aircraft departures by gate, and aircraft seating capacities. Every six months, the TPA will review and update the seating capacity measurements and gate assignments from the preceding six months and apply these to determine allocated enplaning passengers for the following six months. Each concourse s seating capacity by gate shall be used to determine the seating capacity of the Merchant Zones as a percentage of the total of each concourse s seating capacity. That percentage will then be applied to actual monthly enplanements. The allocated enplanements will then be divided by 1000 and applied to the sales per PVCSF to determine sales per PVCSF per 1000 allocated enplaning passengers. B. Mezzanines: For Mezzanine concessions on Concourse A and Concourse B, enplanement allocations shall be determined by an Adjustment Ratio from Concourse B s center core enplanement allocations. The Adjustment Ratio calculation shall be as follows: 1. Concourse B s combined mezzanine concessions- Calculate prior year s average sales per square foot 2. Concourse B s combined passenger level center core concessions, less Newsstands- Calculate prior year s average sales per square foot 3. The Adjustment Ratio will be calculated as above mezzanine sales per square foot divided by above center core sales per square foot. The same Adjustment Ratio will be used each month throughout the calendar year. Mezzanine enplanement allocations shall be determined by the particular concourse s monthly enplanements divided by two (to replicate the passenger level, center core, east and west split) multiplied by the Adjustment Ratio. C. Change in Methodologies: DIA may, from time to time, consider the use of other methodologies. However, these will not be retroactively applied and DIA will thoroughly discuss any methodology change in advance with the concessionaires. 10

11 5.06 [Reserved] 5.07 Customer Service Performance Scoring Customer Service Performance shall be evaluated and scored based on the following classifications: (i) internal, (ii) external, and (iii) when established, training Internal scoring shall relate to customer service surveys conducted at DIA, while external scoring shall relate to comparing a Concession s results to average customer service surveys conducted at comparable airports. Concessions may score a maximum of one point each, for internal and for external categories, in a given month. The third category, Training, relates to the Concession meeting staff attendance standards at a customer service training program after that program is established by DIA. Each Concession meeting the Training criteria shall score an additional 15% of the total customer service score, to be determined by the TPA at the end of each calendar year In the event the TPA uses a sub-contractor to perform the secret shopper surveys required for internal and external customer service scoring, the TPA, to the extent reasonable, shall endeavor to ensure that the same subcontractor shall perform the internal and external surveys to ensure consistency of scoring Internal Customer Service Scoring The Concessions, DIA, and TPA will jointly develop a customer service survey. Each Concession in the various Minor Merchandise categories shall be scored monthly by the TPA-selected secret shoppers using the jointly developed customer service evaluation form for that category. The top third of Concessions in a Minor Merchandise category across all Concourses in a given month shall score a point. The monthly mystery shops can occur at any time during the calendar month. Further, if an error or omission in a mystery shop is discovered, the TPA will be allowed up to 15 days after the end of a month to complete that month s mystery shopping cycle. These additional days, past the end of the calendar month, will only be used to remediate errors or omissions from the prior month. 11

12 External Customer Service Scoring Five competitor airports selected by DIA management shall be surveyed every 18 months by secret shoppers using the jointly approved customer service evaluation form. A Concession s internal score will be compared to the average score of the combined five outside airports. If the Concession s monthly score is greater, it will receive one external service point for the month. In the event the outside airport s score is not complete at the beginning of an 18 month cycle, then the TPA will use the prior period external airport score Training Program Scoring After DIA establishes a customer service training program, Concessions that send at least 50% of the Concession s total employees or 80% of their customer-facing employees in a calendar year shall receive a 15% increase to their monthly customer service score for that year. This score will be assessed after the end of the calendar year. Concessions shall submit a list of employees hired during the year including employee name, position, badge number, and indicate whether or not such employee is customer-facing. The TPA shall check against applicable security records and other information to validate the information submitted. Failure to submit required information within 60 days from the end of the calendar year will result in denial of training points. Failure of the TPA to dispute the information within 60 days of receipt will automatically result in granting the 15% training increase. For calculating total points earned by a concession for purposes of scoring Premium Value Concessions (see Final Scoring of Premium Value Concessions) under some circumstances the training score for the year may not have been determined at the time final scoring for the PVC Candidate is calculated. In that case, there will be no partial year training increase for the PVC Candidate or members of its Scoring Pool Operating Period/Operating Period Denominator A PVC Candidate and its Scoring Pool are evaluated based on performance within the PVC Candidate s Operating Period ( OP ), which is the time period 36 months prior to the Evaluation Date, which Evaluation Date is itself 18 months before the expiration of the Concession Agreement. 12

13 This OP may contain periods in which the PVC Candidate or members of its Scoring Pool were fully or partially closed, typically for a remodel, but potentially for other reasons as well, which may cause an adjustment to the OP to determine the Operating Period Denominator ( OPD ) as described below. Further, the Candidate s Scoring Pool may include stores that are currently closed but which were open at least 12 months during the Candidate s OP. Closure Type 2 Point Impact Determination of OPD Limit Remodel up to 4 months Remodel beyond 4 months through 9 months Force Majeure 3 up to 9 months Greater than 9 months No points scored during fully or partially closed months. No points scored during fully or partially closed months. No points earned during Force Majeure period. For each month of Force Majeure beyond 4 months, a month immediately prior to the original 36 month period will be included for scoring purposes up to 5 months. No PROGRAM BENEFIT except through subjective appeal Reduce OP by months fully or partially closed up to 4 months. Example, 4 month remodel: 36 month OP less 4 month remodel equals 32 month OP. Reduce OP by months closed or partially opened up to 4 months. No reduction of OP beyond 4 months (This imposes a penalty on concessions whose remodel takes longer than 4 months.) Example 6 month remodel: 36 month OP less 4 month remodel equals 32 month OP. Reduce OP by months closed or partially opened up to 4 months. Example 9 month Force Majeure: OP date moved-back 5 months (to 41 months from Evaluation Date) less 4 months equals 32 month OP. See remodel beyond 4 months through 9 months 9 months 9 months Members of the Scoring Pool which are not PVC Candidates shall only be scored based on months fully open during the PVC Candidate s Operating Period. 2 Actual down time (full or partial closure) which does not include design phase. 3 Force Majeure is defined in the concession agreement of the PVC candidate. 13

14 Concession Agreement Commencement Date PVC Candidate Scoring Period Evaluation Date Determination Concession Agreement Expiration Date 5.09 Scoring Process Timeline 5.09 SPVC Program Anticipated Scoring Process and Timeline 36 months 18 months Operating Period Customer Service 4 months Operations Evaluation Period Score, Report, Appeal Concession Agreement Execution 14 months RFP Period if Determined Operations is evaluated since Concession Agreement start 14

15 Eighteen months before the expiration of a PVC Candidate s Concession Agreement, the TPA shall determine whether the PVC Candidate has met the Operations Criteria. If the PVC Candidate fails to meet the Operations Criteria, then it is not possible for the PVC Candidate to obtain the Program Benefit. If the PVC Candidate meets the Operations Criteria, then the TPA shall begin the final scoring of the PVC Candidate and its Scoring Pool. The Manager of Aviation shall have the right to define elaborative procedures and policies to implement or make modifications to this section; however, the TPA generally will use a process similar to the following: 1. Evaluate whether PVC Candidate has met the Operations Criteria. This will involve review of Concession performance with the airport group(s) responsible for monitoring concession agreement compliance. If PVC Candidate does not meet the Operations Criteria, the PVC Candidate is ineligible to receive the Program Benefit and no scoring calculations per 2 through 6 below will be attempted or provided. 2. Score the PVC Candidate. Determine the OP and OPD. Add the scores for each month open during the corresponding OPD. For PVC Candidates, the OPD will typically, but not always be 36 months. For members of the Scoring Pool this will be a minimum of 12 months. 3. Assign Scoring Pool. Determine the Concessions that will be in the Scoring Pool using the PVC Candidate s minor merchandise category and OP. 4. Calculate Month Average Point or MAP. MAP shall be calculated using the formula total points earned in the operating period from Financial and Customer Service criteria, divided by the number of months in the OPD. 5. Rank PVC Candidate. Determine the PVC Candidate s rank based on its MAP ranking among the Scoring Pool. 6. Determine whether PVC Candidate has met the requirements to be granted the Program Benefit. Food Court PVC Candidates rank in the top half of MAPs in their Scoring Pool to achieve the Program Benefit. PVC Candidates in all other Minor Merchandise Categories shall achieve the Program Benefit if they rank in the top third of MAPs in their respective minor merchandise category. The TPA will report to DIA whether the PVC Candidate has achieved the Program Benefit. DIA will notify the concessionaire of the TPA s determination. PVC Candidates which do not achieve the Program Benefit, but whose MAP is within 17% of doing so, shall have the right to make a Subjective Appeal described in more detail in Section 11 below. 15

16 6. Phase-In and Full PVC Program Because many of the PVC Program s performance measures require 36 months of evaluation, and customer service measurements evaluation data will not be fully available until three years of measurements have taken place, implementation of the PVC Program shall require a phase-in of standards as described below Phase-in participation in the PVC Program shall be scored differently than Full PVC Program participation as described below. The PVC Program Start Date ( PSD ) for Phase-in participants is defined as the first day of the month in which all of the following has occurred: (a) sufficient PVC Amendments have been fully executed; (b) the TPA contract has been fully executed; (c) and a subcontract for a secret shopper or customer service survey company has been executed and the subcontractor has completed the first of the monthly secret shopper surveys of DIA Concessions. (i) Phase 1: PSD and continuing 12 months The modified criteria under Phase 1 applies to Concessions with terms expiring since June 1, 2009, through the duration of Phase 1. The Operations Evaluation Period ( OEP ) shall be the time period two years prior to the PSD. Financial scoring performance shall be fully implemented (i.e. shall apply to the period 36 months prior to the PSD). However, allocated enplanement related data was not retained prior to January 1, Scoring opportunities that require allocated enplanement data prior to that date will use available data and project-back to the beginning of the 36 months prior to the PSD. Customer service: the Concession must demonstrate in writing that the Concession provided exceptional customer service through a third party reputable in evaluating customer service and that the PVC Candidate has had ongoing customer service training which was compulsory for employees throughout the Evaluation Period. Operations and Financial Criteria used to evaluate Phase 1 PVC Candidates shall be based on information through the PSD. Within 30 days of notification of failure to obtain the Program Benefit, and if such failure is based on a scoring inaccuracy related to the Financial Performance criteria the PVC Candidate must notify the TPA and DIA in writing its intent to appeal. The concessionaire may appeal using the Subjective Appeals process detailed in Section

17 (ii) Phase 2: End of Phase 1 and continuing 12 months. For Concessions with terms expiring during this phase, the TPA shall use the following modified criteria: The OEP shall be from two years prior to the PSD, to the end of Phase 1. The OP shall be a period three years prior to the end of Phase 1, as adjusted per Section 5.08, i.e. Financial Criteria used to evaluate Phase 2 PVC Candidates shall be based on information in the defined OP. However, allocated enplanement related data was not retained prior to January 1, Scoring opportunities that require allocated enplanement data prior to that date will use available data and project-back to the beginning of the 36 months prior to the PSD. Customer service evaluations shall be based on the surveys conducted in Phase 1. The preceding shall be used to determine the MAP for the concession and its Scoring Pool and ranked as in the full program. (iii) Phase 3: End of Phase 2 and continuing 12 months. For Concessions Agreements expiring during this Phase, the TPA shall use the following modified criteria: The OEP shall be for the period beginning two years prior to the PSD to the end of Phase 2. The OP shall be the period extending from the year before the PSD through the end of Phase 2, as adjusted per Section The TPA shall score using the full financial and two years of customer service criteria. Operations and Financial Criteria used to evaluate Phase 3 PVC Candidates shall be based on information through the end of Phase 2. However, allocated enplanement related data was not retained prior to January 1, Scoring opportunities that require allocated enplanement data prior to that date will use available data and project-back to the beginning of the 36 months prior to the PSD. Customer service evaluations shall be based on the surveys conducted in Phases 1 and 2. (iv) Full PVC Program: The Full PVC Program applies to Concession Agreements expiring after the end of Phase 3, and shall fully implement all of the scoring criteria of the PVC Program. The TPA shall immediately begin scoring Concession Agreements which expire after Phase 3, in the order of expiration, within the 18 month period starting from the end of phase 3 and shall move to score this backlog as soon as possible. It may be necessary to grant some Concession Agreement extensions to allow time to score PVC Candidates initially or in 17

18 the event a PVC Candidate does not achieve sufficient scoring to earn the Program Benefit, implement an RFP for the space. The failure or success of a concession to achieve the Program Benefit does not in and of itself impact the Concession s or its owner s ability to respond to an RFP for which they are otherwise qualified under the terms of the RFP. Receipt of, or failure to receive the Program Benefit are in and of themselves not part of RFP evaluation criteria. 7. ACDBE and Other Federal Regulations The PVC Program is at all times subject to municipal, state, and federal laws and regulations imposed by governmental entities with jurisdiction, including the federal ACDBE program even if ACDBE participation for the space was not previously required. 18 (i) Small and Disadvantaged Business Enterprise Requirements. The PVC Program is subject to and the successful PVC Candidate shall comply with all federal rules and regulations relating to small and disadvantaged business enterprises, including CFR 49 part 23, all applicable provisions of Divisions 1 and 2 of Article VII of Chapter 28 of the City's Revised Municipal Code ( DRMC ), and all applicable Rules and Regulations adopted by Denver s Division of Small Business Opportunity ( DSBO ) for Denver s Small and Disadvantaged Business Enterprise Programs. (ii) ACDBE Participation. Pursuant to 49 CFR Part 23 and prior to the award of a new agreement to a successful EVC, the DSBO Director may establish ACDBE concession specific goals for the space then occupied by the PVC Candidate. The PVC Candidate agrees that it shall make good faith efforts, as defined in Appendix A, 49 CFR Part 26 (Attachment 1), to meet the concession specific goals for ACDBE participation in the performance of any new agreement awarded pursuant to the PVC Program. Such good faith efforts may include but are not limited to utilization of certified ACDBE firms as subtenants, joint venture partners, suppliers or service providers as participants in the performance of any such agreement. Moreover, if in response to the ACDBE goals set by DSBO, the successful PVC Candidate represents that it is a qualified and certified ACDBE, then the successful PVC Candidate shall remain so throughout the term of any such agreement or obtain

19 DSBO s written waiver of the aforementioned requirement, which shall be based on a finding that the successful PVC Candidate made a good faith effort to meet the ACDBE goals by other allowable means. 8. Cost of the Premium Value Concessions Program Concession obligations regarding the cost of the PVC Program are specifically detailed in the applicable Concession Agreements, as amended. Any reasonable cost incurred by DIA or its TPA related to this PVC Program shall be considered a reimbursable cost to administer the PVC Program ( PVC Program Costs ). PVC Program Costs shall include, but not be limited to, TPA contract fees, litigation costs, surveys, evaluations, training programs, and insurance. Other costs related to the PVC Program, such as certain costs pertaining to subjective appeal decisions or to evaluate change in control, shall be borne by the individual Concession making such appeal or required to have such evaluation. When the Joint Marketing Fund s annual revenues reach $1,000,000, the PVC Program Costs (except as noted below in the case of additional determinations requested of the TPA which shall be borne by the PVC Candidate or ownership change evaluations per Section 9 below which shall be paid for by the requesting concession) shall be borne by the Joint Marketing Fund. Until that time, PVC Program Costs shall be borne by Concessions participating in the PVC Program. The TPA shall no later than 45 days prior to the end of each year produce an estimated budget of PVC Program Costs and a projected number of participants for the following year and submit to the Airport for approval. Each participant concession in the PVC Program shall be charged its prorated share of the cost of administering the PVC Program determined by taking total estimated PVC Program Costs at the beginning of each year and dividing by the number of concession locations estimated to participate in the PVC Program during the year. Once agreed to and with the exception described in the following paragraph, a Concession may not withdraw from paying its share of the cost of the PVC Program even if it becomes apparent that the Concession is no longer eligible to receive the Program Benefit. The PVC Program will not be implemented unless at least 20 eligible Concessions agree to participate. A participant may terminate its obligation to continue paying costs once its obligation exceeds $15,000 per concession location per year in 2010 dollars 4. Once a Concession or PVC 4 Based on CPI-U, West region 19

20 Candidate terminates its obligation to pay for a location, it is no longer eligible to receive the Program Benefit for that location. 9. Ownership Changes Ownership changes during the OP, if constituting a significant change in control, can cause a loss of benefits under the PVC Program without relieving a Concession of its obligation to pay PVC Program Costs. Concessions are required to notify the TPA of changes in ownership within 15 calendar days of occurrence. Upon notification by the Concession of an ownership change and submission of all requested information, the TPA shall determine within 30 calendar days of receipt if the new ownership structure is a significant change in control such that there is a material impact to the assumption that the same factors that determine whether the concession is rewarded under the PVC Program are still in place (i.e. Operations, Financial, and Customer Service). A. Not Significant: If the TPA determines the change is not significant, the new entity shall be evaluated for receipt of Program Benefit as if no change had occurred between it and the prior entity. The new entity shall inherit the operations criteria performance and all earned and accumulated Financial performance and Customer Service performance points of the prior entity. B. Significant: A significant change in control shall result in the loss of any points earned by the Concession up to the point of the change in control under the Financial and Customer Service criteria. The new entity shall inherit the Operations criteria performance of the prior entity. In the event the Concession fails to provide requested documents in a timely manner, the change in control shall be determined significant. If the TPA determines that the ownership change constitutes a significant change, the new entity may appeal the TPA s decision using the Subjective Appeal procedures below. Acceptance by the Airport of any assignment of a Concession Agreement from one owner to another in accordance with the terms of the Concession Agreement does not constitute an evaluation of Ownership change required in the PVC Program. 20

21 10. No Liability/Hold Harmless Concessions participating in the PVC Program shall hold DIA, the City, and its employees, agents, and contractors harmless for any and all actions related to the administration and implementation of the PVC Program as more specifically described and agreed to in the Concession Agreement, as amended. 11. Appeals Concessions participating in the PVC Program waive any claims regarding PVC Program scoring errors, except as set forth here Appeals when permitted: There are two types of appeals available to PVC Candidates: Scoring inaccuracies for a calendar year and after the Program Benefit determination. These appeals opportunities are described as follows: A. Scoring Inaccuracies. A Concession may protest the calculation of its PVC Program score for a particular calendar year. A scoring error or inaccuracy is defined as a mathematically incorrect result from a failure to correctly perform mathematical operations, or based on erroneous numerical information, transposing numbers etc. It does not refer to Customer Service scoring of a concession or an airport. All alleged errors must be identified in writing and received by the TPA no later than April 30 of the year following the calendar year that is the subject of the protest. In this protest, a Concession must document any remaining scoring issues relevant to the prior calendar year so that the TPA can either correct the scoring or affirm correctness of the scoring. B. Program Benefit Determination. A Concession may appeal pursuant to final scoring to determine a PVC Candidate s receipt of Program Benefits in the following cases: 1. If a Concession is equal to or within seventeen (17) percent of acquiring the MAP necessary to obtain the Program Benefit. For example, if the MAP necessary to obtain the Program Benefit was 3.6, then to appeal under this provision, the PVC Candidate s MAP must be at least (3.6*(1-0.17)=2.988); 21

22 2. If circumstances occur that fall within the definition of Force Majeure in the Concession Agreement ( Force Majeure ); 3. The TPA erroneously deemed or used poor judgment in deeming a transfer in ownership as a change in control; or 4. A PVC Candidate that has two or fewer concessions in its Scoring Pool Appeals - Content: This Section is applicable only to appeals under B. The written appeal must contain the reason for the appeal (i.e. either because the Concession is at or within 17% of the points required to receive Program Benefit, or because of Force Majeure circumstances that were greater than nine months in duration, or TPA was erroneous in determining a change in control). In cases where the PVC Candidate has two or fewer concessions in its Scoring Pool the PVC Candidate will be notified as such by the TPA after its scoring has been completed. For Program Benefit determination, the PVC Candidate will then be required to submit an appeal per section A below and the cost of appeal will be borne by the program. The appealing PVC Candidate must provide factual justification for its appeal indicating the compelling evidence supporting the appeal. Failure to specify the reason for the appeal and justification shall result in a denial of the appeal. A. Subjective Appeal (17% Appeal) and Two or Fewer in Scoring Pool Appeal: A written appeal from a PVC Candidate may provide justification including but not limited to: a. Relevance and strength of brand; b. Other example justifications: (i) keeping the concept is more advantageous than going to RFP (ii) Scoring did not capture all of the value the PVC Candidate provides to DIA or its customers, (iii) PVC Candidate has gone above and beyond Concession Agreement requirements (iv) PVC Candidate contributed to Sense of Place 22

23 (v) High quality of operations, (vi) High customer service, (vii) Support of green or any other City initiatives, (viii) scoring errors (may not address any years in which the time period to appeal scoring errors has expired). (ix) any other factors that speak to the caliber of the PVC Candidate, (x) other issues as deemed appropriate and reasonable to justify granting of the Program Benefit to the PVC Candidate. B. Appeals due to Force Majeure: PVC Candidate must demonstrate that the condition occurred during the OP, materially impacted the business, prevented the PVC Candidate from earning the points necessary to achieve Program Benefit, and that, based on the history of the PVC Candidate s performance, the needed score would have been obtained had the Force Majeure condition not occurred. C. Appeals based on determinations of change in control: Concession shall document the reason Concession believes the determination was erroneous, or in poor judgment. Information provided must have been available at the time the determination was made and must have been provided to the TPA in a timely fashion, prior to the TPA s original determination. Concession must demonstrate mathematically that a contrary opinion on change in control would have resulted in it obtaining the Program Benefit. Concessions Management may report and shall be held harmless for reporting (i) information regarding customer complaints recorded by DIA related to the PVC Candidate, (ii) operational issues, (iii) any other issues that speak to the caliber of the Concession Appeals - Process: Section is applicable only to appeals under B. The Concession shall notify the TPA and DIA in writing within 30 days of the date of notification of the Program Benefit scoring of its intent to pursue an appeal process ( Appeal Letter ). 23

24 Review of the appeal will be by a panel chosen by the TPA and approved by DIA and the appealing PVC Candidate consisting of: (i) a DIA management representative; (ii) an independent professional mediator; and (iii) a non-competing DIA Concessionaire. The TPA will submit a list of panelist candidates to DIA and the appealing PVC Candidate within ten business days of the TPA s receipt of the Appeal Letter. In the event a panel cannot be agreed to by DIA and the appealing Concession within five business days of the date the first list of panelists is generated by the TPA or if, for any reason, any of the qualifying panelists are unavailable for the PVC Candidate s appeal s hearing, then the TPA shall select a panel of three impartial mediators, which selection shall not be subject to the approval of either DIA or the PVC Candidate. Once a panel is selected then a hearing date will be set by the TPA within 30 calendar days of panel selection. DIA and the PVC Candidate each shall have the opportunity to present at a hearing before the panel arguments and evidence regarding the subject of the appeal letter. Decisions will be based on majority vote of the panel after the hearing, and shall be final, subject to no further appeal. There may be rare circumstances when the three panelists cannot reach a majority decision. For example, after the hearing, a party-panelist might find it necessary to recuse him/herself for some reason; A panelist might abstain during the process; A panelist might take ill or otherwise be physically unavailable. Under such circumstances, if there is no majority decision, then the independent professional mediator s decision is the final one Appeals Costs and Expenses: Section is applicable only to appeals under B. Subjective appeals, i.e. appeals for Concessions whose MAP is within 17% of achieving Program Benefit; Force Majeure appeals; and transfer of ownership appeals- All appeal s costs and expenses shall be borne solely by the Concession making the appeal. Two or fewer concessions in Scoring Pool appeal- Appeal costs and expenses shall be borne as program costs. 24

25 12. Airport has Right to Terminate PVC Program DIA may terminate the PVC Program at any time. Should DIA discontinue the PVC Program, it shall distribute on a prorated basis to participating Concessions any remaining unexpended funds excluding any reasonable costs to terminate the PVC Program including but not limited to any cost to terminate the TPA, or transportation or transfer of records related to the PVC Program. Should the remaining costs exceed the unexpended funds, then DIA shall bill Concessions their prorated share of those costs. If at the time of termination the PVC Program Costs are being paid from the Joint Marketing Fund, then there will be no reimbursement to concessions participating in the PVC Program. 13. Merchandise Guidance The PVC Program and Program Benefit shall be subject to merchandise decisions made by DIA in accordance with the Airport s Merchandise Guidance. If DIA determines, in accordance with the Guidance, that a location occupied by a PVC Candidate that has achieved the Program Benefit in one major merchandise category is more appropriate for a different major merchandise category, DIA shall notify the PVC Candidate. Recognizing that it is in DIA s best interest to find a suitable alternative location for the PVC Candidate, DIA shall make reasonable, diligent efforts to find an alternative location and offer that alternative location to the PVC Candidate. If the PVC Candidate rejects the first alternative location, DIA shall work with the PVC Candidate to find a mutually agreeable alternative location. However, if a mutually agreeable alternative location cannot be found within 60 calendar days of presentation of the first alternative location, then on the 60 th calendar day either party may extend the deadline by another 60 calendar days to attempt to find a mutually agreeable alternative location. Should the parties fail to mutually agree on an alternative location during that period, then upon both parties agreement on the 60 th calendar day, the deadline may be extended an additional 60 calendar days. Upon the expiration of the final 60 calendar day period, DIA may reevaluate its Merchandise Guidance and opt to grant the Program Benefit to the PVC Candidate in its current location, or refund all PVC Program Cost reimbursements made by that PVC Candidate during the term of its Concession Agreement and terminate the PVC Candidate s participation in the PVC Program for that particular concession location, which includes eligibility for Program Benefit and any future financial obligations related to the PVC Program. No reimbursement of PVC Program Costs will be made for the period after the obligation for 25