How gaffes cost leading Turkish firm mouth-watering JKIA lounge tender

Flying experience is not just about cruising at 33,000 feet above sea level, it is also what awaits one at the airport while waiting for take-off or a connecting flight.

This lucrative space is run by private lounges providing serene environments, and often better access to customer service representatives.

Lounges also offer space for private meetings, wireless internet access, and other business services, along with provisions to enhance passenger comforts such as free drinks, snacks, magazines and showers.

Turkey's TAV Operation Services is a leading player in this space providing 24/7 overseas services with its team of highly skilled specialists in Georgia, Tunisia, Macedonia, Latvia, Saudi Arabia, Germany, Kenya, Oman, USA, Denmark, Chile, and Switzerland.

And so when the Kenya Airports Authority (KAA) made a tender call for development and management of passenger lounges at the Jomo Kenyatta International Airport (JKIA) and Kisumu International Airport (KIA), it was a clear front runner.

Minimum annual guarantee

TAV, through its subsidiary TAV Africa Operations Services Ltd (TAV OS), placed a bid to develop and manage a lounge at JKIA -- pitting it against seven other competitors including; The Good Earth (Group) Limited, Plaza Premium Lounge Management Ltd, Mutandao Holdings Limited, Indiana Beach Apartments Ltd, Swissport Kenya Ltd, National Aviation Services WWL and Tradewind Aviation Services.

TAV in its application had placed a Sh52.57 million minimum annual guarantee for the JKIA lounge job -- dwarfing offers by its rival when the tender documents were opened on May 10, 2021.

Plaza Premium Lounge Management Ltd was a distant second with a guarantee offer of Sh33 million, followed by National Aviation Services WWL (Sh15 million), The Good Earth Ltd (Sh7.29 million), Indiana Beach Apartments Ltd (Sh5 million), Swiss port Kenya Ltd (Sh2.5 million) and Mutandao Holdings Limited with Sh300,000. Tradewind Aviation Services had no quote in the tender documents.

At this stage, all looked perfect for TAV given its high quote and work experience in top global destinations including the US, Germany, and France.

But as the tender review got underway, fortunes turned the tide against TAV dealing it a devastating blow that saw it knocked out of the JKIA contract race even before KAA looked at its technical and financial bids.

Documents obtained by Smart Business reveal how a gaffe in complying with the tender specifications ruined TAV's bid -- highlighting the deep complexities of the bidding game.

In a restricted tender call on March 20, 2021, KAA set two key criteria on which the bids would be evaluated.

Key condition

A key condition was that bidders prove their capability by demonstrating at least three consecutive years of experience in the development and management of a passenger lounge facility or development and management of at least four-star hotel lounges.

The tender document instructed that the reference be informed of letters from the site or owner addressed to KAA. It also demanded that bidders provide documentary evidence such as copies of leases, agreements, contracts, or letters of award signed between them and the listed site owner or company with a validity period of between 2017 and 2020.

This looked easy for TAV, which boasts of over 70 airport lounges operations across the world including five at JKIA. Its transaction team promptly tendered documents detailing vast service partnerships, including one in which it provided British Airways with third-party lounge services at JKIA.

“Please treat this as a reference letter for TAV Operation Services operating a CIP Lounge at Jomo Kenyatta International Airport (NBO). Since April 2017 until present TAV Operations Services provides British Airways with third-party lounge services at NBO airport,” Lukasz Wyrzkowski, Global Business Lounge Executive at British Airways said in a referral letter dated April 1, 2021.

“The TAV lounge hosts BA customers travelling in premium cabins as well frequent fliers and their guests. The TAV lounge forms an important part of our ground experience in Nairobi. Throughout the time of our collaboration, TAV Operation Services demonstrated true professionalism as well as passion for excellent customer service,” he further stated.

TAV also tabled an agreement letter showing that it operated the Turkish Airlines lounge at JKIA since 2016 in addition to reference letters from Collinson Group owners of Priority Pass, Dragon pass, and Riga International Airport.

Sub-lease contract

It also presented a sub-lease contract between its subsidiary TAV Latvia as lessor and TAV Latvia Operation Services SIA as the lessee. It further provided a concession agreement dated January 1, 2017 between Oman Airports Management Company SAOC and TAV Operation Services Oman.

A preliminary evaluation of the bids submitted for the JKIA lounge tender, however, revealed horrific blunders that knocked out TAV from the race despite its chart-topping guarantee offer.

It emerged that the TAV bid team failed to honour critical requirements of the tender document, rendering its bid unresponsive.

KAA found TAV AOS tender unresponsive given that it only provided reference letters which bore the name of its parent company TAV OS-- a stranger in the JKIA lounge procurement process.

TAV also failed to provide proof of three consecutive years of experience despite presenting referral letters confirming lounge service partnerships with British Airways.

Although the letter by British Airways met one condition of the tender, TAV did not honour the second part of the conditions requiring bidders to provide documentary evidence such as copies of leases, agreements, contracts, or letters of award signed between them and the listed site owner or company with a validity period of between 2017 and 2020.

Not provided clarity

The firm had made its interpretation of the tender documents and tried to claim KAA had not provided clarity.

In an application for a review by the Public Procurement Regulatory Authority (PPRA), the Turkish firm claimed that KAA failed to provide clarity on whether reference letters were sufficient to meet the tender specifications since lease agreements are classified as confidential.

They said when bidders tried to seek clarity from KAA on whether a reference letter was enough since some lease agreements were confidential but KAA failed to give clarity.

TAV also took issue with the KAA tender team for failing to recognise its parent company in the bid process.

The PPRA, however, rejected TAV’s application saying its demands would be tantamount to an illegal amendment on the tender document.

The authority also ruled that TAV erred in presenting documents by its parent company for the JKIA bid.

“In absence of a joint venture agreement or consortium agreement between the parent company and the applicant, or an attestation of the parent company-subsidiary company relationship, it follows that the applicant did not provide documents to prove that it had the requisite experience as per the document,” the PPRA ruled.

The JKIA lounge development and management tender was eventually awarded to M/s Premium Plaza Lounge Management Limited at a fixed annual concession rate of $5 (Sh573.5) per passenger subject to their quote minimum annual guarantee of Sh33 million exclusive of taxes and payable quarterly in advance.

M/s Paul Caffe bagged the deal for Kisumu lounge facility at a fixed concession rate of $1(Sh114.70) per passenger subject to its quote minimum annual guarantee of Sh800,000 exclusive of tax and payable quarterly in advance.

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