Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
6k
ACTION ITEM
Date of Meeting
October 22, 2019
DATE: October 14, 2019
TO: Stephen P. Metruck, Executive Director
FROM: Laurel Dunphy, Director Airport Operations
Daniel Zenk, Senior Manager Airport Operations
SUBJECT: VIP Hospitality Inc. Contract Amendment to Extend Services
Amount of this request:
$ 3,337,000
Total estimated contract amount:
$17,420,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to execute a contract amendment
with VIP Hospitality, Inc., to support international passenger and baggage processing by
increasing the contract amount by $3,337,000 for a total contract value of $17,420,000 and by
extending the term of services for an additional year through December 31, 2020.
EXECUTIVE SUMMARY
VIP Hospitality provides staffing support to facilitate international passenger throughput and
expedite baggage processing in the airport’s South Satellite. The contract for these services
expires December 31, 2019. The proposed amendment would extend the Centralized
International Support Services CISS/VIP Hospitality Inc. contract term for one year (12 months)
to allow flexibility in staffing levels during the transition period from the South Satellite to the
new International Arrivals Facility (IAF). This added transition time allows experienced staff to
provide seamless customer service and federal agency coordination during activation, potential
phased start-up, and then initial operations in the new facility.
A competitive process to acquire support services for the IAF will be conducted in 2020, after
the customer service and operational uncertainties of the new IAF facility are better known.
JUSTIFICATION
Due to the growth of international passenger traffic in combination with existing constrained
facilities and operational/customer service needs, the Port has required VIP Hospitality to
increase the number of employees to support passenger and baggage processing in the existing
Federal Inspection Services (FIS) facility. A contract extension and funding authorization
increase will assist the Port with providing staffing level flexibility and continuity of operations
through the end of 2020. The operational transition between the old FIS facility and the
COMMISSION AGENDA – Action Item No. 6k Page 2 of 5
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
opening of the new International Arrivals Facility (IAF) poses many customer service and
operational unknowns and challenges. Due to the uncertainty of required contract service
staffing levels, Port staff is requesting a 12-month extension of the VIP Hospitality contract to
assist with the evolving facility transitional needs while opening new IAF in 2020.
Seattle-Tacoma International Airport (SEA) is one of the fastest growing international gateway
airports in the country. Between 2013 and 2018, the number of international passengers grew
by 52 percent, from 3.6 million to 5.4 million. In 2018, the total airport passengers grew by 6.2
percent, to approximately 50 million annual passengers and becoming the eighth busiest
airport in North America. Between 2014 and 2019, the airport has added 10 new international
airlines and 10 new international service destinations. In 2019, there will be 24 airlines serving
29 international destinations, and the airport will open a new 450,000 square foot IAF building
in 2020. With the new IAF, achieving a goal of less than a 75-minute minimum connect time
(MCT) for the airlines should be attainable.
In 2015, immediately following the award of the contract to VIP Hospitality, international traffic
grew much faster than the anticipated contract budget projections.
In 2016, at the Port’s request to improve customer experience, VIP Hospitality continued to add
staff to the passenger processing and baggage handling areas. From contract inception to
today, VIP increased staff from approximately 18 to over 35 employees during peak hours. This
is due to existing facility constraints and the volume of passengers required to be processed,
the increase in the number passengers being held in the International Corridor and on aircraft.
In 2018 approximately 15 percent of total international flights were held in the International
Corridor, resulting in customer complaints.
Over the past year, the Port has also increased its emphasis on improved communication
between VIP staff and passengers, particularly given the congested situation in the FIS. VIP has
embraced this focus with the addition of customer service-focused management, participation
in the Port’s WE ARE SEA customer service training and a collaborative partnership with a newly
assigned Pathfinder position focused on customer service quality assurance in the FIS.
Since 2015, the Port has used the services of VIP Hospitality to assist in the facilitation of the
following:
1. Passenger Services - customer service, foreign language interpretation, crowd control,
queue management, holding flights and passengers for processing, access control and
assisting passengers with CBP documents and new automated passport control
technologies.
2. Baggage Services - repositioning baggage at international carousels to maximize
capacity, assisting passengers with placing baggage on recheck belts, recirculating
baggage carts, and manually handling baggage too large to fit through conveyor belt
systems.
COMMISSION AGENDA – Action Item No. 6k Page 3 of 5
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
These services significantly increase passenger processing rates through passport control and
assist passengers/airlines by efficiently moving baggage through the facility. Without these
services, delivery of passenger assistance and baggage handling would be inefficient and
uncoordinated.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Initiate the request for proposal (RFP) process to award a new contract to
provide centralized passenger and baggage support services for airline passengers during the
transition from old South Satellite (FIS) to the new IAF
Cost Implications: $18,700,000 over a 5-year period, assuming similar rates to existing contract
Pros:
(1) Establishes a new contract for Centralized International Support Services (CISS)
(2) Addresses potential audit concerns by not extending an existing 5-year contract
(3) Provides staff for long-term facility needs and customer service expectations
Cons:
(1) Certainty around the staffing needs is difficult to determine because the demands of
the new IAF are not known
(2) Timing of the RFP process will result in a short-term contract extension for existing
services
(3) Does not provide continuity of service during facility transition
(4) Degradation of customer service due to inexperienced/untrained staff and operational
unknowns
(5) Uncertainty about a contractor being able to provide the appropriate number of staff
and seamless customer service in a timely manner
This is not the recommended alternative.
Alternative 2 – Amend existing contract to cover remaining 2019 contract terms and execute a
CPO-5 policy waiver to extend the existing CISS/VIP Hospitality contract for a 2-year period
ending December 31, 2021. A new RFP would be issued in 2021 for a January 1, 2022, start
date.
Cost Implications: $7,500,000
Pros:
(1) Provides continuity of service during transition from old SSAT (FIS) to the new IAF
(2) Provides the appropriate level of experienced and trained staff
(3) Will minimize the level of uncertainty of operational and customer service
requirements through the transition from old SSAT (FIS) to the new IAF building
(4) Will assist activation team in identifying operational efficiencies
(5) Supports CBP/airlines with operational effectiveness and efficiencies
COMMISSION AGENDA – Action Item No. 6k Page 4 of 5
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
Cons:
(1) Higher risk of an audit finding for extending contract value beyond typical audit
parameters
(2) Will delay the ability for outside contract companies to bid for services
This is not the recommended alternative.
Alternative 3 – Amend existing contract to cover remaining 2019 contract term and issue a
policy waiver to extend authorization of the existing CISS/VIP Hospitality contract for a 1-year
period. Procure a new contract in 2020 for a January 1, 2021, start date.
Cost Implications: $3,337,000
Pros:
(1) Provides continuity of service and a seamless customer service transition during
transition from old SSAT (FIS) to the new IAF
(2) Provides the appropriate level of experienced and trained staff
(3) Will minimize the level of uncertainty of operational and customer service
requirements through the transition from old SSAT (FIS) to the new IAF building
(4) Will assist activation team with discovering operational efficiencies
(5) Supports CBP/airlines with operational effectiveness and efficiencies
Cons:
(1) Risk of an audit finding for extending contract value beyond typical audit parameters
(2) Will delay the ability for outside contract companies to bid for services
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Commission Request for Additional VIP Contract Purchasing Authority
Current Contract Authority (2015-2019)
$11,920,000
2019 Additional Contract Authority Needed
(November-December)
$ 568,000
2020 Contract Authority Needed
$ 3,337,000
Additional contract authorization requested
(used only if needed)
$ 1,595,000
Total Cost Contract Authority Needed
$17,420,000
Once extended, the total contract amount will be $17,420,000 for a term of six years; original
contract amount was $12,660,000 for a five-year period.
COMMISSION AGENDA – Action Item No. 6k Page 5 of 5
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
Annual Budget Status and Source of Funds
The anticipated cost of this contract for 2020 is included in the preliminary 2020 operating
budget. As such, the funding source is the Airport Development Fund. All costs under this
contract will be charged to the FIS cost center and recovered from the airlines that use the FIS
facility.
ATTACHMENTS TO THIS REQUEST
None
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
September 30, 2014 – The Commission authorized execution of a contract for Centralized
International Support Services in the Federal Inspection Services (FIS) Facility at Seattle-
Tacoma International Airport for up to five years (2015-2019) for an estimated amount
of $8,700,000.
