Administrator’s Note: Finally, The Sun newspaper covers this issue, ever so scantily. The Press-Enterprise has been all over this $150 million and growing ordeal. One can only cover for San Bernardino Mayor Pat Morris so long.
Purchases of used equipment cited
Josh Dulaney, Staff Writer
Posted: 07/23/2011 07:10:41 AM PDT
SAN BERNARDINO – Hasty decision-making and slack financial oversight led airport officials to spend millions on used equipment when new equipment could have been bought at a cheaper price, according to a Grand Jury report.
The San Bernardino International Airport Authority in 2007 awarded a $4.1 million contract with a 10percent contingency to developer Scot Spencer – who served time in federal prison for bankruptcy fraud – for the purchase of used jet bridges and other equipment, the San Bernardino County Grand Jury report said.
In a blistering critique of how the airport authority is handling the transformation of the former Norton Air Force Base into a civilian airport, the Grand Jury said airport officials didn’t adequately assess the airport’s equipment needs nor did they inspect the equipment before they bought it.
The process used to buy the big-ticket items has “raised several questions regarding whether the purchases were `advantageous’ to the authority” the report said.
“Further, SBIAA management did not consider or analyze the long-term costs of purchasing used equipment versus the alternative of purchasing new equipment prior to proceeding with the acquisition,” the report said.
The SBIAA, a joint-powers authority composed of the county of San Bernardino and the cities of San Bernardino, Colton, Loma Linda and Highland, is responsible for redeveloping the aviation portion of the former air base.
The Grand Jury report said that between January 2006 and January 2011, the cost of the terminal project grew from $22 million to more than $100 million, with costs still rising.
Airport officials vehemently disagree with the Grand Jury’s findings about the used equipment purchases.
“We knew the price of new products, of new jet bridges and new seats,” said Mayor Pat Morris, who is the authority’s board president. “We priced it out. We got this (at) a dime on a dollar.”
Morris said in the authority’s formal rebuttal to the report that the airport authority will show that it saved “one-half, if not more, in terms of value shopping for this product. And they’re beautiful. Instead of a million dollars per gate we got them at $100,000 each.”
Still, the report said airport management rushed to accept an offer from Spencer’s Norton Development Co. to buy, ship and refurbish used aviation equipment from American Airlines and fixed-base operations equipment from Blue’s Aviation.
Blue’s Aviation was contracted by the authority to manage fixed-based operations at the airport until the company was sold in 2007 to Spencer’s SBD Aircraft Services, the airport’s master tenant at the time, the report says.
According to the Grand Jury, a July 3, 2007, staff report that was “quickly” prepared for a special meeting of the airport authority stated that “the reason for this special opportunity relates to the timely closing of a major terminal in New York coincidental to our needs in San Bernardino.
“The seller of that equipment is anxious to have the equipment removed from the New York facility so that their demolition and remodel of that facility can begin. They are under some pressure to sell quickly.”
It appeared that pressure was put on the airport authority to make a decision quickly, according to the Grand Jury.
The Grand Jury report said the equipment bought by the airport authority – including 11 jet bridges, 10 ground power units, five baggage carousels and gate seating – was previously installed at New York’s John F. Kennedy International Airport.
“We also looked for opportunities to buy used products because we knew we couldn’t afford some of the new stuff on the market and it turned out that American Airlines was redoing (its terminal at JFK in New York City),” Morris said. “…And they had seats, and jet bridges and baggage claim areas that were available to us. Scot brought that to us as an opportunity.”
The report said Donald L. Rogers, the interim executive director of the airport, did not execute a purchase contract, but instead relied on two letters from Spencer in 2008 “as the basis of the agreement.”
Rogers said the letters simply spelled out what equipment would be purchased and at what cost, and the airport used a third-party fund-control firm to oversee the purchases.
“The same process we use we use for all the equipment at the airport,” Rogers said.
The price breakdown for some of the equipment, according to the letters:
$1.2 million for the five baggage carousel systems
$808,134 for six refurbished jet bridges
$599,550 for five un-refurbished jet bridges
$273,000 for 820 seats, plus an extra 132 upholstered shells for replacement inventory
Concerning the seats, the cost of which included transport, refurbishment and storage, the Grand Jury report said that by the airport’s own accounting, it could have bought new ones for $115,000, or almost half of what it cost compared to what was paid through the arrangement with Norton Development.
Also, the used equipment, specifically the jet bridges, is likely to have a shortened lifespan, compared to modern equipment that could have been purchased new, according to the Grand Jury report.
Needed in the first place?
The used jet bridges range in age from 20 to 36 years old, according to the Grand Jury, which cited one manufacturer as saying bridges generally have a lifespan of 20 years but could be extended with proper maintenance.
Yet the Grand Jury questioned if the jet bridges needed to be purchased in the first place, citing an airport study that found the equipment would not be necessary for the first 15 years of the terminal’s operation.
The Grand Jury said mobile stairways are used at multiple airports in the West, including Burbank and Long Beach, and had mobile stairways been used instead of jet bridges, the airport “could have saved several million dollars that was instead paid to the contractor.”
The report went on to note that the failure to come up with a purchase agreement “has left SBIAA with little, if any, contractual protections and Norton Development with little to no legal obligation and no official list of equipment, condition, or purchase price for which it can be held accountable.”
To date, more than $4.3 million has been spent on the equipment, according to the Grand Jury report.
The staff report submitted by Rogers to the airport board on July 3, 2007, said staff had done enough work to ensure the equipment costs were low compared to any available alternatives.
But the Grand Jury says airport management did not provide the airport board or the Grand Jury’s audit team with documentation other than a spreadsheet attached to a Norton Development invoice that neither lists all equipment costs nor has supporting information from a manufacturer or distributor.
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