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CHAPTER 6 Contract Services Virtually all airports use contract services for some part of the operation and maintenance of their facility or the provision of services to their tenants or passengers. Airports may use contract services for a wide variety of task groupings but typical services for which airports contract are jan- itorial, landscaping, technical support (e.g., information technology and graphics), building main- tenance and security guard services. 6.1 Characteristics of Contract Services In this Guide, "contract services" refers to an agreement with a company to use its human resources to directly render an ongoing service on behalf of the airport proprietor. Such contracts can be distinguished from consulting and construction contracts in that (1) the services provided under consulting contracts tend to be related to a specific project or program, require the use of highly trained or educated professionals, and consist of advising the airport proprietor rather than conducting some of the operation; and (2) the services provided under a construction contract are episodic and delimited in duration by a project to build or renovate a facility or portion of a facil- ity. Revenue-generating operating contracts (e.g., parking management agreements) were covered in Chapter 3, Concession Agreements. 6.2 Deciding to Contract Services Airport proprietors differ in their philosophy toward "outsourcing," guided by considerations such as tradition, the influence of unions on local government, the airport's risk tolerance, and the cost and availability of in-house human capital for the service. Airports may use in-house forces for some of the airport (e.g., a new passenger terminal or for non terminal buildings) or supple- ment those forces to undertake some tasks (e.g., infrequent tasks that require specialized equip- ment or training). Airport managers that outsource routine services reported that the principal factors they considered were the desire for airport management to focus on their core strengths, costs, the desire to transfer some risk to a third party, the availability of qualified companies, and the lack of internal resources to provide the service. 6.3 Critical Issues in Contracting Services In achieving best practices in developing and managing operating contracts, airports report that critical success factors include developing a detailed scope of services, establishing performance standards, imposing qualification criteria for the contractor's general manager and/or on-site lead, 49

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50 Guidebook for Developing and Managing Airport Contracts payment terms, allocation of risks, outlining requirements for the handling and disposal of haz- ardous material, and training of staff. Critical issues are as follows: Scope of services Performance standards Qualifications of lead contractor personnel Terms of payment Insurance Indemnification Handling and disposal of hazardous materials Training of staff 6.3.1 Scope of Services Airports have developed sophisticated scope statements for larger operating contracts that enable the contractor to accurately price and staff the service and enable the airport to expect that the contractor can reasonably meet the airport's expectations. These scope statements include A broad definition of the standard for the services to be performed Materials to be furnished by the airport sponsor Equipment to be furnished by the airport sponsor Contractor responsibilities for Trash removal Staffing standards Equipment and supplies Employee compensation Uniforms Security regulations Security access Specification standards for the services to be provided Inspections by the airport sponsor See CRP-CD-81 (enclosed herein), Appendix to Chapter 6, Contract Services, for [1] a Scope of Services/Specification excerpt from MEM janitorial contract which includes details on cover- age areas for the service, schedules, staffing and means and methods; [2] service standards excerpts from LAS janitorial contract which includes details on means and methods for cleaning various areas; [3] service standards excerpts from PIT janitorial contract which includes details on tim- ing for the services, and means and methods; and [4] service standards excerpts from MWAA landscaping contract which includes a more general description of the services to be provided and an appendix with specifics including details on timing for the services, means and methods, and materials. 6.3.2 Performance Standards In contracting out a service, the airport operator does not want to relinquish responsibility to its users for the quality of the service. Therefore, airports can establish (within the contract) pro- visions for regular assessment of the contractor's performance and assign one or more in-house staff to perform these assessments. Best practices establish in the contract criteria on which the performance assessments will be based. Some airports also provide for monetary penalties based on the results of the assessment. See CRP-CD-81 (enclosed herein), Appendix to Chapter 6, Contract Services, for excerpts from [1] the MEM janitorial contract for a particularly innovative provision which includes a

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Contract Services 51 grade sheet and provides monetary incentives for exceeding a defined level of performance as well as monetary penalties for unsatisfactory performance; and [2] the CHS janitorial contract regarding weekly janitorial inspections, inspection forms, the performance evaluation based on those inspections, and the reduction of monies under the contract in the event of repeated "not acceptable" evaluations. 6.3.3 Qualifications of Lead Contractor Personnel Given that airport managers contract for services so as to perform an important service on their behalf and some of these contracts are for large operations within the airport complex, air- port managers have a vested interest in the quality of the leadership of such operations. See CRP-CD-81 (enclosed herein), Appendix to Chapter 6, Contract Services, for [1] an excerpt from the MEM janitorial contract requiring a full-time project manager, who is subject to the approval of the airport sponsor, and the staffing and qualifications of other on-site management staff and [2] service standards excerpts from the MWAA landscaping contract with staffing and qualifications requirements for an on-site supervisor. 6.3.4 Terms of Payment A key element of a contract is the detailing of the amount of compensation, the criteria on which compensation will be based, the method and timeframe for the payee's request for compensation, and the method and timeframe for the payer to respond to the payee's request. Depending on the type of activity covered, the compensation provisions may be simple or highly detailed. See CRP-CD-81 (enclosed herein), Appendix to Chapter 6, Contract Services, for an excerpt from the PHX wildlife management services agreement for provisions regarding compensation and terms of payment. 6.3.5 Insurance Comprehensive insurance provisions are important for the proper allocation of risks. See CRP-CD-81 (enclosed herein), Appendix to Chapter 6, Contract Services, for excerpts from the DFW contract template for sample insurance provisions. Some typical types of required insurance are as follows: Workers' compensation--employers' liability insurance Commercial general liability Damage to rental premises Personal and advertising injury Products and completed operations Pollution liability Professional liability Business automobile liability Excess/umbrella liability 6.3.6 Indemnification Indemnification provisions are also an important part of the proper allocation of risks. See CRP-CD-81 (enclosed herein), Appendix to Chapter 6, Contract Services, for excerpts from the MEM and DFW contracts for sample indemnification provisions.

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52 Guidebook for Developing and Managing Airport Contracts 6.3.7 Handling and Disposal of Hazardous Material Airport managers have had increasing concerns about environmental hazards as (1) more is learned about the effect of certain materials and processes on human health and (2) legislation and case law have heightened airport liability for environmental contamination. Because many of the common operating contract agreements (e.g., for janitorial, landscaping, maintenance, and deic- ing services) involve considerable handling of potentially hazardous material or contaminants, air- ports have adopted extensive provisions in their contracts guiding the handling and disposal of such materials and outlining contractor liability for improper methods and outcomes and require- ments for reporting. See CRP-CD-81 (enclosed herein), Appendix to Chapter 6, Contract Services, for excerpts from the [1] CHS janitorial contract regarding requirements relating to handling industrial waste and compliance with applicable pollution laws; and [2] DFW Airport Operating contract regarding environmental licenses and permits, compliance with environmental codes, release of hazardous materials, solid waste, or process water, inspections, products containing asbestos, environmental indemnity, and safety provisions. 6.3.8 Training of Staff In order to better ensure compliance with the performance standards airport operators may include specific provisions for the training of staff. See CRP-CD-81 (enclosed herein), Appendix to Chapter 6, Contract Services, for the MEM secu- rity contract for provisions regarding instruction and training.