Integrating Environmental Sustainability into Airport Contracts (2013)

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23 ContraCt MeChanisMs Examples of formal contract management and performance monitoring are not widespread across airport contracts; how- ever, there is one exception; the management of design and construction contracts. Airport operators frequently des- ignate construction contract inspectors to verify that work is being undertaken in strict compliance with the contract. For these contract types, contract noncompliance can result in financial penalties or delayed payments for the contrac- tor. For example, at Incheon International Airport (ICN) the Incheon International Airport Corporation (IIAC) mandates that contractors must comply with (1) Korean environmental laws, and (2) IIAC’s Environment and Operations Manual, which was developed based on ISO 14001 primarily for construction-related issues. The environmental team checks bi-annually to make sure the contractor is in compliance with these two contractor mandates. If non-compliance is discov- ered, a fix or alteration is requested. If the contractor refuses to comply, IIAC can then invalidate the contract and take the contractor to court. So far, there have been no occurrences of contract noncompliance. Many airport operators have only recently inserted lan- guage into contracts to encourage sustainability. Currently, most of this language is not strictly enforceable owing to its wording; for example, “the contractor shall seek to . . .” or “the contractor will make best efforts to . . . .” This type of wording, despite not being strictly enforceable, is a good starting point and will influence contractors and suppliers to undertake more environmentally sustainable activities and behaviors. It does however still obligate the airport operator to work in partnership with the tenant or contractor to work toward the airport’s environmental sustainability goals. To date, Chicago Department of Aviation at Chicago O’Hare International Airport and Chicago Midway Inter- national Airport (MDW) has rated 82 design and construc- tion, operations and maintenance, and concession and ten- ant projects, many of which pursued the SAM rating on a voluntary basis. Chicago Department of Aviation has found that positive recognition through its rating and awards pro- grams has had a transformative effect on the local con- tracting and vendor community, without enforcing action through contract mandates. ContraCt inCentiVes For an airport contract to be definitive, the language must be legally enforceable. When this is the case it is possible for the airport operator to withhold payment or enact another puni- tive measure if the contractor is not in compliance. Financial incentives or penalties are extremely effective mechanisms in contract management. However, this type of active con- tract management requires the resources to set up and main- tain monitoring. It is also potentially damaging to manage a contract between the airport operator and the contractor through punitive measures. A more positive mechanism is to drive improvements through financial reward. A number of airport operators are considering such means. For example, at San Francisco International Airport customers are provided with incentives to rent low-emission, fuel-efficient vehicles. Established in 2009, the program rewards customers who rent “green” high mileage or alternative-fueled vehicles, such as hybrids, by offering a $15 discount on each rental. This program also provides financial incentives to rental car companies to increase the number of fuel-efficient cars (with an EPA rating of 17 or higher) to 15% of their rental vehi- cle inventory. In FY2010, 25.6% of car rental transactions were for green vehicles, which saved more than 1 million gallons of gasoline and reduced the amount of greenhouse gas (GHG) emissions by approximately 11,442 metric tons. At Portland International Airport, all concessionaire spaces are being outfitted with sub-meters for energy and water. This will enable the Port of Portland to track energy and water use by tenants and allow the Port to switch to billing by consump- tion to help further reduce utility use by motivating tenants to limit their energy and water consumption, thereby helping the Port meet its environmental goals. Dallas/Fort Worth International Airport (DFW) pro- vides its ground transportation contractor with an Incentive Awards Program that provides an opportunity for monetary rewards, on a quarterly basis, for meeting and exceeding specific performance standards. The contract specifies the following language: Bidders are encouraged to provide their employees with an incentive-based program tied to the same performance standards set forth by DFW Airport. The details of such a program should be included with the submittal of this bid. Performance Incentive Standards (measured quarterly) chapter six ContraCt MeChanisMs, inCentiVes, anD PerForManCe MonitorinG

24 Safety—a ratio of less than or equal to 2.0 accidents per 100,000 total miles operated Courtesy—less than 5 complaints per month Service—average of 5 minutes or less wait time and provide luggage assistance Cleanliness—interior and exterior of vans inspected meet standard (to be set by the Board before the first day of the contract) Maintenance—no more than 30,000 miles between road calls. Road calls are defined as a vehicle unable to continue service due to maintenance failure that requires repairs to be performed in order to resume operation. Monetary Awards—The five measured standards will be val- ued at $2,000 each per quarter, for a total of $10,000 quarterly. The Contractor potentially could be awarded $40,000 annually if all goals are met in each category each quarter. Quarters are defined as three-month periods beginning with the Notice to Proceed date of the contract. PerForManCe MonitorinG Contracts can also be a useful place for airport operators to request regular reporting of environmental metrics, such as monthly recycling data. An increasing number of airport opera- tors are producing annual sustainability reports to demonstrate to stakeholders that they are improving their sustainability performance. The airports represented by the project panel members that produce annual sustainability reports include Boston Logan International Airport, Chicago O’Hare Inter- national Airport, Portland International Airport, Seattle– Tacoma International Airport, San Francisco International Airport, and Toronto Pearson International Airport. The envi- ronmental data underpinning sustainability or environmental reports is derived from all aspects of airport activity and often requires contractors and tenants to provide certain information. A simple line in all contracts can serve this purpose. Zurich Airport uses the following language “The contract partner provides all environmentally relevant data to Flughafen Zurich AG free of charge and informs on all direct environmental impacts caused by its business activity.” Since 2012, at Portland International Airport, the Port of Portland has contracted with a consulting arm of Portland State University (Community Environmental Services) to help them develop and manage the airport-wide waste minimiza- tion program. The scope of work included within the agree- ment between the Port and Community Environmental Ser- vices includes a comprehensive monitoring role of the airport’s waste management hauler. Scope wording includes: Provide regular and random monitoring of the PDX central waste collection area (located beneath the Concourse Connecting Cor- ridor) on an ongoing basis to improve participation in the waste minimization and recycling program, document waste reduction opportunities, enforce ‘best practice’ actions for handling waste, and determine ways to improve education and enforcement for users in this area. When it comes to continually improving their performance, airport operators reported that when they are able to track environmental metrics they have an advantage over those airports that do not track such data. When airport operators demonstrate to their stakeholders that progress has been made, such as by furnishing convincing evidence of improvement for any of the different sustainability metrics such as GHG, water and energy usage, and waste and recycling tonnages, it is often easier to secure funding for future and even bolder contracts. For example, the Chicago Department of Aviation has received more than $500,000 in energy efficiency rebates offered by the Illinois Department of Commerce and Eco- nomic Opportunity. The rebates are calculated on the basis of the energy use reduction potential of various lighting and equipment upgrades. The Chicago Department of Aviation, by using robust energy metrics to justify the business case for energy efficiency investments, secured funding from the state. Additionally, if environmental data are known before the start of a new contract, it is easier for the airport operator to discern whether the contract had its intended effect at the end of the contract’s term. Measuring the day-to-day eco- nomic efficiency of the environmental sustainability good or service and knowing its final outcome helps both the air- port operator and contractor fine tune a contract mid-term, as well as create better contracts in the future by incorporat- ing lessons learned from the current contract period. Hard data complimented by institutional memory are essential for an airport operator to possess when strategically plan- ning for future contracts. At San Francisco International Airport, the new Terminal 2 building was designed and constructed to meet the LEED gold standard. It was the first airport building designed to this stan- dard and is an example of where the environmental metrics of the terminal before and after refurbishment can demonstrate the operational improvements that have been derived through the design and construction contract clause to achieve a mini- mum LEED gold standard. The benefits include: • Preconditioned air and 400 Hz power supply systems: The airport operator provided preconditioned air and 400 Hz power supply to aircraft at all terminal gates, reducing jet fuel consumption by aircraft auxiliary power units (APUs) by 1,400,000 gallons per year and reducing carbon dioxide (CO2) emissions by approxi- mately 15,000 tons per year. • Energy efficiency measures: The incorporation of energy efficient lighting and efficient machinery is expected to reduce electrical energy consumption by 2.9 gigawatt hours per year and natural gas consump- tion by 116,000 therms per year, resulting in a reduction of 750 metric tons of GHG emissions per year. • Building materials savings: By reusing a substantial portion of the infrastructure of the existing building in the renovated terminal, the airport operator generates cost savings and reduces the global warming impact of the new terminal by a one-time reduction of approxi- mately 12,300 tons of CO2.