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ACRP LRD 41 3 LEGAL ISSUES RELATING TO AIRPORT COMMERCIAL CONTRACTS Scott A. Burrell, City University Construction Fund, New York, NY and Thomas D. Bridenbaugh, Parker, Poe, Adams & Bernstein, Washington, DC I. INTRODUCTION The majority of airports in the United States are owned by government entities, including cities, counties, multi- jurisdictional entities, and special purpose entities, such as port authori ties and airport authorities. This ownership structure has significant implications for the contracting activities of such airports as, to one degree or another, they must comply with a variety of procurement, policy, and financial restrictions appli- cable to government entities. These considerations require air- port managers to address a significant number of policy issues and restrictions that would not otherwise be applicable in the private marketplace and require careful consideration by airport managers. Typically, many (if not most) of these considerations will apply even when the airport is considered to be a âquasi- publicâ entity and legislative leaders have âinstructedâ the air- port to operate in a commercial manner. While few, if any, airports are owned directly by state gov- ernments, the requirements of state law are important as these requirements will often restrict or inform how the political sub- divisions, such as the county and city governments, operate. In addition, for those airports operated by special purpose entities, while much of the operating authority and operating restric- tions may be found in the entityâs implementing legislation or delegation, that authority may still be subject to certain state and local law restrictions. Airports enter into various types of commercial con- tracts that include airline agreements, concession operations agreements, general aviation operations agreements, utility agreements, operating and professional services agreements, transportation agreements, and facility design, development and construction agreements. In the government world and in most instances, these contracts can be thought of as falling with- in one of three buckets: so-called âpure procurementâ contracts, concession agreements, and airline agreements (which would also include other contracts funded by the FAA and subject to federal rules). In most instances, when the airport is purchasing for its own account (i.e., buying photocopier paper, pencils, ice melt, professional services, construction, repairs and mainte- nance), it would be considered a âpure procurementâ and would be governed by a set of procurement rules. These procurement rules may be the rules of its âparentâ organization, namely the city, county, or state of which it is a part; a set of airport specific rules; or some combination of both. These rules will generally require a competitive process for purchases above a certain dollar threshold (often between $10,000 and $100,000). While concession agreements, namely retail and food and beverage outlets operated at the airport may be exempt from the procurement rules, they will most likely be subject to some set of rules or policies that will share many commonalities with a government procurement process but in most instances will be less formal and more abbreviated than a âpure procurement.â Airline agreements and other agreements involving federal regulation or funding will often be exempt from state and local procurement and concession rules but will be subject to FAA grant assurances and other applicable federal contracting laws and regulations. In those instances where an airport desires to engage a third party to develop an otherwise unused portion of the airport for essentially non-airport uses, a project specific assessment of the rules and laws applicable to that effort will be required. The laws and regulations governing each of these actions vary from state to state and, in some instances, within a given state. Given the length of this digest, it is not possible to provide a detailed assessment of the hundreds of issues that could be encountered by an airport manager, but rather the purpose is to sensitize airport managers to the government-specific consider- ations that are likely to be encountered and to provide guidance as to how such considerations and restrictions can be addressed. Airport managers are cautioned, however, that many of these issues are complex and careful coordination with airportâs coun- sel and other professionals such as procurement, finance and human resources is encouraged. This digest is intended to focus on those state and local com- mercial law issues related to an airportâs status as a government or quasi-government entity. The digest is not intended to ad- dress commercial contracting obligations under federal Grant Assurances. Sponsors should be mindful that while federal requirements for AIP funded projects parallel state and local re- quirements in some instances, in others they differ markedly in nature from those pertaining to commercial contracts. ACRP Research Report 184: Understanding FAA Grant Assurance Ob- ligations Volume 1: Guidebook provides guidance on business, operational and legal issues that flow from these federal Grant Assurances and the readers of this digest should refer to that report for additional guidance on Grant Assurance compliance.1 In addition, the FAA has published its guidance document Con- tract Provisions Guidelines for Obligated Sponsors and Airport 1 Understanding FAA Grant Assurance Obligations Vol- ume 1: Guidebook, (Airport Cooperative Research Program Report 184, 2018)., https://doi.org/10.17226/25126. See also, FAA Order 5190.6B, Airport Compliance Manual. https://www.faa.gov/airports/ resources/publications/orders/compliance_5190_6/.
CONTENTS I. Introduction, 3 II. Authority, 4 A. Contracting Authority, 4 B. Appropriation and Funding Authority, 6 C. Real Property, 8 III. Contracting Process, 9 A. Contracting and Procurement Issues, 9 B. Procurement Systems, 9 C. Procurement Requirements, 10 D. Concessions Solicitations, 11 E. Good Faith and Fair Dealing, 11 F. Procurement Ethics Issues, 11 IV. Common Contract Issues, 14 A. Indemnification and Limitation of Liability, 14 B. Contract Incentives, Penalties and Service Level Agreements, 17 C. Rights in Data, 18 D. Termination for Convenience, 22 E. Business Inclusion Issues, 23 F. Hiring Preferences, 25 G. Social Policies, 26 H. Project Labor Agreements and Labor Peace Agreements, 26 I. Prevailing Wage Laws, 27 J. Living Wage Statutes, 27 K. Dispute Resolution, 27 L. Freedom of Information and Sunshine Law Issues, 28 M. Standard Contract Provisions, 29 V. Conclusion, 30 2 ACRP LRD 41