Denver International Airport has a number of issues with its concessions contracting process, including unfair practices that cause the airport to lose money, according to a report released Thursday by the Denver Auditor’s Office.

Auditors examined how the airport selects contracts with concessionaires for food and beverage locations, retail shops, duty-free shops and passenger services. Denver Auditor Timothy O’Brien found that the airport should end its concessions incentive program permanently, noting that because of how busy the airport is — it is third-busiest in the United States and the eight-busiest in the world — businesses don’t need any additional incentive to want to be there.

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The report found that airport management allows some concessionaires to bypass the competitive selection process. The airport is supposed to use a competitive bidding process called “request for proposals” to fill its concessions spaces, but because of an incentive program it has for concessionaires, some companies start negotiating their next contracts with the airport before they expire and bypass the competitive selection processes.

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This prevents other businesses from being able to compete for contracts, which the auditor’s office found is unfair and inequitable. It also found the airport could be missing out on revenue by not using the bidding process and that its incentive program violates Executive Order 8, which requires a competitive process for all city contracts with some exceptions.

Looking at funding, the airport pays an outside firm about $500,000 a year to administer the incentive program. This accounts for nearly a third of the entire cost of the airport’s concessions program, but the airport has never evaluated whether it benefits from the program.

The same program was audited in 2014 and asked the airport to assess the incentive program’s effectiveness, and because that never happened, the latest audit recommends discontinuing it.

“I am concerned with how these problems were allowed to go on for so long,” O’Brien said. “But I do believe airport officials are receptive to making the necessary changes going forward. I look forward to seeing their progress when we follow up.”

The auditor’s office also found that the airport has a significant backlog of expired contracts with vendors who are still operating. The contracts have clauses allowing for holdovers like this in special circumstances — for instance, all contracts set to expire during the COVID-19 pandemic received a three-year holdover.

However, extended holdovers like this were happening for years before the pandemic without reasonable justification or restrictions. According to the report, 40% of contracts active as of August 2021 had been in holdover status since the end of 2019. The longest holdover dated back more than 12 years, the report said.

“The airport had poor excuses for some of the unreasonably long holdovers,” O’Brien said. “It was taking advantage of exceptions meant only for emergencies and special circumstances. Then, when a real emergency hit, it fell even further behind in the procurement process.”

In a statement, DIA said: 

Denver International Airport (DEN) has a high-performing, diverse concessions program and we are committed to providing equitable opportunities for all potential concessionaires while providing the tools and incentives for our current concessionaires to thrive. Our contracting processes and program are equitable and in compliance with Executive Order No. 8 and all other city ordinances. Through these processes and programs, we provide many opportunities for new and existing concessionaires to succeed and help DEN meet the needs of our passengers.

Although we agree with the auditor’s recommendations, we do fundamentally disagree on a few findings.