Losing bidder for BWI airport gas station contract questions why rules were changed

Another contract awarded by the Maryland Aviation Administration is drawing criticism and unwanted attention.

Last month, a high-ranking state lawmaker requested that the Office of Legislative Audits look into whether a lucrative contract to operate two gas stations and convenience stores near BWI Thurgood Marshall Airport was awarded properly.

In a letter, Del. Regina T. Boyce (D-Baltimore) asked the head of the Office of Legislative Audits for a status update on Royal Farms’ request for a probe of the Maryland Aviation Administration (MAA) procurement process for the gas stations. Royal Farms, which lost out on an attempt to operate the service stations, has suggested in a filing that the aviation administration’s actions “may certainly be found to be ‘fraud, waste and abuse.'”

For over three years, Royal Farms, the Baltimore-based convenience store company, has been questioning the 2020 decision by the Maryland Aviation Administration, which operates BWI Airport, to deny Royal Farms the contract. The company took steps to file a lawsuit, but later dropped the legal challenge. But it still is seeking an official probe into the contract proceedings.

On Jan. 29, 2020, the Board of Public Works, which awards most large state contracts, voted in favor of the sole bidder, PMG BWI Airport Plaza Developers LLC, a subsidiary of Petroleum Marketing Group, Inc., a Virginia company that operates convenience stores and gas stations. PMG won a 20-year contract to operate an existing gas station on the northern end of the BWI complex, and it was given a 50-year contract to build and operate a new gas station and convenience store on a vacant five-acre parcel near the BWI Amtrak station.

During that Board of Public Works meeting, Maryland Aviation Administration officials said they were obligated to award the contract to the out-of-state bidder, even though other companies, including some in Maryland, were interested in competing for the contract. PMG, the officials explained, was the only potential bidder that met stringent federal guidelines for participation by “disadvantaged business enterprises.”

The Federal Aviation Administration requires that at least 25% of certain airport contracts meet the “Airport Concessions Disadvantaged Business Enterprise (ACDBE) rule,” requiring participation by woman-owned and racially diverse businesses. At the Jan. 29, 2020 BPW meeting, all three members at the time — Gov. Larry Hogan (R), Comptroller Peter Franchot (D) and Treasurer Nancy Kopp (D), who all have since moved on — lamented that the state could not give the contract to a Maryland company.

“This is a very unique situation,” Hogan said. “Because unlike a typical state procurement we’re dealing with a federal law that required this.”

“Correct,” replied Ricky Smith, then as now the aviation administration’s executive director.

During the early stages of the bidding process, Royal Farms executives say they reached out to Maryland Aviation Administration officials to inform them that the company was trying in good faith to meet the Disadvantaged Business Enterprise participation threshold but might fall short. The company asked whether it might be permitted to obtain a waiver and continue bidding for the chance to operate the two gas stations.

Twice, according to the March 2023 complaint that Royal Farms made to the state’s Office of Legislative Audits, MAA officials wrote Royal Farms executives that their proposal was “reasonably susceptible of being made acceptable for award.” In other words, the company might still be able to bid.

But eventually, MAA informed Royal Farms that it was recommending PMG get the contract. The agency offered no explanation in a debriefing with the company, but Smith told the Board of Public Works that in addition to its superior record on Disadvantaged Business Enterprise participation in its contracts, “this company just seems to specialize in creating relationships with the airport community to drive business at its locations.”

Yet a month later, according to the Royal Farms filing, the aviation administration OK’d a change in the contract that no longer required PMG to hit the DBE participation goal. A spokesperson for the MAA, Jonathan Dean, disputes this assertion, noting that it wasn’t until January 2021 that the agency sought approval from the Board of Public Works to alter the contract. Only then, Dean said, did PMG get permission to lay aside the contract participation goals — though he did not offer an explanation for the move.

As part of that vote, PMG was permitted to turn part of the contract over to a subcontractor, Sheetz, the convenience store and restaurant operator. Sheetz, like Royal Farms, had also wanted to bid for the original contract, but was told by MAA officials that it was ineligible because it was unable to meet DBE participation goals.

In September 2021, the aviation administration issued a news release boasting that it had attracted Sheetz, a popular regional brand, to operate the new service station near the Amtrak station.

“While this store location is in the very early stages of development, we are certainly very excited to introduce our unique Sheetz brand to both local and national travelers at BWI Marshall Airport,” Sheetz Vice President of Real Estate, Steven Augustine, said in a statement at the time. Sheetz and the aviation administration said construction of the new convenience store and service station would begin in the spring of 2022.

But the parcel, a four-acre asphalt expanse fenced off from Route 178, across from the headquarters of Northrup Grumman, remains completely undeveloped.

In early 2022, Royal Farms notified the Maryland Aviation Administration that It was preparing a lawsuit against the state over being denied the contract. If PMG was no longer required to meet DBE procurement goals, Royal Farms was prepared to argue, shouldn’t other companies have been considered for the contract?

Royal Farms did not file a lawsuit, after company officials concluded that it could cost hundreds of thousands of dollars to do so. Instead, the company decided to ask the Maryland Office of Legislative Audits (OLA) to conduct an investigation.

OLA routinely conducts regular audits of state agencies and programs, but it is also empowered to investigate contracts and other state operations if waste, fraud or abuse is suspected. That’s the basis for Royal Farms’ request for an OLA investigation, which it filed in March.

“In my view, the actions of MAA may reflect such fraud, waste and abuse, and must be investigated,” Royal Farms President John Kemp wrote in his filing to the OLA. “It appears that MAA officials intentionally deceived Royal Farms, which accepted MAA’s representations as truthful.”

Last month, Boyce, vice chair of the House Environment and Transportation Committee, wrote to Gregory Hook, director of the OLA, asking for a status report on the Royal Farms request. She also wondered how the contract wound up in the hands of a company that did not meet DBE participation guidelines, when Royal Farms was disqualified from bidding for that very reason.

“As a member of the House of Delegates and an American woman of Caribbean and African heritage, it is my responsibility to help maintain the integrity of DBE participation as well as fairness in the procurement process,” Boyce wrote.

Hook told Maryland Matters last month that, for confidentiality reasons, he could not say whether his office had initiated or would initiate an investigation into the service station procurement.

Dean, the MAA spokesperson, declined to comment further.

“As the matter is currently under review, the Maryland Aviation Administration may offer no additional comment but looks forward to working with PMG to continue the development and provide first-class service to passengers at BWI Marshall Airport,” he said in an email.

Other controversial MAA contract decisions

This is not the first time that a lucrative Maryland Aviation Administration contract has come under criticism. Last year, some bidders for a 20-year contract to oversee concessions at BWI Airport warned that the process appeared to be teed up to help one company in particular, whose CEO had a long history in Maryland politics. The MAA recommended that a contract go to New Market Development, the company headed by Major F. Riddick Jr., but the longtime holder of the contract sued the state, and the MAA decided to pause the procurement process before sending the recommendation to the Board of Public Works.

Soon after he took office early this year, Gov. Wes Moore (D) ordered the MAA to restart the concessions contract procurement, and vowed the process would be more fair and equitable.

“My administration is committed to carefully crafting a new solicitation and a procurement process that encourages robust competition, fairness, and provisions that align with our administration’s values and short-term and long-term economic strategies,” Moore said.

Late last month, the state formally reopened the bidding process — though it is being led this time by the Maryland Department of Transportation, the aviation administration’s parent agency, rather than the MAA itself.

Maryland Matters has also written about a controversial decision by the Maryland Aviation Administration to boot a company that has held a key mechanical services contract at BWI airport for more than three decades. The incumbent contractor, Menzies Aviation, went through two appeals to try to overturn the decision — or to even get an in-depth explanation — but has exhausted its administrative options and is not planning to sue.

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