THE NEW QUITO INTERNATIONAL

AIRPORT CONCESSION PROCESS

 

 

 

By

Dr. Mario Luiz Ferreira de Mello Santos

President AEROSERVICE

 

and

 

Professor Norman Ashford

Managing director NACEL

 

 

 

 

 

 

 

 

Artigo publicado na

Revista AIRPORT 2003

Página 63

 

 

 

THE NEW QUITO INTERNATIONAL AIRPORT CONCESSION PROCESS

 

By

Dr. Mario Luiz Ferreira de Mello Santos

President AEROSERVICE

 

and

 

Professor Norman Ashford

Managing director NACEL

 

 

 

 

 

1.   INTRODUCTION

 

Quito is the capital of the Republic of Ecuador, a country with an overall population of some 13 million. An international airport located in the northwestern part of the City serves the city of Quito, with a population of 1.8 million people. The airport and its lands are completely surrounded by urban development. Additionally there are huge mountains, part of the high Andean chain, on both sides of the final approach. There are also a number of serious obstacles in the second segment of aircraft take off and climb out which must be cleared by a sharp right turning manoeuvre. With several fatal accidents having happened in the last years, the airport must be considered operationally as very dangerous. The runway has a length of 3,1200 m but is inadequately provided with sufficient clearways and safety areas. At a declared altitude of 2,800 meters the existing Mariscal Sucre International Airport ranks among the highest international airports in the world (see Fig. 1).

 

 

Fig.1 – Existing Situation at Mariscal Sucre International Airport

 

In the year 2001 approximately 2 million passengers used the airport of which 47% was international traffic. Air cargo has grown at an average annual rate of 19% over the last ten years. In the year 2001, more than 80% of the 110,000 annual tonnes of cargo was exported, mainly in horticultural and agricultural produce. Aircraft movements were amounted to more than 35,000 movements in the same year.

 

Surveys of the operational conditions at the existing passenger terminals indicated that the level of service has been consistently lower than IATA level D During the peak-hour periods, the terminal is extremely crowded. Improvements to operational level of service can be achieved through very expensive works and these could only mitigate and improve the operational conditions inside the terminal building for a short period. The landside areas available for significant terminal expansion are inadequate for major development.

 

The conditions referred to above led the City, on the advice of the airport operators, to the conclusion that there was an urgent need to move the airport to another site. A number of approaches were examined in order to explore possibilities and to find a reasonable solution for the problem of building a New International Airport for the City of Quito. All practical solutions were consistent with the development of a new airport site, located 25 km from central Quito, at a site called Puembo. The altitude of this site is 2,400 meters, at a somewhat lower in altitude than the existing facility. At the Puembo site the reference temperature is 23 degrees centigrade.

 

Several studies were carried out for the development of a new airport at Puembo including one by the ICAO consultancy. In these preliminary studies the necessary dimensions of the site were established consistent with the design length of the new runway (4,100 meters maximum).

 

In 1996, several private enterprise proposals to build and operate a new airport under a concessionary contract were presented by different international consortia to the Commission of New Airports, a entity linked to the Department of Civil Aviation of the Ecuadorian Air Force. This Commission was created to solve the problem of the provision of a new airport not only for Quito but another of similar size, at Guayaquil, Ecuador’s largest city.

 

In 1999, AEROSERVICE Consulting Engineering Ltd. from Sao Paulo, Brazil, was contracted to revalidate and recertify the technical documentation for the Quito project. The firm of Deloitte Touche was commissioned to carry out a technical-economic feasibility study of the same. Subsequently the basis for calling for concession proposals was established.

 

In the year 2000 the new Ecuadorian Government decided to abolish the Commission of New Airports and created two different Corporations, one for each of the mentioned cities with the specific goal to build up its respective new airports.

 

In Quito, the Corporación Aeropuerto y Zona Franca del Distrito Metropolitano de Quito (CORPAQ) was created and a Free Trade Zone was proposed as an integrated part of the project.

 

AEROSERVICE, with Norman Ashford Consultants Ltd (NACEL) as its main consultant, was again contracted to prepare the technical part of the Terms of Reference of proposals to design, build and operate the airport on a BOT basis. A consulting firm from United States, LPA – Group Inc., was charged with the economic, financial and legal aspects of the Terms of Reference.

 

2.    THE BIDDING PROCESS

 

All the pre-qualified consortia in a previously aborted 1996 bidding process were invited to participate of the new bidding process. Several other organizations had also indicated an interest in participating in the new round of the bidding process to finance, design, build and operate the New International Airport of Quito, Ecuador.

 

The project, as defined by CORPAQ, constituted the following:

 

·      Refurbishment of the existing airport (International Airport Mariscal Sucre) and operation of the existing facility until the inauguration of the New Airport;

·      Construction and operation of the access road to the new site;

·      Construction and operation of the New International Airport of Quito;

·      Construction and operation of the Free Trade Zone.

 

The strategy established by CORPAQ to manage the bidding process was as follows:

 

·      The project to be developed under the BOT concept;

·      CORPAQ to assume a very flexible attitude in considering design alternatives, sizing, costs, time of construction and proposed concessionary period of operation;

·      The appointment of a team of local and international assessors to support CORPAQ in the technical, financial and legal aspects of the development of the Terms of Reference and in the analysis and evaluation of the submitted proposals.

 

The proponents could be Consortia formed by the following kind of organizations:

 

·      Airport operator

·      Financial entity

·      Construction company with experience in airport construction

·      Design company with experience in airport planning and design

·      Ecuadorian construction company.

 

The model that was chosen by CORPAQ to evaluate the proposal was the so-called “SWISS CHALLENGE”, a process of direct competitive negotiation between CORPAQ and the bidding Consortia. The main steps supporting this procedure are:

 

·      Selection of the so called “First Bidder”;

·      Signature of a Convenium;

·      Delivering of the Terms of Reference to the “First Bidder”;

·      Receipt of the complete proposal from the “First Bidder”;

·      Analysis of the proposal and subsequent negotiations until an acceptable technical and financial proposal is achieved;

·      Calling for proposals from the remaining pre-qualified interested consortia;

·      Receiving of those proposals;

·      Analysis of the second round bids and negotiation with the preferred bidder in this stage, (called “Second Bidder”)

·      If the final results of the second round of negotiation presented a better proposal than that presented by the “First Bidder” then the latter can review its own proposal and try to improve it in order to have a better proposal than that presented by the “Second Bidder”.

·      If the new proposal presented by the “First Bidder” is better than the proposal presented by the “Second Bidder” then the former is declared the winner of the bidding process;

·      If not, the “Second Bidder” is declared the winner of the bidding process;

·      Final negotiations and discussion of the contract follow;

·      Concession contract signature.

 

Theoretically, the main justification in applying the “SWISS CHALLENGE” instead a traditional international public bidding is time saving.

 

3.    THE SELECTION OF THE FIRST PROPONENT

 

Usually the selection of the first bidder is made based on the guarantees that a particular Consortium can present. Among the pre-qualified consortia, CORPAQ considered the best to be CCC – Canadian Commerce Corporation a consortium supported by the Canadian Government.

 

The CCC consortium was comprised of the following companies:

 

·      Operator : Airport Development Corporation, Toronto, Canada and Houston International Airport, Houston, TX, USA;

·      Design: Marshall, Macklin Monaghan Limited, Toronto, Canada;

·      Contractors: AECON Group Inc., Toronto, Canada and TECHINT - Technical Company International, Buenos Aires, Argentina;

·      ABB = Asea Brown Bovery Ltd., Toronto, Canada joined the Consortium later in place of TECHINT.

A local contractor, Semaica-Sevilla y Martinez, Ings. C. A. was part of the

Consortium as a subcontractor of AECON. When TECHINT left the Consortium a

new composition was agreed among the remaining members.

 

The agreed sharing of participation was:

·      Airport Development Corporation: 6%

·      Houston International Airport: 6%

·      AECON and its sub-contractors 44%

·      ABB: 44%

These percentages are still subject to change if desired by the participants.

 

4.    THE TERMS OF REFERENCE

 

The Terms of Reference were the guidelines stating all the requirements to be covered by the bids. The TOR were made up of the following components:

 

(1.)         Detailed Requirements of Presentation, including information on experience and capability for the operator, contractor and design company;

(2.)         Technical information with the Consortium proposal of a Master Plan for the three phases of development considered for the New Airport: Phase 1(2010), Phase 2 (2020) and Phase 3 (2030).

 

Items (1) and (2) of the Terms of Reference were delivered in two packages called Envelope 1 divided in 2 Parts, A and B, and Envelope 2:

 

·      Part A: contained the confidential answers from the Bidder related to “Experience and Capability” and the “Technical Information”. The information presented showed:

 

(a) Information on the Experience and Capabilities

*      Profile of the companies;

*      Airport project profile;

*      Key personnel;

*      Experience in concession contracts;

*      Experience in projects in Latin America;

*      Experience in airport projects (for the proposed Contractor Company);

*      Profile and experience in Airport Planning and Design (for the proposed Design Company) ;

*      Net assets of the Consortium, source and amount of financing.

 

(b) Technical Information

The Consortium delivered all the technical information related to its concept of the New Airport Master Plan for Phases I, 2 and 3.

 

·      Part B: contained the public part of the Consortium proposal and would be available for eventual examination by other eventual proponents. It contained, as a minimum, the following information:

 

(a)  Technical Information

*      Forecast of passenger and cargo;

*      Drawings of the airport plan;

*      Runway system;

*      Passengers terminal;

*      Improvement of the existing International Airport Mariscal Sucre;

*      Implementation of the planned schedule.

 

(b)  Economic Information

*      Duration of the concession period;

*      Aeronautical fees and costs;

*      Subsidies for the land required by CORPAQ;

 

The Envelope 2 included the confidential answer by the Consortium to the requirements on “Economic Evaluation” of the “Terms of Reference”. As a minimum, that part of the Consortium proposal included the following:

 

(a)  Economic Information

*      Investment Plan and Financial Plan

 

The Consortium presented independent financial plans and combined financial plans for each of the three elements of the project: a financial plan for the existing International Airport Mariscal Sucre, one for the New International Airport, one for the Free Zone and a combined financial plan for all three elements.

 

5.    THE WINNING PROPOSAL

 

The winning proposal was that presented by the Canadian Commercial Corporation. That Consortium met all the requirements of the Terms of Reference. The proposal was judged to be well elaborated with respect to:

 

• structure of the Consortium;
• required documentation;
• technical aspects;
• financial aspects with the justification of prices, tariffs and fees and the internal rate of return (IRR);
• sources of finance were also identified and the net assets of the Consortium were declared;
• drawings with the technical proposal for the airport, presenting the development of the different phases during the life of the airport.

 

The concession period is 35 years, including the remodelling and the operation of the existing airport, and the design, construction and the operation of the New International Airport.

 

According to the phased development identified at the 2010, 2020 and 2030 horizons a detailed forecast was presented by the Consortium to justify the design parameters selected for the required Master Plan. These forecast data were developed for the Consortium by KPMG and are presented as follows:

 

FORECAST DATA

 

The physical configuration of the airport in terms of the Ultimate Capacity presented a two independent parallel runway configuration and a passenger terminal area developed under a pier-finger concept.

 

The First Phase of Development has a 3,600 metre long runway, with possibility of extension to 4,100 meters when required. The Passenger Terminal Building has 38,000 square meters and a capacity of 3,150,000 passengers per annum. IATA Level B was the required standard at the new airport and Level C was the minimum accepted before improvements are provided in order to raise again the level of service from C to B.

 

The amount of investment forecasted by CCC for Phase 1 (2010) was US$ 347,200,000.00.

 

The New Airport could serve most of the route structure at the existing airport without existing major penalties in the pay load. The main routes flown by the air carriers serving the existing airport are New York, Los Angeles, Santiago Chile, Sao Paulo, Buenos Aires and Chicago. Some flights to Madrid from the new facility would have restriction on the payload, depending on the aircraft to be utilized.

 

The Third Phase of Development is presented in figure 2.

 

Figure 2. - MASTER PLAN (Phase 3 – 2030) (Design by Marshall Macklin Monaghan Limited)

 

The Free Trade Zone is located on the Southeast side of the airport boundaries and is part of the concession project.

 

The concessionaire agreement between CORPAQand CCC was signed in the summer of 2002 and the new airport is scheduled to be opened in 2007.